THQ Inc. v. Starcom Worldwide, Inc. (In re THQ Inc.)
| Decision Date | 18 April 2016 |
| Docket Number | Case No. 12-13398 (MFW),Adv. No. 14-51079 (MFW) |
| Parties | In re: THQ INC., et al., Debtors. THQ INC., Plaintiff, v. STARCOM WORLDWIDE, INC., et al., Defendants. |
| Court | U.S. Bankruptcy Court — District of Delaware |
(Substantively Consolidated)
Before the Court are two Motions to Dismiss2 the preference and fraudulent transfer complaint (the "Complaint") filed by THQ Inc. (the "Plaintiff") for failure to state a claim upon which relief can be granted. The Court will grant the Motions toDismiss the preference claim, because the Complaint fails to adequately allege the nature of the antecedent debt, the identities of the transferors and the transferees, and the dates of the alleged transfers. The Court will also dismiss the fraudulent transfer claim, because the Plaintiff merely recites the statutory language without pleading sufficient facts in support of its claim. Because there are no remaining avoidance claims, the Court will also dismiss the section 550 claim, the request for attorneys' fees and prejudgment interest, and the request to disallow claims under section 502. The Court will grant the Plaintiff leave to amend its Complaint.
The Plaintiff and certain of its wholly owned subsidiaries (collectively, the "Debtors") were leading developers and publishers of interactive entertainment software for popular gaming systems. On December 19, 2012, the Debtors filed voluntary petitions for relief under chapter 11 of the Bankruptcy Code (the "Petition Date").
Prior to the Petition Date, one or more of the Debtors entered into one or more agreements with the Starcom Defendants for media and marketing services (the "Starcom Agreements"). It is alleged that the Starcom Defendants subsequently entered intoone or more agreements with the Additional Defendants,3 who operated media and advertisement businesses in various industries (the "Additional Agreements").
On December 19, 2014, the Plaintiff filed its Complaint seeking recovery of certain transfers as preference and/or fraudulent transfers from the Starcom Defendants and/or the Additional Defendants. During the 90 days prior to the Petition Date (the "Preference Period"), the Starcom Defendants received transfers from the Debtors of at least $5,033,959.02. (Complaint at ¶ 11 and Exhibit A.) The Additional Defendants are alleged to have received one or more transfers from the Debtors and/or the Starcom Defendants during the Preference Period. (Complaint at ¶¶ 11, 38.) The Plaintiff further sought recovery of attorneys' fees pursuant to Rule 7008(b) and prejudgment interest, as well as disallowance of any claims pursuant to section 502.
The Movants filed Motions to Dismiss the Complaint. (Adv. D.I. 29 and 40.) Briefing on the Motions to Dismiss is complete and the matter is ripe for decision. (Adv. D.I. 69 and 73.)
The Court has subject matter jurisdiction over thisadversary proceeding. 28 U.S.C. §§ 157 and 1334.
Rule 12(b)(6) of the Federal Rules of Civil Procedure, made applicable by Rule 7012(b) of the Federal Rules of Bankruptcy Procedure, governs a motion to dismiss for failure to state a claim. Joseph v. Frank (In re Troll Commc'ns, LLC), 385 B.R. 110, 116 (Bankr. D. Del. 2008). "To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim [for] relief that is plausible on its face.'" Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). At this stage in the proceeding, it is not a question of "whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims." Scheuer v. Rhodes, 416 U.S. 232, 236 (1974), abrogated on other grounds by, Harlow v. Fitzgerald, 457 U.S. 800, 814-15 (1982).
Since the Twombly and Iqbal decisions, "pleading standards have seemingly shifted from simple notice pleading to a more heightened form of pleading . . . ." Fowler v. UPMC Shadyside, 578 F.3d 203, 210 (3d Cir. 2009). This new standard requires "a plaintiff to plead more than the possibility of relief to survivea motion to dismiss." Id. It is insufficient to provide "threadbare recitals of a cause of action's elements, supported by mere conclusory statements . . . ." Iqbal, 129 S. Ct. at 1940 (citing Twombly, 550 U.S. at 555). Under the heightened standard, a complaint "must contain either direct or inferential allegations respecting all the material elements necessary to sustain recovery under some viable legal theory." Twombly, 550 U.S. at 562 (citation omitted). The Court, in order to determine whether a claim meets this requirement, must "draw on its judicial experience and common sense." Burtch v. Huston (In re USDigital, Inc.), 443 B.R. 22, 35 (Bankr. D. Del. 2011) (citation omitted).
