Maples v. Klein

CourtUnited States District Courts. 11th Circuit. United States District Court of Northern District of Alabama
PartiesSTUART M. MAPLES, Trustee for PRICEVILLE PARTNERS, LLC., Plaintiff, v. JOHN KLEIN, et al., Defendants.
Docket NumberCase No. 5:18-CV-01037-KOB,Case No. 5:18-CV-01036-KOB,Case No. 5:18-CV-01035-KOB
Decision Date27 March 2020

JOHN KLEIN, et al., Defendants.

Case No. 5:18-CV-01035-KOB
Case No. 5:18-CV-01036-KOB
Case No. 5:18-CV-01037-KOB


March 27, 2020

This Document Relates to All Cases


Priceville Partners, LLC, a used car dealership and title-pawn lending service, voluntarily filed for Chapter 11 bankruptcy on March 4, 2016. The bankruptcy trustee sued Priceville's former owners, asserting various claims of fraudulent transfers, preferential payments, and breach of duties—in short, nefarious misdealings and mismanagement of Priceville's assets.

Plaintiff, bankruptcy trustee Stuart Maples, originally filed three separate cases in the United States Bankruptcy Court for the Northern District of Alabama against Priceville's former owners, John Klein, Harold Jeffreys, and Ben Jeffreys, on February 17, 2018. The three Defendants withdrew reference from the bankruptcy court to this court on July 2, 2018 (Doc. 1)1, and the court consolidated the three cases on October 9, 2018. (Doc. 9.) Defendants jointly filed the instant motion for summary judgment on August 22, 2019 (Doc 25), to which Mr. Maples

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responded (Doc. 27) and Defendants replied. (Doc. 35.) For the reasons detailed below, the court will GRANT in part and DENY in part Defendants' motion for summary judgment.

I. Background

In 2013, Harold Jeffreys and Ben Jeffreys, along with Greg Steenson, formed Priceville Partners as a used-car dealership and title-pawn lending service. (Doc. 7-6 at 2.) Originally, Ben Jeffreys owned a 20 percent interest in Priceville, and Harold Jeffreys and Mr. Steenson owned 40 percent each, but Harold Jeffreys soon acquired Ben Jeffreys's interest, giving Harold Jeffreys a 60 percent interest. In 2014, John Klein, Ben Jeffreys, Harold Jeffreys, Mr. Steenson, and Katie Klein (who is John Klein's wife, Harold Jeffreys's daughter, and Ben Jeffreys's sister), organized Priceville Partners II. (Id. at 2-3.)

Mr. Maples alleges that Mr. Steenson "was the onsite manager of the Debtor," and Defendants engaged with Priceville's business "on a regular basis." (H. Jeffreys Doc. 21 at 3.) Mr. Maples states that Harold Jeffreys held weekly meetings and repaired vehicles (id.); Ben Jeffreys worked with vehicles, "signed bills of sale," and "made most of the bank deposits" for Priceville (B. Jeffreys Doc. 5 at 2); and John Klein managed Priceville II and attended monthly meetings with other Priceville owners (Doc. 7-6 at 3).

On December 21, 2015, Harold Jeffreys sued Mr. Steenson in Alabama state court for several claims related to Mr. Steenson's alleged fraud and breach of fiduciary duty as co-owner and operator of Priceville. (Doc. 25-2.) Harold Jeffreys also sued Joseph Wynn, Priceville's accountant. Harold Jeffreys and Mr. Steenson settled the case for $3 million sometime between November 22, 2017 and January 18, 2018, Jeffreys v. Steenson, No. 52-cv-2015-900580 (Doc. 180), and pursuant to a joint stipulation of dismissal, the state court dismissed the suit against Mr. Wynn on March 13, 2019. Jeffreys v. Wynn, No 52-cv-2016-900266 (Doc. 191).

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On March 4, 2016, Priceville voluntarily filed for Chapter 11 bankruptcy. (Bankr. Doc. 1.) In February 2017, Mr. Maples assumed trusteeship for Priceville. (Bankr. Docs. 290-91.) A year later, on February 17, 2018, Mr. Maples brought three separate actions against Ben Jeffreys, Harold Jeffreys, and John and Katie Klein in the United States Bankruptcy Court for the Northern District of Alabama. (Bankr. Docs. 446-448.) Mr. Maples later amended two of the three complaints. (Doc. 7-6; H. Jeffreys Doc. 21.) Defendants moved to withdraw the case to this court on July 2, 2018 (Doc. 1); the court granted the motion on September 11, 2018 (Doc. 3) and consolidated the three cases on October 9, 2018. (Doc. 9.)

In July of 2019, the parties filed joint stipulations of dismissal for several claims against Ben Jeffreys and John Klein and all claims against Katie Klein. (Doc. 20; B. Jeffreys Doc. 19.) The court dismissed the specified claims against John Klein and Ben Jeffreys and dismissed Katie Klein from the case with prejudice. (Doc. 37.)

