Primex Plastics Corp. v. Curtis Zamec, the Nancy L. Zamec Revocable Trust, the Zamec Family Trust, the Curtis J. Zamec Revocable Trust, the Zamec Marital Trust & Trienda, LLC, 15-cv-175-bbc

• Decision Date: 23 February 2016
• Docket Number: 15-cv-175-bbc
• Parties: PRIMEX PLASTICS CORPORATION, Plaintiff, v. CURTIS ZAMEC, THE NANCY L. ZAMEC REVOCABLE TRUST, THE ZAMEC FAMILY TRUST, THE CURTIS J. ZAMEC REVOCABLE TRUST, THE ZAMEC MARITAL TRUST and TRIENDA, LLC, Defendants.
• Court: U.S. District Court — Western District of Wisconsin

PRIMEX PLASTICS CORPORATION, Plaintiff, v. CURTIS ZAMEC, THE NANCY L. ZAMEC REVOCABLE TRUST,THE ZAMEC FAMILY TRUST, THE CURTIS J. ZAMEC REVOCABLE TRUST,THE ZAMEC MARITAL TRUST and TRIENDA, LLC, Defendants.

15-cv-175-bbc

UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF WISCONSIN

February 23, 2016

OPINION AND ORDER

From 2008 to 2010, plaintiff Primex Plastics Corporation sold various plastic products to defendant Trienda, LLC, under a credit agreement. However, Trienda started falling behind on its payments and failed to pay plaintiff approximately $2.7 million for invoiced goods. Plaintiff contends that Trienda, defendant Curtis Zamec (Trienda's majority owner) and several Zamec family trusts may be held liable for breach of fiduciary duty and violating the Wisconsin Fraudulent Transfers Act. In addition, plaintiff asks the court to order defendants to hold in trust the amount of money that they owe plaintiff.

Plaintiff has filed a motion for partial summary judgment with respect to its claims under the Wisconsin Fraudulent Transfers Act and its request for a constructive trust. Dkt. #13. Plaintiff argues that defendants violated the Act when Trienda transferred $7 million to the Nancy Zamec Trust in December 2009 without getting anything of comparable value in return, even though defendants knew or should have known that the transfer would render Trienda unable to pay its debt to plaintiff. The parties recently agreed to dismiss the claims against Trienda, dkt. #41, but none of the parties suggest that Trienda's dismissal has any effect on plaintiff's claims against the other defendants. Both sides assume that the other defendants may be held jointly and severally liable for Trienda's conduct, at least for the purpose of plaintiff's motion, so I will do the same.

The parties agree that plaintiff must prove its claims under the Wisconsin Fraudulent Transfers Act by clear and convincing evidence. E.g., Operating Engineers Local 139 Health Benefits Fund v. Huml Contractors Inc., No. 08-C-1103, 2012 WL 664494, at *6 (E.D. Wis. Feb. 28, 2012); SJ Properties Suites v. STJ, P.C., 759 F. Supp. 2d 1032, 1043 (E.D. Wis. 2010); Mann v. Hanil Bank, 920 F. Supp. 944, 950 (E.D. Wis. 1996). Although plaintiff has submitted some evidence in favor of its claims, defendants have cited evidence that points in the other direction. Because I conclude that plaintiff's evidence is not sufficient to show as a matter of law that Trienda violated the Act and that there are genuine issues of material fact, I am denying plaintiff's motion for partial summary judgment.

OPINION

A. Subject Matter Jurisdiction

As a basis for jurisdiction, plaintiff relies on 28 U.S.C. § 1332, which requires diversity of citizenship between plaintiff and defendants and an amount in controversy morethan $75,000. Because plaintiff alleges that defendants owe millions of dollars, the amount in controversy requirement is met. As requested by the court, dkt. #40, plaintiff has filed supplemental materials showing diversity. Plaintiff is a citizen of New Jersey and Indiana, dkt. #29 at ¶ 1; Zamec is a citizen of Illinois and he is the sole trustee for each of the trusts. Dkt. ##42 and 43. Because Trienda has been dismissed from the case, I need not consider its citizenship.

B. Merits

Plaintiff raises claims under two related statutes that are both part of the Wisconsin Fraudulent Transfers Act, Wis. Stat. §§ 242.04(1) and 242.05(1):

A transfer made or obligations 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:

(a) With actual intent to hinder, delay or defraud any creditor of the debtor; or

(b) Without receiving a reasonably equivalent value in exchange for the transfer or obligation, and the debtor:

1. Was engaged or was about to engage in a business or a transaction for which the remaining assets of the debtor were unreasonably small in relation to the business or transaction; or

2. Intended to incur, or believed or reasonably should have believed that the debtor would incur, debts beyond the debtor's ability to pay as they became due.

Wis. Stat. § 242.04(1).

A transfer made or obligation incurred by a debtor is fraudulent as to acreditor whose claim arose before the transfer was made or the obligation was incurred if the debtor made the transfer or incurred the obligation without receiving a reasonably equivalent value in exchange for the transfer or obligation and the debtor was insolvent at that time or the debtor became insolvent as a result of the transfer or obligation.

