Lim v. Miller Parking Co.
| Decision Date | 12 May 2016 |
| Docket Number | Case Number 11-14422 |
| Citation | 560 B.R. 688 |
| Parties | K. Jin Lim as Trustee of MP Liquidating Co. LLC, Plaintiff, v. Miller Parking Co., James N. Miller Revocable Trust UTA, Nathan L. Miller Trust, Alison J. Miller Trust, David M. Miller Trust, and James N. Miller, Defendants. |
| Court | U.S. District Court — Eastern District of Michigan |
Christopher A. Grosman, Jeffrey B. Miller, Robert M. Carson, Robert A. Weisberg, Carson Fischer, PLC, Bloomfield Hills, MI, Kimberly R. Clayson, Kenneth M. Schneider, Schneider, Miller, Detroit, MI, for Plaintiff.
Candace V. Yono, Joshua A. Lerner, Steven Z. Cohen, Steven Rabinovitz, Cohen, Lerner & Rabinovitz, Royal Oak, MI, for Defendants.
OPINION AFTER TRIAL
This case focuses on the assets of the Miller family, and its late patriarch Bruce Miller, that have been accumulated through various businesses in Detroit and Chicago, which owned or operated several urban surface parking lots and parking structures. Miller Parking Company LLC, known throughout this lawsuit as "Miller Detroit," filed for bankruptcy protection after a $3 million judgment was entered against it in the Oakland County, Michigan circuit court on June 30, 2009. Plaintiff K. Jin Lim, the bankruptcy trustee of Miller Detroit (now known as MP Liquidating Co. LLC), filed the present action against James N. Miller (Bruce Miller's son, who also was the president of Miller Detroit), another family business, which was an Illinois corporation called Miller Parking Company (Miller Chicago), and Bruce Miller's other children and grandchildren (Janet Stein, Andrew Stein, Matthew Stein, Amy M. Weinstein, Benjamin Weinstein, Emily Weinstein, Nathan L. Miller, Alison J. Miller Goldstein, and David M. Miller), and their respective trusts. Under various theories, Lim alleged that Miller Detroit funneled many of its assets to Miller Chicago, that Miller Chicago is the alter ego of Miller Detroit, and that both companies made fraudulent transfers to the detriment of the bankruptcy estate that should be set aside.
Miller Detroit did not own parking facilities; instead, it provided administrative services to parking facilities owned by other entities, several of which included James and Bruce Miller as partners or shareholders. The events that precipitated the bankruptcy can be traced to 2004, when Alan Ackerman—a business associate of Bruce Miller for many years—and his company CH Holding (which owned a surface parking lot in Detroit and dealt with Miller Detroit) sued Bruce Miller and Miller Detroit in state court following a breakdown in the business relationship between the partners and their respective companies. James Miller was then the president of Miller Detroit and a principal shareholder and officer of Miller Chicago. In February 2009, while the Oakland County case was pending, a third party that held a long-term lease on Miller Chicago's major capital asset, the Bismark Parking Deck in Chicago, exercised an option in the lease to buy the deck. When the sale closed, Miller Chicago was left with no ongoing operations or major assets other than cash from the sale. On June 30, 2009, Ackerman won a judgment in the Oakland County case against Miller Detroit and Bruce Miller for approximately $3 million. In September 2009, James Miller distributed approximately $9 million in cash and other assets held by Miller Chicago to its shareholders, who consisted of the Miller children and grandchildren and their trusts (but not Bruce Miller or Miller Detroit). Not long after, James Miller dissolved the Chicago company. On October 7, 2009, Miller Detroit filed for bankruptcy.
