JRS Partners v. Warren
| Decision Date | 25 March 2021 |
| Docket Number | NO. 3:17-cv-01258,3:17-cv-01258 |
| Parties | JRS PARTNERS, GP, et al. Plaintiffs, v. CHRIS WARREN, et al., Defendants. |
| Court | U.S. District Court — Middle District of Tennessee |
MEMORANDUM OPINION
Pending before the Court is Plaintiffs' Motion for Summary Judgment as to the only remaining Defendant, Brandy Warren (Doc. No. 169, "the Motion"),1 to which Defendant Warren ("Defendant") has failed to respond. The Local Rules of Court provide that failure to file a timely response to a motion shall indicate that there is no opposition to the motion. Local Rule 7.01(b).
In addition, Defendant has failed to file a timely response to Plaintiffs' Statement of Undisputed Facts, as required by Local Rule 56.01(b). If a timely response is not filed within the required time periods, the asserted facts shall be deemed undisputed for purposes of summary judgment. Local Rule 56.01(f). It is well-settled that the non-moving party must cite specific portions of the record in opposition to a motion for summary judgment, and the court is not required to search the record for some piece of evidence that might stave off summary judgment. Mullenix v. Eastman Chemical Co., 237 F. Supp. 3d 695, 710 (E.D. Tenn. 2017); Flannery v. Tune Imports, Inc., No. 3:18-cv-00584, 2020 WL 2512825, at *4 (M.D. Tenn. May 15, 2020).
The Court may not grant Plaintiffs' Motion solely because Defendant failed to respond, however. Mullenix, 237 F. Supp. 3d at 710; United States v. $155,900.00 U.S. Currency, No. 3:20-cv-00879, 2021 WL 780515, at *1 (M.D. Tenn. Feb. 26, 2021). The Court, at a minimum, is required to examine Plaintiffs' Motion for Summary Judgment to ensure that Plaintiffs have discharged their initial burden. Id. (citing Miller v. Shore Fin. Servs., Inc., 141 F. App'x 417, 419 (6th Cir. 2005)). The Federal Rules of Civil Procedure still require the moving party to demonstrate the absence of a disputed question of material fact and a ground that would entitle the moving party to judgment as a matter of law. Id.; Fed. R. Civ. P. 56(c).2
As earlier decisions in this case and the corresponding criminal case indicate, Plaintiffs are victims of a Ponzi scheme3 perpetrated by certain of the former Defendants in this case.4 This scheme involved investments in Clean Energy Advisors ("CEA"), a company founded by Christopher Warren, who marketed CEA as providing solar farm investment opportunities inexchange for tax-advantaged predictable income, when in fact CEA did no such thing and was simply a sham. United States v. Christopher Warren, Case No. 3-18-cr-00153, Doc. No. 21. Plaintiffs are judgment creditors of CEA. (Doc. Nos. 63 and 87).
Plaintiffs have alleged here that Defendant Brandy Warren received proceeds of that scheme in a significant cumulative sum. According to Plaintiffs, that money is subject to Tennessee's Uniform Fraudulent Transfers Act ("UFTA"), and Plaintiffs are entitled.to it. Via the Motion, Plaintiffs seek a judgment against Defendant in the amount of $3,903,830.
Summary judgment is appropriate where there is no genuine issue as to any material fact and the movant is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c). "By its very terms, this standard provides that the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986). In other words, even if genuine, a factual dispute that is irrelevant or unnecessary under applicable law is of no value in defeating a motion for summary judgment. See id. at 248. On the other hand, "summary judgment will not lie if the dispute about a material fact is 'genuine[.]'" Id.
A fact is "material" within the meaning of Rule 56(c) "if its proof or disproof might affect the outcome of the suit under the governing substantive law." Anderson, 477 U.S. at 248. A genuine dispute of material fact exists if the evidence is such that a reasonable jury could return a verdict for the non-moving party. Harris v. Klare, 902 F.3d 630, 634-35 (6th Cir. 2018).
The party bringing the summary judgment motion has the initial burden of identifying portions of the record that demonstrate the absence of a genuine dispute over material facts.Pittman v. Experian Information Solutions, Inc., 901 F.3d 619, 627-28 (6th Cir. 2018). If the summary judgment movant meets that burden, then in response the non-moving party must set forth specific facts showing that there is a genuine issue for trial. Id. at 628.
