Huntsberger v. Umpqua Holdings Corp. (In re Berjac of Or.)

• Decision Date: 04 September 2015
• Docket Number: No. 6:14–cv–01851–AA.,6:14–cv–01851–AA.
• Citation: 538 B.R. 67
• Court: U.S. District Court — District of Oregon
• Parties: In re BERJAC OF OREGON, Debtors, Thomas A. Huntsberger, Trustee Plaintiff, v. Umpqua Holdings Corp., Umpqua Bank, Pacific Continental Corp., Pacific Continental Bank, Century Bank, Summit Bank, and Jones & Roth, P.C. Defendants.

538 B.R. 67

In re BERJAC OF OREGON, DebtorsThomas A. Huntsberger, Trustee Plaintiff

v.Umpqua Holdings Corp., Umpqua Bank, Pacific Continental Corp., Pacific Continental Bank, Century Bank, Summit Bank, and Jones & Roth, P.C. Defendants.

No. 6:14–cv–01851–AA.

United States District Court, D. Oregon.

Signed Sept. 4, 2015.

Christopher H. Kent, Leslie S. Johnson, Kent & Johnson, LLP, Portland, OR, for Plaintiff.

John Spencer Stewart, Thomas A. Larkin, Tyler J. Storti, Stewart Sokol & Larkin LLC, Jacob S. Gill, Keith A. Ketterling, Stoll Stoll Berne Lokting & Schlachter, Sanford R. Landress, Greene & Markley, P.C., Stephen F. English, Thomas R. Johnson, Perkins Coie, LLP, Portland, Cassie K. Jones, Gleaves Swearingen LLP, Eugene, OR, for Defendant.

OPINION AND ORDER

AIKEN, Chief Judge:

Defendants Umpqua Holdings Corp. (UHC), Umpqua Bank (collectively Umpqua), Pacific Continental Corp. (PCC), Pacific Continental Bank (PCB), Century Bank¹ , Summit Bank (collectively the banks), and Jones & Roth, P.C. (J & R), move to dismiss or make more definite and certain plaintiff's, Thomas Huntsberger, claims against them pursuant to Fed. R. Civ. P. 8(a), 9(b), 12(b)(6), and 12(e). For the reasons set forth below, defendants' motions are granted in part and denied in part.

BACKGROUND

Plaintiff is the court appointed Chapter 7 trustee of debtor, Berjac of Oregon (debtor), which filed for bankruptcy on August 31, 2012. Pl.'s Am. Compl. ¶¶ 5–6. Debtor was a general partnership that was wholly owned by its only two partners, Michael and Gary Holcomb. Id., at ¶ 6. Debtor was in the insurance premium financing business, whereby it collected money from investors that it purportedly used to advance insurance premiums to businesses that chose not to pay the full premiums upfront. Id. at ¶¶ 6, 13. Plaintiff alleges, however, that the money received from investors was used personally by the Holcombs, as well as by their family members and affiliates, and was also used to pay interest and return principal to earlier investors in furtherance of a Ponzi scheme that cost investors over $44 million when the scheme collapsed. Id. at ¶ 15; Pl.'s Opp'n to PCD's Mot. to Dismiss 2.

Plaintiff alleges that a key part of the Holcombs' alleged Ponzi scheme, were lines of credit that the Holcombs established at the banks, which “allowed investors to withdraw money from their accounts at any time ... when current funds were insufficient to pay investor calls.” Pl.'s Am. Compl. ¶ 16. Specifically, plaintiff alleges that debtor established lines of credit with Umpqua Bank and PCB and that Michael and Gary Holcomb, personally, and through a family owned business, the Holcomb Family Limited Partnership (HFLP), established additional lines of credit at Century Bank and Summit Bank. Id.

Plaintiff also argues that J & R, the firm that provided accounting services for debtor, was aware that “the banks were making lending decisions based, at least in part, on the financial statements issued by [J & R] ... [and] that in the absence of accountant-prepared financial statements, debtor's ability to maintain or obtain new credit relationships with the banks would be impaired.” Id. at SI 21. Moreover, plaintiff argues that the alleged Ponzi scheme, in which “investors could add to and withdraw their money at any time, on demand—was accomplished with, and required the assistance of, the banks and the accountants [and] [w]ithout their assistance, the scheme would have collapsed.” Id. at ¶ 19.

STANDARDS

I. Motion to Dismiss

Federal Rule of Civil Procedure 8(a)(2) requires only “a short and plain statement of the claim showing that the pleader is entitled to relief, in order to give the defendant fair notice of what the ... claim is and the grounds upon which it rests.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (citation and quotes omitted). “While a complaint attacked by a motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Id., (citation and quotes omitted) (see also Papasan v. Allain, 478 U.S. 265, 286, 106 S.Ct. 2932, 92 L.Ed.2d 209 (1986) on a motion to dismiss, courts “are not bound to accept as true a legal conclusion couched as a factual allegation.”).