Wis. Stat. § 242.05(1).

In its opening brief, plaintiff argues that Trienda violated four provisions: § 242.04(1)(a), § 242.04(1)(b)1, § 242.04(1)(b)2 and § 242.05(1). However, in its reply brief, plaintiff says nothing about § 242.04(1)(b)1, so I assume that plaintiff has abandoned that claim for the purpose of its motion for partial summary judgment and I will limit my analysis to the other three provisions.

1. Wis. Stat. § 242.04(1)(a)

The focus of the dispute under this provision is whether Trienda made the $7 million transfer to the trust with "actual intent" to avoid paying its debt to plaintiff. Of course, proving a party's mental state is a difficult thing to do in the context of a motion for summary judgment. If the party denies that it acted with the required intent and the party's testimony is not incredible as a matter of law, then the issue must be resolved by the factfinder rather than as a matter of law. In re Chavin, 150 F.3d 726, 728 (7th Cir. 1998) (court may not discredit witness testimony unless it is "utterly implausible in light of all relevant circumstances"); Day v. City of Baraboo, 06-C-188-C, 2007 WL 5633174 (W.D. Wis. Jan.31, 2007) (in case involving intent as element, "[o]nce the defendant testifies that he did not have a[n] [unlawful] motive . . . it would be the rarest of instances in which theplaintiff could prevail at summary judgment. A court would have to conclude that the defendant was lying, but this is a determination almost always reserved for the factfinder.")

Not surprisingly, defendants deny that Trienda made the transfer to avoid paying plaintiff. Dfts.' PFOF ¶¶ 93-95, dkt. #39. (Defendants say that the transfer was part of Zamec's estate planning. Id. at ¶ 16.) Further, plaintiffs do not argue that defendants' testimony is incredible as a matter of law. Rather, plaintiff seems to concede that avoiding payment to plaintiff was not a factor in Trienda's decision to make the transfer. Plt.'s Resp. to Dfts.' PFOF ¶ 93, dkt. #39 (not disputing defendants' proposed finding of fact that transfer "had nothing to do with Primex").

Plaintiff attempts to circumvent this problem by arguing in the introduction portion of its opening brief that, "[u]nder Wisconsin law, there is no obligation to delve into the mind of the transferor" to prove "actual intent." Plt.'s Br., dkt. #14, at 3. Plaintiff does not explain this argument, but I understand plaintiff to be drawing an inference from Wis. Stat. § 242.04(2), which lists a number of objective factors that may inform the determination of "actual intent," such as "[t]he transfer or obligation was to an insider," "[t]he debtor retained possession or control of the property transferred after the transfer" and "[t]he transfer or the obligation was disclosed or concealed." Plaintiff seems to believe that it is entitled as a matter of law to a finding of "actual intent" if it can adduce evidence in support of some of the listed factors.

Plaintiff's reading of § 242.04(2) is not a reasonable one. The listed factors are not a statutory definition of "actual intent." Rather, § 242.04(2), states that, "[i]n determiningactual intent . . . . consideration may be given, among other factors, to" the listed factors. There is no indication that the statute is altering the ordinary meaning of "actual intent." Town of Hoard v. Clark County, 2015 WI App 100, ¶ 17, 366 Wis. 2d 239, 873 N.W.2d 241, 245 ("Statutory language is construed based on its common and ordinary meaning.").

Because mental status is difficult to prove, it is not unusual to use circumstantial evidence involving more objective facts in an attempt to prove intent indirectly. E.g., Whitley v. Albers, 475 U.S. 312, 320 (1986) (listing objective factors that may inform determination whether correctional officer used force "maliciously and sadistically for the very purpose of causing harm"). However, this does not mean that the plaintiff is excused from proving intent or that a finding of intent is compelled by circumstantial evidence. Rather, it simply means that a finder of fact may infer intent from that circumstantial evidence.

Not surprisingly, plaintiff does not cite any case law to support its counterintuitive proposition that "actual intent" is an objective standard. In their opposition brief, defendants cite Mann v. Hanil Bank, 920 F. Supp. 944, 952 (E.D. Wis. 1996), in which the court declined to decide this issue as a matter of law. Rather, despite strong objective evidence supporting many of the statutory factors, the court concluded that "a reasonable jury could conclude that the plaintiffs failed to establish intent to defraud by clear and convincing evidence, especially if it finds [the defendant's] story believable or his testimony credible." Because I agree with the approach taken in Mann and plaintiff does not cite any contrary authority, I am denying plaintiff's motion for summary judgment with respect to§ 242.04(1)(a).

2. Wis. Stat. § 242.04(1)(b)2

With respect to this provision, the parties dispute whether plaintiff has satisfied two requirements: (1) whether Trienda received something of "reasonably equivalent value" for the transfer; and (2) whether Trienda "believed or reasonably should have believed" that it "would incur . . . debts beyond [its] ability to pay as they became...