In re NM Holdings Company, LLC, Case No. 03-48939 (Jointly Administered) (Bankr. E.D. Mich. 4/17/2009), Case No. 03-48939 (Jointly Administered)

CourtUnited States Bankruptcy Courts. Tenth Circuit. U.S. Bankruptcy Court — Eastern District of Michigan
Writing for the CourtThomas J. Tucker
PartiesIn re: NM HOLDINGS COMPANY, LLC, et al., Chapter 7, Debtors. In re: DELUXE PATTERN CORPORATION, et al., Chapter 7, Debtors. STUART A. GOLD, TRUSTEE, Plaintiff, v. LARRY J. WINGET, SR., et al., Defendants.
Decision Date17 April 2009
Docket NumberNo. 06-4719,No. 06-4724,No. 06-4731,No. 05-4964.,No. 05-5592.,No. 05-4969.,(Consolidated with Adv. Pro. No. 03-5356,No. 06-4730,No. 05-4966.,No. 06-4715,,No. 06-4717.,No. 06-4733,No. 06-4729,No. 05-4972.,No. 03-5358.,Case No. 03-48939 (Jointly Administered),No. 06-4720,Adv. Pro. No. 04-4373,No. 06-4732,No. 06-4721,No. 06-4726,No. 05-4963.,No. 06-4725,No. 06-4714.,No. 06-4723,No. 06-4710.,No. 05-4968.,No. 03-5359.,No. 06-4718.,No. 06-4722,No. 06-4712.,Case No. 04-54977-TJT (Jointly Administered),No. 06-4709.,No. 06-4728,No. 06-4727,No. 06-4713.,No. 03-5357.,No. 06-4711,

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In re: NM HOLDINGS COMPANY, LLC, et al., Chapter 7, Debtors.
In re: DELUXE PATTERN CORPORATION, et al., Chapter 7, Debtors.
LARRY J. WINGET, SR., et al., Defendants.
Case No. 03-48939 (Jointly Administered)
Case No. 04-54977-TJT (Jointly Administered)
Adv. Pro. No. 04-4373
(Consolidated with Adv. Pro. No. 03-5356
No. 03-5357.
No. 03-5358.
No. 03-5359.
No. 05-4963.
No. 05-4964.
No. 05-4966.
No. 05-4968.
No. 05-4969.
No. 05-4972.
No. 05-5592.
No. 06-4709.
No. 06-4710.
No. 06-4711,
No. 06-4712.
No. 06-4713.
No. 06-4714.
No. 06-4715,
No. 06-4717.
No. 06-4718.
No. 06-4719
No. 06-4720
No. 06-4721
No. 06-4722
No. 06-4723
No. 06-4724
No. 06-4725
No. 06-4726
No. 06-4727
No. 06-4728
No. 06-4729
No. 06-4730
No. 06-4731
No. 06-4732
No. 06-4733
United States Bankruptcy Court, E.D. Michigan, Southern Division.
April 17, 2009

THOMAS J. TUCKER, Bankruptcy Judge.

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In these consolidated adversary proceedings, the Chapter 7 trustee in eleven jointly-administered bankruptcy cases seeks to recover a total of more than $320 million from Defendant Larry J. Winget, Sr. and numerous other defendants.

Before the Court are several motions to dismiss, and several motions in the alternative for more definite statement regarding, various counts in the Plaintiff Stuart A. Gold, Trustee's Complaint in Case No. 04-4373, and in his complaints in several other of the consolidated adversary proceedings.

The motions raise many issues, including issues about (1) a bankruptcy court's authority to order substantive consolidation of non-debtor entities with the estate of a bankruptcy debtor, particularly in light of the Supreme Court's decisions in Grupo Mexicano de Desarrollo, S.A. v. Alliance Bond Fund, Inc., 527 U.S. 308 (1999) and Butner v. United States, 440 U.S. 48 (1979); (2) the doctrine of judicial estoppel and related concepts; (3) statutes of limitation applicable to fraudulent transfer claims and preference-avoidance claims; (4) the extent to which Fed.R.Civ.P. 9(b) requires fraudulent transfer claims to be pleaded with particularity; and (5) the level of detail that must be alleged in order to state a claim, under Fed.R.Civ.P. 8 and 12(b)(6), for avoidance of preferential transfers.

The motions also raise several issues specific to Michigan law, including issues about (1) the extent to which the Michigan Business Corporation Act preempts fraudulent transfer claims under the Michigan Uniform Fraudulent Transfer Act; and (2) claims of unjust enrichment.

For the reasons discussed below, the Court will grant the motions to dismiss in part and deny them in part, and will deny all of the motions for more definite statement. The Court also will grant Gold leave to file an amended complaint.

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I. Background

A. Procedural history

1. The Venture Holdings bankruptcy cases

Venture Holdings Company LLC ("Venture Holdings") (Case No. 03-48939) and ten of its related entities1 filed voluntary chapter 11 bankruptcy petitions on March 28, 2003. The eleven cases are jointly administered under Case No. 03-48939. (The eleven Debtors in these cases are collectively referred to as the "Venture Debtors" and "Debtors"). An official unsecured creditors committee was formed on April 13, 2003.

Debtors were unable to confirm a plan. After a lengthy confirmation hearing, the Court denied confirmation of Debtors' second amended joint plan on January 21, 2005. The Court later approved the sale of substantially all of the Debtors' assets.2 The sale closed on May 2, 2005.3 On January 11, 2006, Debtors' bankruptcy cases were converted to Chapter 7. Stuart A. Gold was appointed as the Chapter 7 trustee on January 19, 2006.