“To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ ” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Twombly, 550 U.S. at 570, 127 S.Ct. 1955 ). A claim is facially plausible “when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. The plausibility standard requires more than the sheer possibility or conceivability that a defendant has acted unlawfully. Id. at 678–79, 129 S.Ct. 1937 (see also Twombly, 550 U.S. at 555, 127 S.Ct. 1955, “Factual allegations must be enough to raise a right to relief above the speculative level.”). “Where a complaint pleads facts that are merely consistent with a defendant's liability, it stops short of the line between possibility and plausibility of entitlement to relief.” Iqbal, 556 U.S. at 678, 129 S.Ct. 1937 (citation and quotes omitted).

Dismissal under Rule 12(b)(6) is proper only when the complaint either (1) lacks a cognizable legal theory or (2) fails to allege sufficient facts to support a cognizable legal theory. Mendiondo v. Centinela Hosp. Med. Ctr., 521 F.3d 1097, 1104 (9th Cir.2008). “A well-pleaded complaint may proceed even if it appears that a recovery is very remote and unlikely.” Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974).

II. Pleading Standard for Claims of Fraud

Where a complaint includes allegations of fraud, Rule 9(b) requires that the allegations be “specific enough to give defendants notice of the particular misconduct which is alleged to constitute the fraud charges so that they can defend against the charge and not just deny that they have not done anything wrong.” Semegen v. Weidner, 780 F.2d 727, 731 (9th Cir.1985). The complaint “must be accompanied by ‘the who, what, when, where, and how’ of the misconduct charged.” Vess v. Ciba–Geigy Corp. U.S.A., 317 F.3d 1097, 1108 (9th Cir.2003). Moreover, Rule 9(b) states that although “malice, intent, knowledge, and other conditions of a person's mind may be alleged generally,” the plaintiff must “set forth facts from which an inference of scienter could be drawn.” Cooper v. Pickett, 137 F.3d 616, 628 (9th Cir.1997) (internal quotations omitted).

However, where fraud is not an essential element of a claim, only those allegations of a complaint which aver fraud are subject to Rule 9(b)'s heightened pleading standard. Kearns v. Ford Motor Co., 567 F.3d 1120, 1124 (9th Cir.2009) (citing Vess, 317 F.3d at 1105 ). When a party does not aver fraud, the party's allegations need only satisfy the requirements of Rule 8(a)(2). Id. “Fraud can be averred by specifically alleging fraud, or by alleging facts that necessarily constitute fraud (even if the word fraud is not used).” Vess, 317 F.3d at 1105.

III. Pleading Standard in Cases with Multiple Defendants

“Where several defendants are sued in connection with an alleged fraudulent scheme, the plaintiff must identify the role of each defendant in the scheme.” Alcantar v. MML Investors Services, Inc., 2008 WL 2570938, at *5 (D.Or.2008) (citing Swartz v. KPMG, LLP, 476 F.3d 756, 765 (9th Cir.2007) ). “[C]onclusory allegations that defendants were acting in concert, acting as agents, or were active participants in the conspiracy, without any stated factual basis, are insufficient as a matter of law.” Id. (internal quotations omitted). “Rule 9(b) does not allow a complaint to merely lump multiple defendants together, but require[s] plaintiffs to differentiate their allegations when suing more than one defendant ... and inform each defendant separately of the allegations surrounding his alleged participation in the fraud.” Swartz, 476 F.3d at 764–65. Moreover, “in the context of a fraud suit involving multiple defendants, a plaintiff must, at a minimum, identify the role of each defendant in the alleged fraudulent scheme.” Id.

IV. Motion to Make More Definite and Certain

Under Rule 12(e), “[a] party may move for a more definite statement of a pleading to which a responsive pleading is allowed but which is so vague or ambiguous that the party cannot reasonably prepare a response.” Fed. R. Civ. P. 12(e). A plaintiff should be granted leave to amend if the complaint can possibly be cured by additional factual allegations. Doe v. U.S.A., 58 F.3d 494, 497 (9th Cir.1995). However, “[d]ismissal without leave to amend is proper if it is clear that the complaint could not be saved by amendment.” Kendall v. Visa U.S.A., Inc., 518 F.3d 1042, 1051 (9th Cir.2008).

DISCUSSION

Plaintiff argues that “the gravemen of the entire action is the existence [of] a very old Ponzi scheme,” which “was accomplished with, and required the assistance of, the banks and accountants [and] [w]ithout their assistance, the scheme would have collapsed.” Pl.'s Am. Compl. ¶ 19; Pl.'s Opp'n to J & R's Mot. to Dismiss 13. Specifically, plaintiff argues that that the banks and J & R “took actions that knowingly and substantially facilitated the Ponzi scheme” and that “allegations of a Ponzi scheme are prima facie for fraud.” Pl.'s Opp'n to PCD's Mot. to Dismiss 2; Pl.'s Opp'n to Umpqua's Mot. to Dismiss 10. Consequently, plaintiff makes eleven claims for relief against the banks and J & R pursuant to sections 541, 544, and 547–551 of the Bankruptcy Code, as well as Oregon Revised Statutes 95.200 –95.310 (Oregon's Uniform Fraudulent Transfers Act (UFTA)). Pl.'s Am. Compl. 13–29.

As an initial matter, because a Ponzi...