In re 3710 Hendricks Road Corp., Case Number 05-43771 (Bankr. N.D. Ohio 3/31/2008)

• Decision Date: 31 March 2008
• Docket Number: Case Number 05-43771.,Adversary Number 05-4131.
• Citation: In re 3710 Hendricks Road Corp., Case Number 05-43771 (Bankr. N.D. Ohio 3/31/2008), Adversary Number 05-4131., Case Number 05-43771. (Bankr. N.D. Ohio Mar 31, 2008)
• Parties: IN RE: 3710 HENDRICKS ROAD CORP., fka YSD INDUSTRIES, INC. Chapter 7, Debtor. THE LAMSON & SESSIONS COMPANY, and RICHARD G. ZELLERS, TRUSTEE, Plaintiffs, v. MUNDINGER TRUST, et al., Defendants.
• Court: U.S. Bankruptcy Court — Northern District of Ohio

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IN RE: 3710 HENDRICKS ROAD CORP., fka YSD INDUSTRIES, INC. Chapter 7, Debtor THE LAMSON & SESSIONS COMPANY, and RICHARD G. ZELLERS, TRUSTEE, Plaintiffs, v. MUNDINGER TRUST, et al., Defendants.

Case Number 05-43771.

Adversary Number 05-4131.

United States Bankruptcy Court, N.D. Ohio.

March 31, 2008.

MEMORANDUM OPINION REGARDING DEFENDANT'S MOTION TO DISMISS (NOT INTENDED FOR NATIONAL PUBLICATION)

KAY WOODS, Bankruptcy Judge

This opinion is not intended for national publication and carries limited precedential value. The availability of this opinion by any source other than www.ohnbuscourts.gov is not the result of direct submission by this Court. The opinion is available through electronic citation at www.ohnb.uscourts.gov pursuant to the E-Government Act of 2002 (Pub. L. No. 107-347).

This matter is before the Court on the Joint Motion to Dismiss of Defendants William D. Mundinger Trust U/A 10/13/99, William D. Mundinger, William H. Peters Revocable Trust U/A 4/15/02, William H. Peters, Stanley W. Cosky, Karen A. Mundinger Revocable Trust, Karen A. Mundinger, Deanna V. Peters Revocable Trust, Deanna V. Peters, and James L. Messenger ("Motion to Dismiss") (Doc. # 139) filed on July 31, 2007, by Defendants William D. Mundinger ("Mundinger"), William H. Peters ("Peters"), William D. Mundinger Trust ("Mundinger Trust"), William H. Peters Revocable Trust ("Peters Trust"), Stanley W. Cosky ("Cosky"), Karen A. Mundinger ("Mrs. Mundinger"), Karen A. Mundinger Revocable Trust ("Mrs. Mundinger Trust"), Deanna V. Peters ("Mrs. Peters"), Deanna V. Peters Revocable Trust ("Mrs. Peters Trust"), and James L. Messenger ("Messenger") (collectively, "Movants").

Plaintiff The Lamson & Sessions Co. ("Lamson") filed Plaintiff The Lamson & Sessions Co.'s Memorandum in Opposition to Motion to Dismiss ("Lamson's Response") (Doc. # 152) on August 13, 2007, and Plaintiff Chapter 7 Trustee Richard Zellers ("Trustee") filed Opposition of Plaintiff Richard G. Zellers, Trustee, to Defendants' Joint Motion to Dismiss and Memorandum of Law in Support Thereof ("Trustee's Response") (Doc. # 158) on August 31, 2007.

This Court has jurisdiction over this adversary proceeding pursuant to 28 U.S.C. § 157.¹ Venue in this Court is proper pursuant to 28 U.S.C. §§ 1391(b), 1408, and 1409. The following constitutes the Court's findings of fact and conclusions of law pursuant to FED. R. BANKR. P. 7052.

