Sourcing Mgmt., Inc. v. Simclar, Inc.

• Decision Date: 30 July 2015
• Docket Number: Civil Action No. 3:14–CV–2552–L.
• Citation: 118 F.Supp.3d 899
• Parties: SOURCING MANAGEMENT, INC., Plaintiff, v. SIMCLAR, INC., Concurrent Manufacturing Solutions, LLC, Balmoral Funds, LLC and Jane Does 1–10, Defendants.
• Court: U.S. District Court — Northern District of Texas

118 F.Supp.3d 899

SOURCING MANAGEMENT, INC., Plaintiff,

v.SIMCLAR, INC., Concurrent Manufacturing Solutions, LLC, Balmoral Funds, LLC and Jane Does 1–10, Defendants.

Civil Action No. 3:14–CV–2552–L.

United States District Court, N.D. Texas, Dallas Division.

Signed July 30, 2015.

Peter J. Harry, Buffey E. Klein, Husch Blackwell LLP, Dallas, TX, for Plaintiff.

Keith Miles Aurzada, Bryan Cave LLP, Dallas, TX, for Defendants.

MEMORANDUM OPINION AND ORDER

SAM A. LINDSAY, District Judge.

Before the court is Balmoral Funds, LLC and Concurrent Manufacturing Solutions, LLC's Motion to Dismiss, filed September 11, 2014 (Doc. 13). Having considered the motion, response, reply, pleadings, jurisdictional evidence, record, and applicable law, the court denies Balmoral Funds, LLC and Concurrent Manufacturing Solutions, LLC's Motion to Dismiss.

I. Background Facts and Procedural History

This is the second of two civil actions filed in the Northern District of Texas by Plaintiff Sourcing Management, Inc. ("Plaintiff" or "SMI") against Defendant Simclar, Inc. ("Simclar"). The earlier action (Simclar I ), resulted in a judgment in favor of Plaintiff against Simclar in the amount of $3,753,369.94, along with reasonable attorney's fees. Plaintiff now seeks to recover the judgment from two companies, Balmoral Funds, LLC ("Balmoral"), and its subsidiary Defendant Concurrent Manufacturing Solutions, LLC ("Concurrent"), alleging they colluded with Simclar to effect a transfer of Simclar's assets under the guise of a private foreclosure sale to prevent Plaintiff from collecting on Simclar's debt. Plaintiff seeks a declaration that the transfer of Simclar's assets to Balmoral and Concurrent was a fraudulent transaction in violation of the Texas Uniform Fraudulent Transfer Act ("TUFTA"), and requests that the court set aside the fraudulent transfers and submitthe transferred assets to Plaintiff's judgment in the amount of $3,753,369.94. Plaintiff also seeks to impose successor liability on Concurrent and Balmoral for Simclar's obligations, and brings a claim for unjust enrichment.

For their part, Balmoral and Concurrent contend that the transfer at issue was a routine foreclosure under Article 9 of the Uniform Commercial Code executed by Plaintiff's secured creditor, the Bank of Scotland, which had a first priority interest in all of Simclar's assets, and that it exercised its default remedies with respect to its collateral. Balmoral and Concurrent move to dismiss under Federal Rule of Civil Procedure 12(b)(6), contending that the Article 9 foreclosure sale did not involve the transfer of assets, as defined by TUFTA, and that Plaintiff's allegation are otherwise deficient under controlling case law. Additionally, as a threshold matter, Balmoral moves to dismiss under Federal Rule of Civil Procedure 12(b)(2) for lack of personal jurisdiction. The court now sets forth the relevant facts, accepting all well-pleaded facts in the complaint as true and viewing them in the light most favorable to Plaintiff. See Sonnier v. State Farm Mutual Auto. Ins. Co., 509 F.3d 673, 675 (5th Cir.2007).

A. The Parties to this Dispute

Plaintiff is a Texas corporation headquartered in Rockwall, Texas. Pl.'s First Am. Compl. ¶ 2 ("Compl."). Plaintiff is an outside sales representative for manufacturing corporations, and as such manages accounts and generates sales for various manufacturers, including Defendant Simclar. Id. ¶ 9. Defendant Simclar, now dissolved, was at all relevant times a Florida corporation with a principal place of business in Hialeah, Florida. Id. ¶ 3. Concurrent is a Delaware limited liability company in Hialeah, Florida. Id. ¶ 5. Balmoral is a California limited liability company in Los Angeles, California. Id. ¶ 4.

