Universitas Educ. v. Avon Capital, LLC

• Docket Number: 21-6044,21-6049,21-6133,21-6134
• Decision Date: 04 August 2023
• Parties: UNIVERSITAS EDUCATION, LLC, Petitioner/Judgment Creditor-Appellee, v. AVON CAPITAL, LLC, Respondent/Judgment Debtor, ASSET SERVICING GROUP, LLC, Respondent/Garnishee, and SDM HOLDINGS, LLC, Respondent/Garnishee-Appellant, and AVON CAPITAL, LLC, a Wyoming limited liability company, Intervenor. UNIVERSITAS EDUCATION, LLC, Petitioner/Judgment Creditor-Appellee, v. AVON CAPITAL, LLC, Respondent/Judgment Debtor, ASSET SERVICING GROUP, LLC, Respondent/Garnishee, and SDM HOLDINGS, LLC, Respondent/Garnishee, and AVON CAPITAL, LLC, a Wyoming limited liability company, Intervenor-Appellant. UNIVERSITAS EDUCATION, LLC, Petitioner/Judgment Creditor-Appellee, v. AVON CAPITAL, LLC, Respondent/Judgment Debtor, ASSET SERVICING GROUP, Respondent/Garnishee, and SDM HOLDINGS, LLC, Respondent/Garnishee-Appellant. AVON CAPITAL, LLC, a Wyoming limited liability company, Intervenor. UNIVERSITAS EDUCATION, LLC, Petitioner/Judgment Creditor-Appellee, v. AVON CAPITAL, LLC, Respondent/Judgment Debtor, and ASSET SERVICING GROUP, et al., Respondents/Garnishees. AVON CAPITAL, LLC, a Wyoming limited liability company, Intervenor-Appellant.
• Court: U.S. Court of Appeals — Tenth Circuit

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UNIVERSITAS EDUCATION, LLC, Petitioner/Judgment Creditor-Appellee, v. AVON CAPITAL, LLC, Respondent/Judgment Debtor, ASSET SERVICING GROUP, LLC, Respondent/Garnishee, and SDM HOLDINGS, LLC, Respondent/Garnishee-Appellant, and AVON CAPITAL, LLC, a Wyoming limited liability company, Intervenor. UNIVERSITAS EDUCATION, LLC, Petitioner/Judgment Creditor-Appellee, v. AVON CAPITAL, LLC, Respondent/Judgment Debtor, ASSET SERVICING GROUP, LLC, Respondent/Garnishee, and SDM HOLDINGS, LLC, Respondent/Garnishee, and AVON CAPITAL, LLC, a Wyoming limited liability company, Intervenor-Appellant. UNIVERSITAS EDUCATION, LLC, Petitioner/Judgment Creditor-Appellee, v. AVON CAPITAL, LLC, Respondent/Judgment Debtor, ASSET SERVICING GROUP, Respondent/Garnishee, and SDM HOLDINGS, LLC, Respondent/Garnishee-Appellant. AVON CAPITAL, LLC, a Wyoming limited liability company, Intervenor. UNIVERSITAS EDUCATION, LLC, Petitioner/Judgment Creditor-Appellee, v. AVON CAPITAL, LLC, Respondent/Judgment Debtor, and ASSET SERVICING GROUP, et al., Respondents/Garnishees. AVON CAPITAL, LLC, a Wyoming limited liability company, Intervenor-Appellant.

Nos. 21-6044, 21-6049, 21-6133, 21-6134,

United States Court of Appeals, Tenth Circuit

August 4, 2023

(D.C. No. 5:14-FJ-00005-HE) (W.D. Okla.)

Before EID, BALDOCK, and CARSON, Circuit Judges.

ORDER

These matters are before the court on the Petition for Rehearing of Appellant SDM Holdings, LLC Intervenor/Appellant Avon Capital, LLC, A Wyoming Limited Liability Company's Petition for Panel Rehearing; and the Partially Opposed Motion for Leave to Include a One-Document Appendix to the Petition for Rehearing by Appellant SDM Holdings, LLC. Upon careful consideration we direct as follows.

SDM Holdings, LLC's motion to include a one-document appendix to its petition for rehearing is GRANTED. Pursuant to Fed. R App. P. 40, both petitions for panel rehearing are GRANTED IN PART to the extent of the modifications in the attached revised order and judgment. The court's July 13, 2023 order and judgment is withdrawn and replaced by the attached revised order and judgment, which shall be filed as of today's date.

ORDER AND JUDGMENT ^[*]

ALLISON H. EID, CIRCUIT JUDGE

Appellee Universitas Education, LLC ("Universitas") seeks to enforce a judgment obtained in New York against Appellant Avon Capital, LLC ("Avon"), and its subsidiary, Appellant SDM Holdings, LLC ("SDM"), in the Western District of Oklahoma. Universitas alleges that it was unable to recover the full judgment amount from Avon in New York, so it seeks to pierce Avon's corporate veil and collect a garnishment from SDM, an Oklahoma LLC that nominally holds legal title to one of Avon's potential assets, an insurance portfolio.

The district court adopted the magistrate judge's ("MJ") Report and Recommendation finding that Avon's Wyoming-based LLC ("Avon-WY") had fraudulently acquired the SDM insurance portfolio using stolen funds, as well as the MJ's conclusion that the insurance portfolio was subject to garnishment because it was beneficially owned by Avon-WY. The district court then granted Universitas summary judgment and placed Avon-WY into a receivership pursuant to Oklahoma Statute ("O.S.") § 12-1551.

