Robert F. Anderson, for Congaree Triton Acquisitions, LLC v. Cattano (In re, Congaree Triton Acquisitions, LLC)
| Decision Date | 01 February 2016 |
| Docket Number | Adversary Proceeding Number: 15-80147-jw,Case Number: 12-00456-jw |
| Parties | In re, Congaree Triton Acquisitions, LLC, Debtor(s). Robert F. Anderson, as Chapter 7 Trustee for Congaree Triton Acquisitions, LLC, Plaintiff(s), v. Carroll A. Campbell John D. Cattano, Defendant(s). |
| Court | United States Bankruptcy Courts. Fourth Circuit. U.S. Bankruptcy Court — District of South Carolina |
The relief set forth on the following pages, for a total of 16 pages including this page, is hereby ORDERED.
/s/_________
US Bankruptcy Judge
District of South Carolina
This matter comes before the Court on the Motion to Dismiss the Amended Complaint pursuant to Fed. R. Civ. P. 12(b)(6) ("Rule 12(b)(6) Motion") filed by Carroll A. Campbell, III and John D. Cattano ("Campbell & Cattano"). The Chapter 7 Trustee, Robert F. Anderson ("Trustee"), filed a response to the Rule 12(b)(6) Motion and both parties filed memoranda of law in support of their positions. After considering the arguments of the parties presented at a hearing and the record in this adversary proceeding, the Court makes the following findings of fact and conclusions of law pursuant to Fed. R. Civ. P. 52, which is applicable in bankruptcy proceedings under Fed. R. Bankr. P. 7052.1
1. On January 4, 2011, Congaree Triton Acquisitions, LLC ("Debtor") filed Articles of Organization with the South Carolina Secretary of State. The purpose of Debtor's incorporation
was to purchase and operate two natural stone distributing companies, Triton Stone of Charlotte, Inc. ("TSCLT") and Triton Stone of Myrtle Beach, Inc. ("TSMB"). Campbell & Cattano were two of the principal investors in Debtor.
2. On March 1, 2011, Debtor entered into an Asset Purchase Agreement ("A.P.A.") with TSCLT and TSMB to purchase substantially all of the assets of the two companies (the "Purchase Transaction").
3. Pursuant to the A.P.A., the assets of TSCLT and TSMB were then transferred to Debtor on March 11, 2011.
4. Shortly after its formation and the Purchase Transaction, Debtor experienced financial difficulties and filed a petition under Chapter 11 of the Bankruptcy Code on January 26, 2012.
5. On June 29, 2012, upon a motion and hearing, Debtor's bankruptcy case was converted to Chapter 7 and the Trustee was appointed.
6. On March 7, 2014, Campbell & Cattano filed a complaint in the Richland County Court of Common Pleas asserting multiple causes of action against several parties related to the Purchase Transaction ("State Court Defendants"), which was assigned case number 2014-CP-40-1517 ("State Court Action").2 The basis of Campbell & Cattano's complaint centers on alleged misrepresentations Campbell & Cattano received regarding TSMB and TSCLT prior to the Purchase Transaction and Debtor's incorporation. Additionally, Campbell & Cattano alleged wrongdoing by the State Court Defendants after the entry of the A.P.A. Subsequently, on July 9,2014, the State Court Action was transferred to the Horry County Court of Common Pleas ("State Court").3
7. On March 10, 2014, the Trustee commenced an adversary proceeding (Adv. Pro. No. 14-80026-jw) by filing a complaint which asserted several causes of action relating to the Purchase Transaction ("Purchase Transaction Adversary") against multiple defendants, including many of the State Court Defendants.4
8. On September 12, 2014, after notice and a hearing, including the objection of Campbell & Cattano, this Court entered an Order Approving Settlement between the Trustee and Inga R. Ivey, Michella I. Williams and 9002 Dunes, LLC regarding certain claims raised in the Purchase Transaction Adversary ("9/12/14 Order"). As part of that settlement, the Trustee released any claims the Debtor may have possessed at the time of petition against Inga R. Ivey, Michella I. Williams and 9002 Dunes, LLC.