I. FACTUAL AND PROCEDURAL BACKGROUND

In addition to the facts listed below, this Order incorporates by reference the facts detailed in Memorandum Opinion Denying Motion to Dismiss, entered on October 5, 2005, in the main case from which this Adversary Proceeding has arisen (Case # 05-43771, Doc. # 62).

YSD Industries ("YSD" or "Debtor") filed a chapter 7 voluntary petition on June 26, 2005. On June 28, 2005, Debtor filed Notice of Removal of State Court Civil Action to Bankruptcy Court (Doc. # 1), which commenced this Adversary Proceeding. The State Court Action ("State Court Action"), filed by Lamson in the Court of Common Pleas of Cuyahoga County, Ohio, on July 9, 2004, against Debtor, Mundinger, and Peters, sets forth six counts: (i) breach of contract against Debtor, (ii) breach of contract against Mundinger and Peters, (iii) fraudulent transfer in violation of Ohio Revised Code ("O.R.C.") § 1336.04, (iv) fraudulent transfer in violation of O.R.C. § 1336.05, (v) breach of fiduciary duty, and (vi) unjust enrichment. (Doc. # 2.) At all relevant times, Mundinger and Peters were directors of YSD and YSD's sole shareholders.

On July 5, 2005, Debtor filed Answer of Defendant YSD Industries, Inc. — Jury Demand Endorsed Hereon (Doc. # 12), which had been previously filed in the Court of Common Pleas of Cuyahoga County, Ohio, in response to the State Court Action. On July 5, 2005, Lamson filed with this Court a copy of the State Court Action Amended Complaint (Doc. # 13), which sets forth the same six counts listed above.

On August 11, 2005, Trustee filed Trustee's Amended Motion for Order Substituting Trustee as Plaintiff ("Substitution Motion")² (Doc. # 25) with respect to Counts II, III, IV, V, and VI of the Amended Complaint. Subsequent to the October 19, 2005, hearing on this issue, this Court issued Memorandum Opinion Granting in Part [as to Counts III, IV, and V] and Denying in Part [as to Counts II and VI] Trustee's Amended Motion for Order Substituting Trustee as Plaintiff ("Substitution Order") (Doc. # 33) on October 24, 2005.³

Trustee filed Amended Complaint (Doc. # 48) against Debtor, Mundinger, and Peters on November 30, 2005. Mundinger and Peters filed Separate Answer of Defendants William Mundinger and William Peters (Doc. # 54) on January 26, 2006.

Lamson filed Second Amended Complaint of Plaintiff The Lamson & Sessions Co. (Doc. # 63) on May 5, 2006, against Mundinger and Peters, who filed Separate Answer of Defendants William Mundinger and William Peters (Doc. # 66) on May 24, 2006.

Trustee and Lamson (collectively "Plaintiffs") filed Third Amended Complaint (Doc. # 87) against all Defendants,⁴ except Messenger, on November 8, 2006. The Third Amended Complaint contained ten counts. The named Defendants filed six separate Answers to Plaintiffs' Third Amended Complaint on December 14, 2006 (Doc. ## 100-105.)

Trustee filed Motion for Leave to File Amended Complaint ("Motion to Amend") (Doc. # 124) on May 23, 2007. Movants, except Messenger,⁵ filed Objection and Brief in Opposition to Motion for Leave to File [Fourth] Amended Complaint (Doc. # 127) on June 15, 2007. On June 20, 2007, the Court held a Hearing on the Motion to Amend, which was granted on June 20, 2007.