A party asserting that a fact cannot be or genuinely is disputed—i.e., a party seeking summary judgment and a party opposing summary judgment, respectively—must support the assertion by citing to materials in the record, including, but not limited to, depositions, documents, affidavits or declarations. Fed. R. Civ. P. 56(c)(1)(A). In reviewing a motion for summary judgment, this court must view the evidence in the light most favorable to the non-moving party. Tlapanco v. Elges, 969 F.3d 638, 647 (6th Cir. 2020) (quoting Anderson, 477 U.S. at 248). Likewise, the court should view the facts and draw all reasonable inferences in favor of the non-moving party. Pittman, 901 F.3d at 628. Credibility judgments and weighing of evidence are improper. Hostettler v. College of Wooster, 895 F.3d 844, 852 (6th Cir. 2018). As noted above, where there is a genuine dispute as to any material fact, summary judgment is not appropriate. Id. The court determines whether sufficient evidence has been presented to make the issue of fact a proper jury question. Id. The mere existence of a scintilla of evidence in support of the non-moving party's position will be insufficient to survive summary judgment; rather, there must be evidence upon which the jury could reasonably find for the non-moving party. Rodgers v. Banks, 344 F.3d 587, 595 (6th Cir. 2003).
Tennessee has adopted the UFTA, which provides remedies to creditors when insolvent debtors fraudulently transfer assets to third parties. See Tenn. Code Ann. § 66-3-301 et seq. The Act treats a transfer as fraudulent "if the debtor made the transfer . . . without receiving a reasonably equivalent value in exchange for the transfer . . . and the debtor was insolvent at thattime or the debtor became insolvent as a result of the transfer." Tenn. Code Ann. § 66-3-306(a); Billy F. Hawk, Jr. GST Non-Exempt Marital Tr. v. Comm'r of Internal Revenue, 924 F.3d 821, 827 (6th Cir. 2019).
The UFTA provides that: (a) A transfer made or obligation incurred by a debtor is fraudulent as to a creditor, whether the creditor's claim arose before or after the transfer was made or the obligation was incurred, if the debtor made the transfer or incurred the obligation: (1) with actual intent to hinder, delay, or defraud any creditor of the debtor; or (2) without receiving a reasonably equivalent value in exchange for the transfer or obligation. Tenn. Code Ann. § 66-3-305(a).
Under the UFTA, a "creditor" means a person who has a claim. Tenn. Code Ann. § 66-3-302(4). The Court finds that Plaintiffs are "creditors" because they lost money in the Ponzi scheme; in other words, they became tort claimants and therefore creditors from the moment they invested in CEA because, as explained below, CEA was insolvent from its inception. In addition, Plaintiffs are judgment creditors of CEA (See Doc. Nos. 63 and 87).5 "Transfer" means every mode, direct or indirect, absolute or conditional, voluntary or involuntary, of disposing of or parting with an asset or an interest in an asset, and includes payment of money, release, lease, and creation of a lien or other encumbrance. Tenn. Code Ann. § 66-3-302(12). As indicated below, Plaintiffs have shown that "transfers" were made to Defendant from CEA.
Moreover, because CEA was a Ponzi scheme, it was insolvent6 from its inception. Courts hold that a Ponzi scheme is inherently insolvent because each new investor has a tort claim that cannot be repaid. In re Schuholz, No. 18-13108, 2019 WL 11639553, at *3 (Bankr. S.D. Ohio Oct. 18, 2019); see also Wiand v. Lee, 753 F.3d 1194, 1201, n.3 (11th Cir. 2014) (); Warfield v. Byron, 436 F.3d 551, 558 (5th Cir. 2006) ().
Plaintiffs contend that Defendant never worked for or provided services for CEA and, therefore, she cannot show that CEA received any "reasonably equivalent value" for the transfers it made to her. Whether Defendant received a reasonably equivalent value in exchange for the payments to her is a question of fact. In re Wilkinson, 196 F. App'x 337, 341 (6th Cir. 2006). A court considering this question should first determine whether the debtor received any value in the exchange.7 If so, the court should determine if the value received was reasonably equivalent. Id.; see also In re Ellis, Adversary Proceeding No. 1:17-ap-1051-SDR, 2018 WL 2176346, at *4 .
Here, as indicated, Defendant has not responded to Plaintiffs' Statement of Undisputed Material Facts and, thereby, has admitted their truthfulness. Those facts, supported by citations to the record, establish that Defendant never was employed by CEA or performed services for it. Nor was she ever employed by the other companies that were related to CEA and part of thePonzi scheme. (Doc. No. 171 at ¶¶ 55-58; Doc. No. 171-5 at 3; Doc. No. 171-4 at ¶¶ 1-4). There is no evidence before the Court that Defendant received the transfers from CEA in payment of a debt or other obligation.
Plaintiffs have carried their initial burden to show that CEA did not receive "reasonably equivalent value" for the monies it transferred to Defendant, and Defendant has not carried her resulting burden to show that...
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