The Third Circuit has articulated a two-part analysis to be applied in evaluating a complaint. Fowler, 578 F.3d at 210-11. First, the court "must accept all of the complaint's well-pleaded facts as true, but may disregard any legal conclusions." Id. at 210-11 (citation omitted). Second, the court must determine "whether the facts alleged in the complaint are sufficient to show that the plaintiff has a 'plausible claim for relief.'" Id. at 211 (citation omitted).
The moving party has the burden of demonstrating that dismissing the complaint is appropriate. Troll Commc'ns, 385 B.R. at 117 (citation omitted).
The Plaintiff alleges that if the Starcom Defendants assert that they were not the initial, intermediate or mediate transferees of the Transfers or the persons for whose benefit the Transfers were made, then the Additional Defendants were the initial, intermediate or mediate transferees of the Transfers. (Complaint at ¶ 33.) The Plaintiff also asserts that it may learn, through discovery or otherwise, of additional transfers that might have been made.
The Movants argue that the Plaintiff fails to specifically identify any transfer made to any of them but instead merely recites the statutory elements of section 547(b). The Movants contend that the preference claim must be dismissed because the Complaint is devoid of particularized facts with respect to the nature and amount of each antecedent debt, the dates on which the transfers were made, and the identities of the transferors and the transferees. The Movants contend that the alleged preferential transfers must be identified with particularity to ensure that they received sufficient notice with respect to what transfers are at issue as to them. See, e.g., Pardo v. Gonzaba (In re APF Co.), 308 B.R. 183, 188-89 (Bankr. D. Del. 2004) (stating that a preference complaint must identify the nature and amount of each antecedent debt, each transfer by date, amount, name of the transferor, and name of transferee (citing ValleyMedia, Inc. v. Borders, Inc. (In re Valley Media, Inc.), 288 B.R. 189, 192 (Bankr. D. Del. 2003)). The Movants further argue that the Plaintiff should not be allowed to engage in discovery until it has properly pled its Complaint because Rule 8 "does not unlock the doors of discovery for a plaintiff armed with nothing more than conclusions." Sanchez v. AFA Foods, Inc., et al. (In re AFA Investment, Inc.), 2012 WL 6544945, *4 (Bankr. D. Del. Dec. 14, 2012) (quoting Iqbal, 556 U.S. at 678-79).
The Plaintiff responds that it has met the pleading requirements to survive the Motions to Dismiss. Specifically, the Plaintiff contends that the Complaint and Exhibit A, when read together, sufficiently identify the transfers at issue.
A preference complaint, in order to survive a motion to dismiss, must include: "(a) an identification of the nature and amount of each antecedent debt and (b) an identification of each alleged preference transfer by (i) date [of the transfer], (ii) name of debtor/transferor, (iii) name of transferee and (iv) the amount of the transfer." OHC Liquidation Trust v. Credit Suisse First Boston (In re Oakwood Homes Corp.), 340 B.R. 510, 521-22 (Bankr. D. Del. 2006); Valley Media, Inc., 288 B.R. at 192. See also Anderson News, LLC v. The News Grp., Inc. (In re Anderson News, LLC), No. 09-10695 (CSS), 2012 WL 3638785, at *2 (Bankr. D. Del. Aug. 22, 2012) (). In a case with multiple debtors, as here, the Complaint must sufficiently allege which debtor owed the antecedent debt and that the same debtor made the preferential transfer. See, e.g., Michalski v. State Bank and Trust (In re Taco Ed's, Inc.), 63 B.R. 913, 925 (Bankr. N.D. Ohio 1986) ().
The Court agrees with the Movants that the Complaint does not adequately identify the transferors and the transferees, the nature of the antecedent debt, and the dates of the alleged transfers to the Additional Defendants. There are no specific allegations of what transfers were actually made to the Additional Defendants and by whom. The Plaintiff acknowledges that Exhibit A only identifies transfers made to the Starcom Defendants by one or more of the Debtors. (Complaint at ¶ 11.) With respect to the Additional Defendants, the Plaintiff asserts that the "Starcom Defendants may have made one or more transfers . . . [to] the Additional Defendants." (Complaint at ¶¶ 11, 33.) With respect to the identity of any antecedent debt which the transfers paid, the Plaintiff merely alleges that "the Transfers were made for or on account of an antecedent debt owed by one or more of the Debtors to the Additional Defendants before theTransfers were made." (Complaint at ¶ 38.) With respect to the nature of the antecedent debt, the Complaint...
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