Plaintiffs filed Fourth Amended Complaint ("Complaint") (Doc. # 129) against all Defendants on June 21, 2007. This Complaint is the subject of the Motion to Dismiss and sets forth the following ten counts:

1. Lamson's breach of contract claim against Mundinger and Peters based on alter ego ("Count I");

2. Trustee's claim for fraudulent transfer (O.R.C. § 1336.04) against Mundinger, Peters, Cosky, Mundinger Trust, Mrs. Mundinger, Mrs. Mundinger Trust, Peters Trust, Mrs. Peters, and Mrs. Peters Trust ("Count II");

3. Trustee's claim for fraudulent transfer (O.R.C. § 1336.05) against YSD, Mundinger, Peters, Cosky, Mundinger Trust, Mrs. Mundinger, Mrs. Mundinger Trust, Peters Trust, Mrs. Peters, and Mrs. Peters Trust ("Count III");

4. Trustee's claim for breach of fiduciary duty against Mundinger, Peters, and Messenger ("Count IV");

5. Lamson's unjust enrichment claim against Mundinger and Peters ("Count V") 6. Trustee's unjust enrichment claim against Mundinger and Peters ("Count VI");

7. Trustee's claim for unlawful dividends against Mundinger, Messenger, and Peters ("Count VII");

8. Lamson's claim for intentional interference with contract against Mundinger, Peters, Dennison, and Packer Thomas ("Count VIII");

9. Trustee's claim for professional negligence against Dennison and Packer Thomas ("Count IX"); and

10. Trustee's claim for aiding and abetting fraudulent transfers against Dennison, Messenger, and Packer Thomas.

Defendants filed seven separate answers between July 31, 2007, and August 7, 2007 (Doc. ## 138, 140-144, and 150.)

II. STANDARD FOR REVIEW

A party may bring a motion to dismiss for failure to state a claim pursuant to FED. R. CIV. P. 12(b)(6) to test whether a cognizable claim has been pled in the complaint. If a plaintiff fails to state a cognizable claim, the court can dismiss the complaint. To withstand dismissal, the complaint must (i) provide a short and plain statement of the claim that shows the plaintiff is entitled to relief, (ii) give the defendant fair notice of the claim, and (iii) state the grounds upon which the claim rests. See FED. R. CIV. P. 8(a); Conley v. Gibson, 355 U.S. 41, 47 (1957).

FED. R. CIV. P. 12(b)(6), which is applicable to this case through FED. R. BANKR. P. 7012, requires that a complaint be dismissed for failure to allege "enough facts to state a claim to relief that is plausible on its face." Bell Atlantic Corp. v. Twombly, 127 S. Ct 1955, 1974 (2007).⁶ The Court of Appeals for the Sixth Circuit noted:

[in Twombly, t]he Supreme Court has recently clarified the law with respect to what a plaintiff must plead in order to survive a Rule 12(b)(6) motion. . . . The Court stated that "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." Additionally, the Court emphasized that even though a complaint need not contain "detailed" factual allegations, its "[f]actual allegations must be enough to raise a right to relief above the speculative level on the assumption that all the allegations in the complaint are true."

Association of Cleveland Fire Fighters v. City of Cleveland, 502 F.3d 545, 548 (6th Cir. 2007) (citations omitted) (second alteration in original). See also, Nicholson v. Countrywide Home Loans, No. 1:07-CV-3288, 2008 U.S. Dist. LEXIS 20714, *6 (N.D. Ohio March 17, 2008) ("Accordingly, the claims set forth in a complaint must be plausible, rather than conceivable." (citing Twombly, 127 S. Ct. at 1974)); Boling v. Correctional Medical Services, No. 07-11752, 2007 U.S. Dist. LEXIS 80479, *8-9 (E.D. Mich. Oct. 31, 2007) (Noting Twombly "is consistent with the holdings of several prior Sixth Circuit opinions.. . . [that a complaint] `must contain either direct or inferential allegations regarding all the material elements' . . . . [and be more than] `a statement of facts that merely creates a suspicion that the pleader might have a right of action.'" (citations omitted)); and Reid v. Purkey, No. 2:06-CV-40, 2007 U.S. Dist. LEXIS 42761, *4-5 (E.D Tenn. June 11, 2007) ("While a complain [sic] need not contain detailed factual allegations, a pleader has a duty . . . . to supply, at a minimum, the necessary facts and grounds which will support his right...