On October 7, 2011, Lim filed her complaint in this case, alleging that James and Bruce Miller commingled the affairs of their two companies and carried out a fraudulent scheme to funnel assets from Miller Detroit to Miller Chicago, in order to evade creditor claims against Miller Detroit. On January 11, 2013, after the Court granted Lim's motion to amend, Lim filed a nine-count amended complaint. In Count I of her amended complaint, the trustee alleges that certain payments by Miller Detroit to Miller Chicago made within the twelve months before the bankruptcy filing date are voidable under 11 U.S.C. § 547(b). In Counts II and III, she contends that payments and other transfers made by Miller Detroit to the defendants during the two years before the bankruptcy filing date—and after Ackerman and CH Holding obtained their judgment—are voidable as fraudulent transfers under 11 U.S.C. §§ 548, 544(b)(1), and Michigan Compiled Laws §§ 566.34 -36. In Count IV, the trustee alleges that the distributions by Miller Chicago to its shareholders are voidable. In Counts V and VI the trustee seeks substantive consolidation of Miller Chicago and Miller Detroit and a judicial determination that Miller Detroit was the alter ego or a mere instrumentality of Miller Chicago for the purposes of the bankruptcy proceedings. In Count VII, the trustee seeks damages for alleged breaches of fiduciary duty by defendant James N. Miller in his capacity as president of Miller Detroit. In Count VIII, the trustee alleges a breach of contract on the premise that Miller Detroit is entitled to payments from Miller Chicago of $4.6 million according to a spreadsheet provided by defendant James N. Miller. Finally, in Count IX, the trustee seeks an accounting of all transactions involving the Detroit and Chicago entities, alleging that the defendants have failed or refused to provide any accurate disclosure of the consideration received in exchange for certain promissory notes issued by Miller Detroit to Miller Chicago or the various payments made under those notes and other arrangements between the companies.
On February 3, 2015, the Court held a final pretrial conference, where the parties agreed to bifurcate the proceedings and submit the claims raised in Count IV (disgorgement), Count V (substantive consolidation), Count VI (alter ego ), and Count IX (accounting) for decision by the Court sitting without a jury; the remaining claims, if appropriate, would be tried by a jury later. The Final Pretrial Order directed that those claims be presented at a bench trial.
The case came on for trial before the Court without a jury on February 17, 2015, with the proofs concluding on March 10, 2015. The plaintiff's attorney indicated on the first day of trial that he would not make any presentation on the request for an accounting. Despite its equitable nature and the direction in the final pretrial order, plaintiff's counsel believed that the demand for an accounting related solely to the deferred claims such as those for fraudulent transfer, which were reserved for later decision by a jury. For the purpose of this trial, the Court finds the claim in Count IX abandoned.
The Court heard the testimony of eleven witnesses and received 438 exhibits. The parties also submitted several stipulations of fact that were incorporated in the joint final pretrial order. The parties filed post-trial briefs and proposed findings. The Court ordered the parties, when submitting their proposed findings of fact, to support each assertion with a reference to testimony or an exhibit in the record. However, both parties cited certain exhibits that were not received in evidence. The following constitutes the Court's findings of fact under Federal Rule of Civil Procedure 52(a)(1), based on the record evidence, followed by its application of the governing law.
The Miller family's involvement with car parking services began with Bruce Miller's father, Nathan V. Miller. In 1935, Nathan joined a company called Chicago Service Parking Co., an Illinois corporation that was incorporated on October 23, 1933. Bruce Miller joined the company in 1959. The shareholders of that corporation varied over the years. Bruce Miller became a shareholder in 1957. The company qualified to do business in Michigan in 1974. In 1983, the shareholders, which included other Miller family members, changed the name of the corporation to Miller Parking Company (referred to in this opinion as "Miller Chicago"). In 1999, the corporation was converted to an "S" corporation under the Internal Revenue Code. James Miller was a corporate officer as early as 1994.
Miller Chicago constructed the Bismark Deck, a 460-car parking garage in downtown Chicago. The corporation also owned and operated several other parking properties in Chicago. In 1998, Miller Chicago sold its interests in various parking entities to Parking Properties, LLC, which was owned by Bruce Miller, his children, and grandchildren. The transaction was seller financed, with $250,000 paid at closing and the balance in a note for $4,400,000. Bruce Miller gifted his interest in Miller Chicago to his children and grandchildren, so that by early 2002 he no longer had any financial interest in that company. However, during the times relevant to this lawsuit, the directors of Miller Chicago were James Miller, Bruce Miller, and Bruce's wife Doris Miller. James Miller was the president, and his wife, Arleen, was the secretary of Miller Chicago.
By the end of 2001, Miller Chicago owned four parking properties in Chicago. In August 2000, it entered into an agreement with Standard Parking, which took over the operations of the lots (including the Bismark Deck). Miller Chicago sold off most of the lots, but continued to own the Bismark Deck until it was sold in 2009. From August 2000 onward, Miller Chicago functioned essentially as a landlord, receiving income from its parking properties and distributing the revenue to its shareholders. It closed its administrative office in Chicago on September 30, 2000. Thereafter, administrative functions were performed by Miller Detroit in Detroit.
Bruce Miller was married to Doris Miller; they had three children: James N. Miller, Amy M. Weinstein, and Janet Stein. James first received...
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