Avon-WY and SDM appealed to this Court, and their appeals were consolidated on April 27, 2021. We vacate the district court's February 11, 2021 order for lack of jurisdiction; we find the underlying dispute was moot at the time of decision due to the expiration of Universitas's Western District of Oklahoma judgment. We remand the case to the district court to conduct further proceedings.

I.

Between 2006 and 2007, three Avon LLC entities were formed: a Nevada LLC ("Avon-NV") in June 2006, a Connecticut LLC ("Avon-CT") in November 2006, and Avon-WY in May 2007. Each of these Avon entities was ninety-nine percent owned by Carpenter Financial and one percent owned by Caroline Financial-both of which were controlled by Daniel Carpenter.

Universitas was the sole beneficiary of two life insurance policies totaling $30 million. Carpenter dispersed Universitas's $30 million in life insurance policies among his shell entities via a complex series of transactions. One of these transactions was a $6,710,065.92 transfer from Grist Mill Capital, a shell entity controlled by Carpenter, to Avon-NV's TD Bank account. Although Avon-NV's tax identification number was used to open the TD Bank account, "Avon-CT was the entity involved with the . . . transactions." Aplt. App'x Vol. X at 1743.

Meanwhile, Avon-WY acquired a one hundred percent membership interest in SDM. The payments for the acquisition were made from Avon-NV's TD Bank account on behalf of Avon-WY. Although Avon-WY was administratively dissolved for failure to maintain a registered agent during the transactions, Avon-WY was the signatory on the SDM purchase agreement.^[1]

When Universitas's benefits came due, its claim to the benefits was denied by the insurer. Universitas obtained a favorable award in arbitration. Although the plan trustee sought to vacate the award in the U.S. District Court for the Southern District of New York, the award was confirmed on August 15, 2014. The Southern District of New York found that Carpenter fraudulently transferred the $30 million in life insurance policies to hundreds of shell entities under his control. Avon was one of these entities. Thus, the Southern District of New York entered judgment for Universitas in the amount of $30,181,880.30. $6,710,065.92 of the judgment was against Avon.

Of Universitas's $6,710,065.92 judgment against Avon, it alleges that it was only able to recover $6 million in funds. Universitas filed the New York judgment in the Western District of Oklahoma on November 7, 2014.^[2] The Western District of Oklahoma traced the fraudulently transferred funds to Avon-WY's acquisition of SDM's life insurance portfolio and pierced Avon-WY's corporate veil to allow Universitas to execute the judgment against the insurance portfolio. Universitas then attempted to collect a garnishment from SDM.

The parties disputed whether Avon-NV and Avon-WY were alter egos of Avon-CT, the named debtor in the New York judgment. The district court referred the matter to the MJ, who issued a Report and Recommendation finding that the entities were "one and the same for purposes of their liability to Universitas." Id. at 1794. The MJ also determined that, because Avon-WY fraudulently acquired the SDM insurance portfolio using stolen funds, the insurance portfolio was subject to garnishment. The district court reviewed the MJ's recommendations de novo and agreed with all of them, granting summary judgment to Universitas on February 11, 2021. The district court subsequently placed Avon-WY into a receivership pursuant to O.S. § 12-1551.

SDM filed a motion to alter the judgment, relying on O.S. § 12-735(B), which states, "[a] judgment shall become unenforceable and of no effect if more than five (5) years have passed from the date . . . [t]he last garnishment summons was issued." The district court denied SDM's motion and upheld the judgment in an order dated April 8, 2021. Avon-WY and SDM appealed to this Court; their appeals were consolidated by the Court on April 27, 2021. Universitas alleges that it re-filed the New York judgment in the Western District of Oklahoma on December 9, 2021. Aple. Supp. App'x Vol. I at 32; Oral Argument, No. 21-6044, at 16:54-17:00 (Sept. 27, 2022).

II.

a.

28 U.S.C. § 1963 instructs the following regarding registration of judgments for enforcement in other districts:

A judgment in an action for the recovery of money or property entered in any court of appeals, district court, bankruptcy court, or in the Court of International Trade may be registered by filing a certified copy of the judgment in any other district or, with respect to the Court of International Trade, in any judicial district, when the judgment has become final by appeal or expiration of the time for appeal or when ordered by the court that entered the judgment for good cause shown. Such a judgment entered in favor of the United States may be so registered any time after judgment is entered. A judgment so registered shall have the same effect as a judgment of the district court of the district where registered and may be enforced in like manner.

Additionally, Federal Rule of Civil Procedure ("F.R.C.P.") 69(a)(1) states:

A money judgment is enforced by a writ of execution, unless the court directs otherwise. The procedure on execution-and in proceedings supplementary to and in aid of judgment or execution-must accord with the procedure of the state where the court is located, but a federal statute governs to the extent it applies.

This indicates that the statute of limitations period for a judgment is based on the law of the state where the judgment is filed, not the limitations period of the state where the federal district court that issued the judgment is located. As Universitas is attempting to enforce the judgment in Oklahoma, we must apply Oklahoma law on the registration of judgments.

O.S. § 12-735(B) states the following regarding judgments registered in the state:

A judgment shall become unenforceable and of no effect if more than five (5) years have passed from the date of:

1. The last execution on the judgment was filed with the county clerk;

2. The last notice of renewal of judgment was filed with the court clerk;

3. The last garnishment summons was issued; or

4. The sending of a certified copy of a notice of income assignment to a payor of the judgment debtor.

The Oklahoma Supreme Court held in Taracorp, Ltd. v Dailey, 419 P.3d 217 (Okla. 2018), that "when a judgment creditor seeks to enforce a Colorado judgment a second time in Oklahoma, after...