9. On June 8, 2015, after notice and a hearing, including the objection of Campbell & Cattano, this Court entered an Order Approving Settlement between the Trustee and Triton Partners Management Group d/b/a Triton Stone Management Group of Charlotte, LLC d/b/a Triton Stone Management, LLC d/b/a Triton Stone Group of Charlotte, LLC, Triton Stone Group, LLC, Triton Stone of Southhaven, and Joshua L. Kessler regarding certain claims raised in the Purchase Transaction Adversary ("6/8/15 Order").5 As part of that settlement, the Trustee releasedany claims involving the Purchase Transaction the Debtor may have possessed at the time of petition against those parties and their representatives and agents.
10. On July 15, 2015, the Trustee filed the present adversary proceeding seeking declaratory judgments and permanent injunctive relief against Campbell & Cattano. The Trustee alleges that Campbell & Cattano's State Court Action involves derivative claims, which are property of the bankruptcy estate under 11 U.S.C. § 541.6 The Trustee seeks declaratory judgments that certain claims in the State Court Action are property of the estate, that certain claims in the State Court Action were settled by the settlement agreements approved by the 9/12/14 Order and 6/8/15 Order and that Campbell & Cattano's prosecution of the State Court Action is in violation of § 362(a)(3). Further, the Trustee seeks permanent injunctive relief to prevent any further prosecution of the derivative claims in the State Court Action by Campbell & Cattano.
11. On August 13, 2015, Trustee filed an amended complaint ("Trustee's Amended Complaint") in the present adversary proceeding.
12. Thereafter, Campbell & Cattano filed the Rule 12(b)(6) Motion.
Campbell & Cattano have filed a Fed. R. Civ. P. 12(b)(6) motion to dismiss the Trustee's Amended Complaint. "'The purpose of Rule 12(b)(6) is to test the sufficiency of a complaint' and not to 'resolve contests surrounding the facts, merits of a claim, or the applicability of defenses.'" Presley v. City of Charlottesville, 464 F.3d 480, 483 (4th Cir. 2006) (quoting Edwards v. City of Goldsboro, 178 F.3d 231, 243 (4th Cir. 1999)). In order for a complaint to survive a Rule 12(b)(6) motion, the "[f]actual allegations must be enough to raise a right to relief above the speculative level, on the assumption that all the allegations are true (even if doubtful in fact)." Bell Atl. Corp.v. Twombly, 550 U.S. 544, 555 (2007). "A complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570). In addition to the allegations in the complaint, courts may consider matters of public record as well as the documents attached to the complaint and the motion to dismiss "so long as they are integral to the complaint and authentic." Phillips v. Pitt County Memorial Hosp., 572 F.3d 176, 180 (4th Cir. 2009).
In the Rule 12(b)(6) Motion, Campbell & Cattano assert that the Trustee's Amended Complaint is barred by judicial estoppel on two grounds. First, the Trustee previously submitted an advisory opinion in the State Court Action,7 alleging that some of Campbell & Cattano's claims are derivative while stating that others were merely similar in object and purpose to the Trustee's claims.8 With the latter group, the Trustee requested the State Court refrain from hearing until the resolution of the Trustee's claims. The advisory opinion was provided at the request of the State Court when that court was determining the direct or derivative nature of the claims raised in the State Court Action in the context of a motion to dismiss under S.C. R. Civ. P. 12. In the present adversary proceeding, the Trustee is alleging that some of the claims previously reported as being similar in object and purpose to the Trustee's claims are instead derivative.9 As a result of theseinconsistent positions taken by the Trustee, Campbell & Cattano allege that the present proceeding should be barred.
Second, at a hearing before this Court on May 5, 2015 regarding the Trustee's Notice and Application for Settlement in a related adversary proceeding in this case, counsel for the Trustee stated that "although Mr. Cattano and Mr. Campbell will have the ability to pursue direct claims in state court, the settlement will extinguish the trustee's derivative claims that would be asserted on behalf of Triton Stone Charlotte and Triton Stone Myrtle Beach." Furthermore, counsel for the Trustee stated that "[Campbell & Cattano] will have an ability to pursue their direct claims to the extent that the claims are direct." Campbell & Cattano argue that these statements recognize their independent direct claims, a position which is inconsistent with the position taken in the Trustee's Amended Complaint.
To determine these arguments in the context of a Rule 12(b)(6) motion, an affirmative defense, like judicial estoppel, may be considered in limited circumstances if the factual requirements of the defense appear on the face of the plaintiff's complaint. See Goodman v. Praxair, Inc., 494 F.3d 458, 464 (4th Cir. 2007) (en banc) .
There are three essential elements to establish judicial estoppel:
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