Ge Capital Commercial Inc. v. Worthington Nat'l Bank
| Decision Date | 25 July 2011 |
| Docket Number | Civil Action No. 3:09-CV-572-L |
| Parties | GE CAPITAL COMMERCIAL INC., et al., Plaintiffs, v. WORTHINGTON NATIONAL BANK, Defendant. |
| Court | U.S. District Court — Northern District of Texas |
Before the court are: (1) Defendant Worthington National Bank's 12(b)(1) Motion to Dismiss for Lack of Subject-Matter Jurisdiction, filed March 7, 2011; (2) Defendant Worthington National Bank's 12(b)(1) Motion to Dismiss for Lack of Subject-Matter Jurisdiction, filed April 27, 2011; (3) and Plaintiff's Motion for Leave to File Surreply to Defendant's Reply in Support of Motion to Dismiss for Lack of Subject Matter Jurisdiction, filed March 28, 2011. After carefully considering the motions, responses, reply, and applicable law, the court denies as moot Defendant Worthington National Bank's 12(b)(1) Motion to Dismiss for Lack of Subject-Matter Jurisdiction, filed March 7, 2011; denies Defendant Worthington National Bank's 12(b)(1) Motion to Dismiss for Lack of Subject-Matter Jurisdiction, filed April 27, 2011; and denies as moot Plaintiff s Motion for Leave to File Surreply.
Plaintiffs GE Capital Commercial Inc., General Electric Capital Corporation, and GE Capital Financial Inc. (collectively, "GECC" or "Plaintiffs") filed their Original Complaint and Application for Preliminary and Permanent Injunction in this court on March 27, 2009. Plaintiffs filed theirAmended Complaint on April 9, 2009, alleging multiple claims against Defendants and requesting damages, attorney's fees, costs, a permanent injunction, and a writ of attachment. Plaintiffs originally instituted this suit against Wright & Wright, Inc. ("Wright & Wright"), BBAF Enterprises, Inc. ("BBAF"), Justin Prather ("Prather"), David Ashley Wright ("Wright"), Worthington National Bank ("Worthington"), PlainsCapital Bank ("PlainsCapital"), Sterling Bank ("Sterling"), Texana Bank ("Texana"), and Frank Boyd Buchanan, III ("Buchanan"). Worthington is the sole remaining Defendant in the suit, as all others have been dismissed.
Plaintiffs filed their Second Amended Complaint ("Complaint"), the live pleading, on June 26, 2009. The Complaint asserted claims for money had and received, violations of the Texas Uniform Fraudulent Transfer Act ("TUFTA"), breach of fiduciary duty, conversion, fraud, conspiracy, and the imposition of a constructive trust. Plaintiffs also seek damages, reasonable attorney's fees, costs, a permanent injunction, and a writ of attachment. By court order on December 31, 2009, the court dismissed Plaintiffs' conversion claim with prejudice, dismissed with prejudice the fraudulent transfer claims against Worthington and PlainsCapital to the extent that the claims concern the funds deposited and then held in Worthington and PlainsCapital bank accounts controlled by Defendants Prather, Buchanan, or Wright. GECC's conspiracy and breach of fiduciary duty claims against Prather, Buchanan, and BBAF, were dismissed after the parties settled. The breach of fiduciary claims against Wright and Wright & Wright, were dismissed after the parties settled. On February 23, 2011, the court granted Plaintiffs' Unopposed Motion to Dismiss Plaintiffs' Causes of Action for money had and received, permanent injunction, and constructive trust. The only substantive claims remaining are GECC's claims for fraudulent transfers in violation of TUFTA, attorney's fees, and court costs.
This action arises out of a series of allegedly fraudulent schemes resulting in the alleged conversion of over $12,500,000 from GECC. Plaintiffs contend that, in 2004, Defendant Prather entered into a scheme with Defendants Wright and Buchanan involving the purchase and sale of heavy construction equipment. Both Wright and Buchanan allegedly, after being promised an improbable and high rate of return by Prather, orally agreed to invest millions of dollars into the scheme, turned over control of their bank accounts to Prather, created new accounts and business entities with Prather, and sought outside investors to finance the heavy equipment purchases.
Wright allegedly maintained bank accounts with Defendant Sterling Bank in his own name and in the name of Wright & Wright, a company of which Wright was the sole member and owner by 2003. Buchanan allegedly maintained a bank account with Defendant PlainsCapital Bank in the name of Defendant BBAF, a company incorporated by Buchanan in 2006. In 2007, Prather and Wright allegedly opened a bank account together at Defendant Worthington Bank and, in connection therewith, sought and obtained a $2,500,000 line of credit from Worthington.