After the dust settled, Mr. Maples, as the debtor's trustee, brings a total of eight causes of action that partially overlap among three Defendants. Mr. Maples's remaining claims are as follows: his federal claims against John Klein are (1) fraudulent transfers and (2) preferential payments; and his state law claims are (3) fraudulent transfers and (4) alter ego. His federal claims against Ben Jeffreys are (1) fraudulent transfers and (2) preferential payments; and his state law claim is (3) fraudulent transfers. Mr. Maples's federal claims against Harold Jeffreys are (1) fraudulent transfers, (2) preferential payments, (3) equitable subordination, and (4) post-petition transactions; and his state law claims are (5) fraudulent transfers, (6) breach of good faith and fair dealing, and (7) breach of loyalty and care.

To support his claims, Mr. Maples's complaints paint a generally unflattering picture of Priceville's operation and management. He alleges that Harold Jeffreys, a sophisticated

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businessman who personally invested more than $3 million into Priceville, knew that Mr. Steenson was a convicted felon, but that Harold Jeffreys partnered with Mr. Steenson anyway to help run the used-car business. (H. Jeffreys Doc. 21 at 3.) He further alleges that Harold Jeffreys's "gross mismanagement" and negligence permitted Mr. Steenson to turn the business into a "scam." (Id. at 5.)

The complaints also allege that all three Defendants used vehicles paid for by Priceville or used Priceville accounts to pay for personal items. (Doc. 7-6 at 3; B. Jeffreys Doc. 5 at 4-5.) Mr. Maples included with his complaints a list of 19 checks from Priceville to John Klein between 2014 and early 2016, as well as a list of debit payments from Priceville II that went toward a variety of organizations, mostly gas stations and restaurants. (Doc. 7-6 at 11-19.) Mr. Maples argues that Harold Jeffreys gave friends and family members preferential loan rates for Priceville's vehicles and that, after Priceville filed for bankruptcy, Harold Jeffreys transferred title of at least ten Priceville-owned vehicles to a salvage shop. (H. Jeffreys Doc. 21 at 6.) Mr. Maples further asserts that John Klein fraudulently transferred about $135,000 of Priceville's assets to himself and family members (Doc. 7-6 at 7); Ben Jeffreys fraudulently transferred about $200,000 to himself and family members (B. Jeffreys Doc. 5 at 9); and Harold Jeffreys fraudulently transferred about $700,000 to himself and family members and is liable for a total of almost $2.5 million. (H. Jeffreys Doc. 21 at 12.)

Lastly, Mr. Maples alleges that Ben Jeffreys, along with other employees of Priceville, manipulated Priceville's books to falsely show that certain businesses owed Priceville money that, in fact, was not owed. (B. Jeffreys Doc. 5 at 3). Mr. Maples now seeks to recover Defendants' allegedly fraudulent transfers and hold Defendants accountable for their putative self-serving behavior as Priceville's owners and managers.

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II. Standard

Summary judgment allows a trial court to decide cases when no genuine issues of material fact are present and the moving party is entitled to judgment as a matter of law. See Fed. R. Civ. P. 56. When a district court reviews a motion for summary judgment, it must determine two things: (1) whether any genuine issues of material fact exist; and if not, (2) whether the moving party is entitled to judgment as a matter of law. Id.

The moving party "always bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of 'the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any,' which it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986) (quoting Fed. R. Civ. P. 56).

Once the moving party meets its burden of showing the district court that no genuine issues of material fact exist, the burden then shifts to the non-moving party "to demonstrate that there is indeed a material issue of fact that precludes summary judgment." Clark v. Coats & Clark, Inc., 929 F.2d 604, 608 (11th Cir. 1991). In response, the non-moving party "must do more than simply show that there is some metaphysical doubt as to the material fact." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). The non-moving party must "go beyond the pleadings and by [its] own affidavits, or by the 'depositions, answers to interrogatories, and admissions on file,' designate 'specific facts showing that there is a genuine issue for trial.'" Celotex, 477 U.S. at 324 (quoting Fed. R. Civ. P. 56(e)) (emphasis added).

The court must "view the evidence presented through the prism of the substantive evidentiary burden," to determine whether the nonmoving party presented sufficient evidence on which a jury could reasonably find for the nonmoving party to defeat the motion. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 254 (1986). The court must refrain from weighing the

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evidence and making credibility determinations, because these decisions fall to the province of the jury. Id. at 255.

Furthermore, all evidence and inferences drawn from the underlying facts must be viewed in the light most favorable to the non-moving party. See Graham v. State Farm Mut. Ins., 193 F.3d 1274, 1282 (11th Cir. 1999). After both parties have addressed the motion for summary judgment, the court must grant the motion only if no genuine issues of material fact exist and if the moving party is entitled to judgment as a matter of law. See Fed. R. Civ. P. 56.

III. Analysis

Defendants' joint motion...

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