In re Jmc Telecom LLC

• Decision Date: 05 October 2009
• Docket Number: Bk. Case No. 2:07-bk-15900-RN.,Adv. Case No. 2:08-ap-01012-RN.,No. CV 08-7932 AHM.,CV 08-7932 AHM.
• Citation: 416 B.R. 738
• Parties: In re JMC TELECOM LLC.
• Court: U.S. District Court — Central District of California

Page 738

416 B.R. 738

In re JMC TELECOM LLC.

No. CV 08-7932 AHM.

Bk. Case No. 2:07-bk-15900-RN.

Adv. Case No. 2:08-ap-01012-RN.

United States District Court, C.D. California.

October 5, 2009.

COPYRIGHT MATERIAL OMITTED

Proceedings:

IN CHAMBERS (No Proceedings Held)

A. HOWARD MATZ, District Judge.

I. INTRODUCTION

This case is on appeal from an Order of the Bankruptcy Court dismissing Appellant's complaint for fraudulent transfer as being time-barred. The Court finds that the facts and legal arguments are adequately presented in the briefs and record. Accordingly, because the court conclusively finds that the decisional process would not be significantly aided by oral argument, this matter shall be decided on the record before this court without oral argument. See Bankruptcy Rule 8012; Fed. R.App. P. 34(a)(2)(C).

Appellant, the Bankruptcy Trustee for JMC Telecom LLC ("JMC"), alleges that Appellees, Jean-Marie Cabri and Alexandra Allinne Cabri, fraudulently transferred $630,000 from JMC's accounts into Mrs. Cabri's personal account on May 12, 1999. ER 116. Appellant did not file suit to recover these funds until January 8, 2008. Appellant nevertheless argues that Bankruptcy Judge Richard Neiter erred in finding the suit time-barred under California Civil Code § 3439.09(c). For the following reasons, the Court AFFIRMS the decision of the Bankruptcy Court to dismiss the complaint.

II. SUMMARY OF FACTUAL ALLEGATIONS IN THE COMPLAINT

Mr. Jean-Marie Cabri and Mrs. Alexandra Allinne Cabri, husband and wife, formed JMC Telecom LLC in late 1997. Mr. Cabri owned a 70% membership interest in JMC, and Mrs. Cabri owned the remaining 30% membership interest. ER 115. In September 1998, AT & T Corp. ("AT & T") and JMC entered into an agreement under which AT & T would provide prepaid calling services to JMC and JMC in turn would sell the services as prepaid telephone cards to end-users in the maritime market. ER 117.

On May 12, 1999, $630,000 was paid from JMC's bank account to an account in the name of Mrs. Cabri. The transaction (the "Transfer") was described in JMC's records as a transfer to "Other Savings A/C." ER 116. JMC was made insolvent by the Transfer. ER 117.

On June 4, 1999, AT & T filed a complaint against JMC for breach of contract in the Federal District Court for the District of New Jersey. A judgment was entered on December 29, 2004 for AT & T in the amount of $10,743,885.68. ER 117.

During the course of discovery in the breach of contract dispute, AT & T questioned JMC about the reason for the Transfer. In an email dated December 23, 2003, counsel for JMC advised AT & T as follows:

This email is in response to your letter of December 17, 2003 requesting information concerning documents and records relating to the "other savings account" listed in JMC's 1999 and 2000 trial balances. I have looked into this matter. I have been advised that the "other savings account" was not a JMC savings account. It was the personal account of the wife of Jean Marie Cabri. The account was closed in 2000. I previously mentioned to Richard Brown that I believed the account was not a JMC account, but a third party account.

ER 118.

After AT & T obtained judgment, JMC filed an appeal to the Third Circuit, and the parties entered post-judgment discovery to determine to what extent the judgment could be satisfied. ER 118. As part of that discovery process, Mr. Cabri filed two declarations — one on Feb. 28, 2005 and one on May 17, 2005 — which asserted that all funds transferred away from JMC were used for legitimate business purposes. ER 120-21.

AT & T won the appeal in the Third Circuit and the Supreme Court denied JMC's petition for a writ of certiorari on June 4, 2007. ER 122.

On July 12, 2007, JMC filed a voluntary chapter 7 petition for bankruptcy. ER 115. Appellant John P. Pringle is the bankruptcy trustee in that ongoing proceeding. On January 8, 2008, Appellant filed his Original Complaint in this case. ER 80. The Original Complaint was dismissed with leave to amend pursuant to Fed.R.Civ.P. 12(b)(6), and Appellant filed his Amended Complaint on May 19, 2008. ER 114-198. Appellees filed a motion to dismiss the Amended Complaint under Fed.R.Civ.P. 12(b)(6), which Bankruptcy Judge Richard Neiter granted without leave to amend on Nov. 19, 2008. ER 235-37.