GECC contends that the Worthington line of credit, ostensibly acquired for the purpose of purchasing heavy equipment, was never used for that purpose. By June 2008, Prather and Wright still owed Worthington $2,470,000 to satisfy the bank's demand for repayment of the loan and had nothing to show from their alleged heavy equipment scheme. During the same time period, Prather also allegedly acquired a $3,500,000 loan from PlainsCapital. The terms of the PlainsCapital loan required Prather to maintain certain accounts at PlainsCapital with a minimum average monthly balance reaching into the range of hundreds of thousands of dollars; Prather allegedly could not independently meet these obligations.
As a result of Worthington's loan repayment demand, and, due to the necessity to maintain high value accounts with PlainsCapital, Prather allegedly engineered a new scheme to steal money to pay off his debt. In late June or early July 2008, Prather's employer, CitiCapital Commercial Corporation, operated a credit extension program that financed the purchase of golf cars, and Prather was the manager of this program. Prather allegedly used his status as manager to beguile Citi into wiring money directly into the bank accounts of BBAF and Wright & Wright by falsely indicating that those two companies were golf car "distributors." During July 2008, Prather allegedly wired almost $7,500,000 to Wright & Wright's bank account, and used $2,470,000 of that money to repay Worthington. In early August 2008, GECC underwent a merger and acquired CitiCapital Commercial Corporation, while Prather continued perpetuating his scheme. Prather allegedly created fabricated invoices, false e-mails, fraudulent promissory notes, and fictitious GECC employees to protect his scheme, causing GECC to wire over $5,000,000 more to BBAF and Wright & Wright between August 2008 and January 2009.
Once the combined $12,500,000 allegedly stolen through Prather's scheme was deposited into BBAF's or Wright & Wright's bank accounts by CitiCapital Commercial Corporation and GECC, Prather, Buchanan, or Wright would allegedly wire those funds to other bank accounts. These bank accounts included Buchanan's personal account at PlainsCapital, Wright's personal account at Sterling, and Prather's personal accounts. Worthington allegedly grew suspicious of Prather and Wright's financial dealings with their "investors," but it declined to investigate the suspicious transactions, instead electing to close Prather and Wright's bank accounts. PlainsCapital and Sterling also allegedly had these same suspicions but made no investigation and did not close the accounts.
Prather allegedly used many of the fraudulently acquired funds to maintain the minimum required account balances at PlainsCapital to maintain his $3,500,000 loan. In March 2009, however, Prather ultimately defaulted on this loan, and PlainsCapital then allegedly seized over $525,000 from Prather's other bank accounts. As previously stated by the court, the only remaining claims are those for fraudulent transfer in violation of TUFTA, as Plaintiffs contend that Worthington is still in possession of funds that were fraudulently acquired by Prather, and a claim for attorney's fees.
On March 7, 2011, Worthington filed a motion to dismiss for lack of subject matter Jurisdiction. Worthington contends that Plaintiffs do not have standing to assert their claims because Plaintiffs did not suffer an injury. On March 30, 2011, the court held a pretrial conference and conferred with the parties regarding Defendant's Motion to Dismiss for Lack of Subject-Matter Jurisdiction. Through the course of discussing standing, Plaintiffs requested that they be allowed two weeks to produce additional documents related to the issue of standing. Given the importance of the standing issue, the court granted Plaintiffs' request and instructed Plaintiffs to produce documents establishing their standing to assert claims against Worthington. Defendant was then instructed to file an amended or a new motion to dismiss pursuant to 12(b)(1) of the Federal Rules of Civil Procedure by April 27, 2011. Plaintiffs were directed to respond by May 11, 2011, and Defendant was instructed to file a reply by May 21, 2011. All parties complied with the amended scheduling order.
Worthington questions whether Plaintiffs have standing to bring this action. Article III of the Constitution "confines the federal courts to adjudicating actual 'cases' and 'controversies.'"Allen v. Wright, 468 U.S. 737, 750 (1984). To establish standing, a plaintiff must satisfy three elements:
First, the plaintiff must have suffered an injury in fact—an invasion of a legally protected interest which is (a) concrete and particularized, and (b) actual or imminent, not conjectural or hypothetical. Second, there must be a causal connection between the injury and the conduct complained of—the injury has to be fairly . . . trace[able] to the challenged action of the defendant, and not . . . th[e] result [of] the independent action of some third party not before the court. Third, it must be likely as opposed to merely speculative, that the injury will be redressed by a favorable decision.
Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61 (1992) (internal...
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