Furr v. TD Bank, N.A. (In re Rollaguard Sec., LLC), Case No. 14-38071-EPK (Substantively Consolidated)

Citation591 B.R. 895
Decision Date01 October 2018
Docket Number Adv. Proc. No. 16-01756-EPK,Case No. 14-38071-EPK (Substantively Consolidated),Adv. Proc. No. 16-01755-EPK, Adv. Proc. No. 16-01757-EPK
Parties IN RE: ROLLAGUARD SECURITY, LLC, Shamrock Jewelers, Inc., and Shamrock Jewelers Loan & Guarantee, LLC, Debtors. Robert C. Furr, not individually but as Chapter 7 Trustee of the estates of the Debtors, Rollaguard Security, LLC, et al., Plaintiff, v. TD Bank, N.A., Defendant. Robert C. Furr, not individually but as Chapter 7 Trustee of the estates of the Debtors, Rollaguard Security, LLC, et al., Plaintiff, v. PNC Bank, N.A., Defendant. Robert C. Furr, not individually but as Chapter 7 Trustee of the estates of the Debtors, Rollaguard Security, LLC, et al., Plaintiff, v. JPMorgan Chase Bank, N.A. d/b/a Chase Bank, Defendant.
CourtUnited States Bankruptcy Courts. Eleventh Circuit. U.S. Bankruptcy Court — Southern District of Florida

John H. Genovese, Esq., Jesus M. Suarez, Miami, FL, for Plaintiff.

Matthew J. Feeley, Miami, FL, Jose R. Florez, Buchanan Ingersoll & Rooney PC, Stephen C. Villeneuve, Ft. Lauderdale, FL, Pamela Miller, Daniel Shamah, O'Melveny & Myers LLP, New York, NY, for Defendant.

OMNIBUS ORDER AFTER REMAND ON PLAINTIFF'S REQUEST FOR LEAVE TO FILE AMENDED COMPLAINTS
Erik P. Kimball, Judge, United States Bankruptcy Court

Robert C. Furr, as trustee (the "Trustee" or "Plaintiff") in the substantively consolidated chapter 7 cases of Rollaguard Security, LLC ("Rollaguard"), Shamrock Jewelers, Inc. ("Shamrock Jewelers"), and Shamrock Jewelers Loan & Guarantee, LLC, commenced these three adversary proceedings by complaints filed on December 29, 2016. The Trustee brought substantially identical claims against TD Bank, N.A. ("TD Bank") (Adv. Proc. No. 16-01755-EPK), PNC Bank, N.A. ("PNC Bank") (Adv. Proc. No. 16-01756-EPK), and JPMorgan Chase Bank, N.A. d/b/a Chase Bank ("JPMC Bank") (Adv. Proc. No. 16-01757-EPK) (collectively, the "Defendants"). The Defendants moved to dismiss and, after full briefing, the Court granted those motions and entered judgments in favor of the Defendants. Thereafter, the Trustee sought reconsideration of the dismissal order and, in the alternative, permission to file amended complaints. The Court denied the Trustee's request for reconsideration of the Court's legal rulings made in granting the motions to dismiss. The Court also ruled, consistent with prevailing law in this circuit, that because judgments had been entered in favor of the Defendants the Trustee must first obtain relief from the judgments under the applicable rules of civil procedure and only then would the Court consider the Trustee's request to amend the complaints. After a hearing to consider the Trustee's request to amend the complaints, the Court denied that request. The Trustee appealed the Court's orders dismissing the adversary proceedings, the judgments, and the orders denying the Trustee's motion to reconsider and for permission to file amended complaints. On appeal, the District Court ruled that the more lenient standard of Fed. R. Bankr. P. 7015 applied even though this Court had entered judgments in favor of the Defendants, and remanded the cases to this Court to consider the Trustee's request to file amended complaints under that standard. As discussed more fully below, after a careful review of the Trustee's proposed amended complaints, the Court rules that the proposed amendments would be futile and thus denies the Trustee's request to file amended complaints.

ORIGINAL COMPLAINTS

Each of the original complaints in these adversary proceedings alleged substantially the same facts and presented the same five requests for relief. In counts I and II of the original complaints, the Trustee sued the Defendants to avoid alleged fraudulent transfers made by Rollaguard and Shamrock Jewelers (together, the "Debtors")1 to the Defendants under the actual and constructive fraud provisions of sections2 548(a)(1)(A)-(B) and under the actual and constructive fraud provisions of section 544 incorporating Florida Statutes §§ 726.105(1)(a)-(b), and to recover the alleged fraudulent transfers from the Defendants pursuant to section 550. In counts III, IV, and V of the original complaints, the Trustee sought money damages for the Defendants' alleged aiding and abetting of conversions and for their alleged negligence.