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2. The Deluxe Pattern bankruptcy cases

Deluxe Pattern Corporation and eight of its related entities4 filed voluntary chapter 11 bankruptcy petitions on May 24, 2004. The nine cases are jointly administered under Case No. 04-54977. (The nine Debtors in these cases are collectively referred to in this opinion as the "Deluxe Debtors"). The Deluxe Debtors continued business operations, engaged in efforts to confirm a reorganization plan, and filed various adversary proceedings.

The Deluxe Debtors were all owned, directly or indirectly, and controlled by, Larry J. Winget. Winget also controlled, directly or indirectly, all of the Venture Debtors. Unlike the Venture Debtors, which were under Winget's control when they filed their voluntary bankruptcy petitions in 2003, the Deluxe Debtors were no longer under Winget's control when they filed their bankruptcy petitions in 2004. Rather, they were then controlled by a Board of Directors appointed by certain secured creditors of the Venture and Deluxe Debtors, who had exercised their rights under stock pledges that Winget had given them, to secure his personal guaranty of the Venture and Deluxe Debtors' secured debt.

The Deluxe Debtors sold substantially all of their assets, in conjunction with the sale of the Venture Debtors' assets, all of which the Court approved in an Order filed on April 19, 2005 in the jointly-administered Venture cases.5 As noted above, that sale closed on May 2, 2005.

Several of the Deluxe Debtors filed adversary proceedings against Larry J. Winget and his

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affiliated entities which were not in bankruptcy, on August 15, 2005, May 23, 2006, and May 24, 2006. Twenty-five of these cases remain pending and are consolidated with Case No. 04-4373,6 but none of these cases are involved in the motions addressed by this opinion.

The Deluxe Debtors filed a joint chapter 11 plan, then later a "modified" first amended plan, then later a second amended plan,7 but withdrew each plan without prejudice.8 Ultimately, on January 11, 2008, the Court entered an order converting the Deluxe cases to Chapter 7, effective January 30, 2008. Basil T. Simon is the Chapter 7 Trustee in each of the Deluxe cases.

3. These adversary proceedings

On April 5, 2004, while the Venture bankruptcy cases were still in Chapter 11, Debtors and the official committee of unsecured creditors jointly filed a thirteen count complaint against 31 defendants, initiating adversary proceeding no. 04-4373.

In Count XI of the complaint, Plaintiffs sought the avoidance and recovery of preferential transfers against a group of eight defendants identified as the "Corporate Preference Defendants."9 On August 30, 2005, the Court granted a motion by Plaintiffs to sever their preference claims against the "Corporate Preference Defendants" from the claims against the other defendants in the Original Complaint.10 The severed claims are now the subject of a

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separate adversary proceeding, Case No. 04-5178.

Gold, Trustee, substituted as Plaintiff in this adversary proceeding and in other adversary proceedings previously filed by Debtors and/or the Committee. Gold and certain defendants later stipulated to the consolidation of eight other adversary proceedings into this adversary proceeding for discovery and trial purposes.11 Later, 27 more adversary proceedings were consolidated with this one, for pretrial purposes.12

Several defendants in Case No. 04-4373 filed motions to dismiss Gold's Complaint or, in the alternative, for a more definite statement. These moving defendants are grouped as follows:

• Larry J. Winget, Sr. ("Larry Winget" or "Winget"); Venture Nevada LLC ("Venture Nevada"); Pompo Insurance & Indemnity Company, Ltd., ("Pompo"); VIR Company LLC ("VIR"); and Modas LLC ("Modas");13

• N. Mathew Winget ("N. Winget") and Linden Creek Enterprises, LLC ("Linden Creek");14

• Golf Course Services, Inc. ("GAS"); Winget Construction Services, LLC ("WCS"); and individual defendants, Gwendolyn Cameron, Adelicia J. Tiganelli, Brian P. Winget and Alicia J. Winget;15 and

• Venture Asia Pacific Pty., Ltd. ("Venture Asia"), and Venture Industries Australia Pty., Ltd. ("Venture Australia")(motion to dismiss only; no

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motion for more definite statement.)16

In several of the other adversary proceedings that are consolidated with Case No. 04-4373, the defendants also filed motions to dismiss and motions in the alternative for more definite statement. These motions raise issues that are essentially the same as issues raised by the motions in Case No. 04-4373, and are discussed more specifically at the end of this opinion.

The Court has entered several scheduling orders in these cases, and discovery is ongoing. The Court heard oral argument on the motions, at multiple hearings. This opinion addresses all of the motions.

II. Jurisdiction

This Court has subject matter jurisdiction under 28 U.S.C. §§ 1334(b), 157(a) and 157(b)(1), and Local Rule 83.50(a)(E.D. Mich.). It is clear that all claims in these consolidated adversary proceedings seeking to avoid and recover preferences or fraudulent transfers are core proceedings, under 28 U.S.C. § 157(b)(2)(F) and (H), respectively. For purposes of this opinion and given the Court's disposition of the motions at hand, and under 28 U.S.C. §§ 157(b)(1) and 157(c), it is not necessary, at this time, to determine the extent to which any other claims are core proceedings.

III. Applicable legal standards

A. Standards governing the motions to dismiss

Defendants bring their motions to dismiss under Fed.R.Civ.P. 12(b)(6), applicable in this adversary proceeding through Fed.R.Bankr.P. 7012, arguing that several counts in the Complaint fails to state a claim upon which relief can be granted.

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A motion under Rule 12(b)(6) tests the "sufficiency of [a] complaint." Conley v. Gibson, 355 U.S. 41, 45 (1957). A court must examine the plaintiff's allegations and determine whether, as a matter of law, "the plaintiff is entitled to legal relief even if everything alleged in the complaint is true." Mayer v. Mylod, 988 F.2d 635, 638 (6th Cir. 1993). "[A] court considering a motion to dismiss under Rule 12(b)(6) `must accept all...

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