III. STANDARD OF REVIEW

This Court reviews the Bankruptcy Court's factual findings for clear error and its legal conclusions de novo. In re Anastas, 94 F.3d 1280, 1283 (9th Cir.1996). The only issues raised in this appeal are questions of law. Therefore, review is de novo.

On a motion to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure for failure to state a claim, the allegations of the complaint must be accepted as true and are to be construed in the light most favorable to the nonmoving party. Wyler Summit P'ship v. Turner Broad. Sys., Inc., 135 F.3d 658, 661 (9th Cir.1998). A Rule 12(b)(6) motion tests the legal sufficiency of the claims asserted in the complaint. Thus, if the complaint states a claim under any legal theory, even if the plaintiff erroneously relies on a different legal theory, the complaint should not be dismissed. Haddock v. Bd. of Dental Examiners, 777 F.2d 462, 464 (9th Cir.1985).

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[.]" ... While a complaint attacked by a Rule 12(b) (6) motion to dismiss does not need detailed factual allegations ..., a plaintiffs obligation to provide the "grounds" of his "entitle[ment] to relief" requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do .... Factual allegations must be enough to raise a right to relief above the speculative level ....

Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 1964-65, 167 L.Ed.2d 929 (2007) (internal citations omitted).

"Two working principles underlie ... Twombly." Ashcroft v. Iqbal, ___ U.S. ___, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009). "First, the tenet that a court must accept as true all allegations contained in a complaint is inapplicable to legal conclusions. Threadbare recitals of elements of a cause of action, supported by mere conclusory statements, do not suffice ... Second, only a complaint that states a plausible claim for relief survives a motion to dismiss." Id. at 1949-50. "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.... The plausibility standard is not akin to a `probability requirement,' but it asks for more than a sheer possibility that defendant has acted unlawfully." Id. at 1949. "Determining whether a complaint states a plausible claim for relief ... [is] a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Id. at 1950.

"Generally, a ... court may not consider any material beyond the pleadings in ruling on a Rule 12(b)(6) motion.... However, material which is properly submitted as part of the complaint may be considered" on a motion to dismiss. Hal Roach Studios, Inc. v. Richard Feiner & Co., 896 F.2d 1542, 1555 n. 19 (9th Cir.1989) (citations omitted). Documents whose contents are alleged in a complaint and whose authenticity no party questions, but which are not physically attached to the pleading, may be considered in ruling on a Rule 12(b)(6) motion to dismiss without converting the motion to dismiss into a motion for summary judgment. Lee v. City of Los Angeles, 250 F.3d 668, 689 (9th Cir.2001). If the documents are not physically attached to the complaint, they may be considered if their "authenticity ... is not contested" and "the plaintiffs complaint necessarily relies" on them. Parrino v. FHP, Inc., 146 F.3d 699, 705-06 (9th Cir.1998). Furthermore, under Fed. R.Evid. 201, a court may take judicial notice of "matters of public record." Mack v. South Bay Beer Distribs., 798 F.2d 1279, 1282 (9th Cir.1986), abrogated on other grounds by Astoria Fed. Sav. & Loan Ass'n v. Solimino, 501 U.S. 104, 111 S.Ct. 2166, 115 L.Ed.2d 96 (1991). "The ... court will not accept as true pleading allegations that are contradicted by facts that can be judicially noticed or by other allegations or exhibits attached to or incorporated in the pleading." 5C Wright & Miller, Fed. Prac. & Pro. § 1363 (3d ed.2004).

IV. ANALYSIS

This appeal presents three issues. First, does Cal. Civil Code § 3439.09(c) absolutely bar appellant's cause of action for fraudulent transfer, where more than seven years passed between the alleged fraudulent transfer and the filing of the complaint? Second, do the doctrines of "equitable tolling" or "equitable estoppel" apply to the running of the statute of limitations under § 3439.09(c)? Third, does the Amended Complaint allege facts sufficient to establish a claim for "constructive trust"?

A. Section 3439.09(c) Operates as an Absolute Bar on Fraudulent Transfer Claims Older than Seven Years

The Bankruptcy Court properly found that the action for fraudulent transfer is time-barred by Cal. Civil Code § 3439.09(c). ER 236. The California Uniform Fraudulent Transfer Act ("CUFTA") sets forth a statute of limitation that requires a plaintiff to file within four years of the transfer or, for an intentional fraud, within one year after the transfer was or could reasonably have been discovered. Cal. Civ.Code §§ 3439.09(a)-(b). The CUFTA also includes a statute of repose, Cal. Civ.Code § 3439.09(c), which creates an absolute backstop of seven years within which a cause of action for fraudulent transfer must be filed.

Cal. Civil Code § 3439.09(c) states, "Notwithstanding any other provision of law, a cause of action with respect to a...