MOTIONS TO DISMISS

In response to the original complaints, each of the Defendants filed a motion to dismiss [ECF No. 26, Adv. Proc. No. 16-01755-EPK; ECF No. 26, Adv. Proc. No. 16-01756-EPK; and ECF No. 21, Adv. Proc. No. 16-01757-EPK]. In the motions to dismiss, the Defendants raised substantially similar arguments in opposition to the original complaints and adopted each other's arguments. The Court permitted the parties to brief the motions to dismiss in full [ECF Nos. 38 and 39, Adv. Proc. No. 16-01755-EPK; ECF Nos. 42 and 43, Adv. Proc. No. 16-01756-EPK; and ECF Nos. 30 and 31, Adv. Proc. No. 16-01757-EPK].

ORDER GRANTING MOTIONS TO DISMISS

On July 27, 2017, the Court entered a consolidated order dismissing with prejudice all three adversary proceedings [ECF No. 43, Adv. Proc. No. 16-01755-EPK; ECF No. 50, Adv. Proc. No. 16-01756-EPK; and ECF No. 33, Adv. Proc. No. 16-01757-EPK] (the "Dismissal Order"). The Court dismissed counts I and II on several grounds. First, the Court ruled that the original complaints did not describe any "transfers" that could be avoided as fraudulent transfers under either section 548 or section 544 incorporating Florida law. Second, the Court ruled that the Defendants are not "transferees" from whom the Trustee may recover under section 550(a)(1). Third, the Court ruled that the original complaints did not contain sufficient allegations to plausibly support the conclusion that the Debtors deposited their own funds into their own unrestricted bank accounts with the intent to hinder, delay, or defraud creditors, as required by the relevant statutes, and so the Trustee's actual fraud claims in counts I and II must be dismissed. Fourth, the Court ruled that the Debtors obtained reasonably equivalent value in exchange for the bank deposits, and so the Trustee's constructive fraud claims in counts I and II must be dismissed. Fifth, the Court ruled that the Trustee's claims in counts I and II based on section 544, incorporating Florida law, must be dismissed as the Trustee failed to identify by name at least one triggering creditor for each such claim. The Court ruled that the claims relating to Shamrock Jewelers Loan & Guarantee, LLC in counts IV and V must be dismissed as a result of the application of the in pari delicto defense, as that defense was apparent on the face of the original complaints. The Court ruled that counts III and IV of the original complaints must be dismissed as the Trustee failed to allege sufficient facts to show that any of the Defendants had actual knowledge of the alleged conversion by the Debtors' principal or that any of the Defendants rendered substantial assistance to the Debtors' principal, two independent reasons for dismissal of those claims. The Court ruled that the claims in count V based in negligence must be dismissed as the Trustee failed to plead a duty of care on the part of the Defendants. Because the Trustee did not seek permission to amend the original complaints, consistent with prevailing law in this circuit the Court dismissed the original complaints with prejudice. The Court then entered judgments in favor of the Defendants [ECF No. 45, Adv. Proc. No. 16-01755-EPK; ECF No. 52, Adv. Proc. No. 16-01756-EPK; and ECF No. 35, Adv. Proc. No. 16-01757-EPK].

MOTION FOR RECONSIDERATION AND/OR TO AMEND COMPLAINTS

The Trustee then filed an omnibus motion seeking reconsideration of the Dismissal Order and the judgments under Fed. R. Civ. P. 59(e), 60(b)(6), and 15(a)(2), made applicable here by Fed. R. Bankr. P. 9023, 9024, and 7015, respectively, and/or permission to file an amended complaint in each adversary proceeding [ECF No. 50, Adv. Proc. No. 16-01755-EPK; ECF No. 57, Adv. Proc. No. 16-01756-EPK; and ECF No. 40, Adv. Proc. No. 16-01757-EPK]. The Trustee asked the Court to reconsider several legal issues addressed in the Dismissal Order. The Trustee argued that the bank deposits alleged in the original complaints were "transfers" avoidable as fraudulent transfers, that it was not proper for the Court to address the "conduit defense" at the motion to dismiss stage and so the Court should not have ruled that none of the Defendants are "transferees" subject to judgment under relevant law, and that the original complaints contained sufficient allegations to overcome the other shortcomings relied on by the Court in dismissing the original complaints.3 In the alternative, the Trustee sought leave to file amended complaints against each of the Defendants. The Trustee stated that he received discovery from the Defendants after the motions to dismiss were fully briefed.4 The Trustee alleged that the recently received documents contained new evidence, not available prior to the filing of the original complaints, which supported certain of the Trustee's original claims and new claims for aiding and abetting breach of fiduciary duty. The Trustee sought permission to file amended complaints, in the forms attached to the Trustee's omnibus motion, that the Trustee stated incorporated the new evidence.

RULINGS ON MOTION FOR RECONSIDERATION/AMENDMENT

The Court entered two orders in connection with the Trustee's omnibus motion for reconsideration and/or for permission to filed amended complaints. In the first order, the Court denied the Trustee's request for the Court to reconsider its legal rulings in dismissing these adversary proceedings [ECF No. 51, Adv. Proc. No. 16-01755; ECF No. 58, Adv. Proc. No. 16-01756; ECF No. 41, Adv. Proc. No. 16-01757]. In that first order the Court also ruled that, because the Court had entered judgments in favor of the Defendants, in order to obtain permission to file the proposed amended complaints the...

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