B. The Actions Giving Rise to this Dispute

This case stems from a prior litigation in the Northern District of Texas between Plaintiff and Defendant Simclar. See Sourcing Management, Inc. v. Simclar, Inc., 3:11–cv–2663–F ("Simclar I" ). Simclar I arose from a dispute between the parties over Simclar's nonpayment of commissions in breach of the parties' sales representative contract. Compl. ¶¶ 10–11. On October 10, 2011, Plaintiff sued Simclar for violating the terms of the contract. Id. ¶ 12. Following discovery, Plaintiff filed its motion for summary judgment. Id. When Simclar failed to respond, the court issued an order to show cause why the pending summary judgment motion should not be granted. Id. ¶ 13. On October 30, 2012, Simclar filed a response to the show cause order, asserting as follows:

Now comes Defendant Simclar, Inc., by and through counsel, and in response to the Court's Order to Show Cause (Doc. No. 39) notifies the Court and opposing counsel that Simclar will not be filing a response to Plaintiff Sourcing Management, Inc.'s Motion for Summary Judgment (Doc. No. 36). Simclar was in default under more than $17 million in loan obligations to its lender, the Bank of Scotland (the "Bank"), which had a first priority security interest in all of the assets of Simclar and its subsidiaries. On October 18, the Bank exercised its default remedies with respect to its collateral and sold the assets of Simclar and its subsidiaries in a private sale under Article 9 of the Uniform Commercial Code for an amount substantially less than the outstanding indebtedness. Effective upon the sale, Simclar ceased all business operations.

Ex. B to Compl. (Simclar, Inc.'s Response to Show Cause Order). On November 19, 2012, United States District Judge Royal Furgeson ruled in favor of Plaintiff, finding that Simclar breached the parties' contract, and rendered judgment against Simclar in the amount of $3,753,369.94, along with reasonable attorney's fees. Ex. A to Compl. (Order Granting Plaintiff's Motion for Summary Judgment and Final Judgment). Plaintiff, however, has been unable to collect any portion of this judgment.

Plaintiff alleges it has been unable to collect any of its $3,753,369.94 judgment because of a fraudulent transfer of assets. Plaintiff alleges Defendants colluded to transfer Simclar's assets to Balmoral and Concurrent under the guise of a private foreclosure sale just prior to the entry of judgment by Judge Furgeson in Simclar I. Plaintiff alleges the transfer of assets rendered Simclar insolvent and has prevented Plaintiff from collecting on the judgment. More specifically, Plaintiff alleges that:

15. A review of the documents that Simclar produced during discovery show[s] the private sale and conveyance to Balmoral occurred after at least six months of due diligence. The secret plan for Balmoral to acquire the assets, code named "Project Heat," had been in the works throughout 2012. (Ex. E). Exhibit E—Bates-labeled Simclar 9162–9175—details Project Heat discussions between Simclar, Balmoral (Robin Nourmand), and Mark Allen. In that document, the parties identified total assets of over $44 million against bank debt of $9,309,000 owed to Bank of Scotland.

16. It was the alleged foreclosure of the $9 million line of credit which was the impetus for the transfer of over $44 million of assets to Balmoral. This transfer was made at a time when Simclar was undisputably a debtor (as evidenced by SMI's claims and the final judgment entered in the underlying case), owing $3,753,369.94 to SMI. The transfer was clearly collusive and made for the purpose of avoiding debts to creditors such as SMI.

17. Without notice to its creditors or any attempt to address its known liabilities, Simclar transferred its assets to Balmoral on October 18, 2012. The company immediately began operations as Concurrent Manufacturing, LLC. The transition to the new name is clearly the result of collusive activity between Simclar's officers, Simclar's lender, and the claimed current owner of Simclar, Balmoral Funds LLC, by and through Concurrent Manufacturing Solutions, LLC, a special purpose entity set up for the acquisition.

18. Simclar received less than reasonably equivalent value in the transfer. Compl. ¶¶ 15–18.

In support of its allegation that Balmoral acquired Simclar's assets and participated in collusive activity to avoid payment of the judgment, Plaintiff attaches to its pleadings a press release from Balmoral dated October 19, 2012. See Ex. D to Compl. The press release is titled "Balmoral Funds Announces Acquisition of Simclar's North American Contract Electronic Manufacturing Assets; New Executives Installed at the Rebranded Company, Concurrent Manufacturing Solutions." Id. at Ex. D. The Press Release states in relevant part:

Balmoral Funds is pleased to announce that it has acquired the assets of Simclar, Inc. in Hialeah, Florida; Ozark, Missouri; and Matamoros, Mexico. Going forward, the new company will be known as Concurrent Manufacturing Solutions LLC. Balmoral plans to invest in capital equipment, facility improvements, process improvements and working capital, among other areas, in order to improve and grow Concurrent's business.

... Concurrent will locate its business headquarters in Hialeah, FL and operate facilities at the present locations of the acquired assets in Florida, Missouri, Texas and Matamoros, Mexico.

* * * *

About Balmoral Funds: Balmoral Funds has over $100 million of assets under management focused on investing in corporate carve-outs, restructurings and other special situations.

Id.

Plaintiff further alleges that contemporaneously with Simclar's filings in response to Judge Furgeson's show cause order informing the court that Simclar had ceased all business operations, Simclar advised its customers that it was merely operating under a new name, and that its management remained intact, it used the same operating account, retained the same employees, same phone numbers, and same locations. Id. ¶ 14 and Ex. C. In support, Plaintiff attaches to its pleadings a letter it received from Simclar dated October 19, 2012, in which Simclar states:

Dear Valued Customer:

On October 19, 2012, Concurrent Manufacturing Solutions LLC acquired the assets of

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