Opinion
CASE NO. 18-12151 PROC. NO. 19-1058
01-22-2020
IN RE: AMY SUE HAMILTON Debtor MARK A. WARSCO, TRUSTEE Plaintiff v. AARON PIERCE, SAM PIERCE, and 75 SNOW LAKE LLC Defendants
NOT INTENDED FOR PUBLICATION DECISION AND ORDER ON MOTION TO DISMISS
On January 22, 2020
By this adversary proceeding, the trustee/plaintiff seeks to avoid an allegedly fraudulent pre-petition transfer of marital property and a fraudulently induced marital settlement agreement. The defendants responded by filing a motion to dismiss arguing the court lacks subject matter jurisdiction because the Rooker-Feldman doctrine bars avoidance of the marital dissolution settlement, Fed. R. Civ. P. Rule 12(b)(1), and that the complaint fails to state a claim upon which relief can be granted, Fed. R. Civ. P. Rule 12(b)(6), because of the failure to plead fraud with the particularity required by Rule 9(b). The matter is before the court to consider the issues raised by the defendants' motion and the plaintiff's response thereto.
The defendants' first argument is that the Rooker-Feldman doctrine precludes this litigation over the property settlement approved by the state court in connection with the debtor's divorce from the defendant Aaron Pierce. The doctrine is based upon the principle that lower federal courts do not have jurisdiction to review state court decisions. Only the Supreme Court may do so. Exxon Mobil Corp. v. Saudi Basic Indus. Corp., 544 U.S. 280, 125 S. Ct. 1517, 1526 (2005); Long v. Shorebank Development Corp., 182 F.3d 548, 554 (7th Cir. 1999); GASH Associates v. Village of Rosemont, Ill., 995 F.2d 726, 728 (7th Cir. 1993). It is a "narrow doctrine, confined to cases brought by state-court losers complaining of injuries caused by state-court judgments . . . ." and is "inapplicable where the party against whom [it] is invoked was not a party to the underlying state-court proceeding." Lance v. Dennis, 546 U.S. 459, 464, 126 S.Ct. 1198, 1201 (2006) (internal quotations and citations omitted). Here, the plaintiff/trustee was not a party to the state court litigation and so Rooker-Feldman does not apply. See, In re Erlewine, 349 F.3d 205, 210-11 (5th Cir. 2003); In re Haskell, 1998 WL 809520 *5 (Bankr. N.D. Ill. 1998); In re Maui Indus. Loan & Finance Co., 454 B.R. 133 (Bankr. D. Haw. 2011).
The defendants' remaining argument is that the trustee has failed to sufficiently plead fraud. "In all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity." Fed. R. Civ. P. Rule 9(b). "This means the who, what, when, where, and how: the first paragraph of any newspaper story." DiLeo v. Ernst & Young, 901 F.2d 624, 627 (7th Cir.1990). As a third party outsider, who must act for the benefit of creditors and the estate and is often pleading based on secondhand information, a bankruptcy the trustee is generally afforded some liberality in pleading fraud. In re Hearthside Baking Co. Inc., 402 B.R. 233, 235 (Bankr. N.D. Ill. 2009); In re O.P.M. Leasing Services, Inc., 32 B.R. 199, 203 (Bankr. S.D.N.Y. 1983). Where, as here, the fraud complained of has a statutory basis, the requirements of Rule 9(b) will be satisfied if the complaint contains allegations corresponding to the statutory elements that make a transfer "fraudulent" and therefore avoidable. See, In re Chochos, 325 B.R. 780, 783 (Bankr. N.D. Ind. 2005). See also, General Electric Capital Corp. v. Lease Resolution Corp., 128 F.3d 1074, 1079-80 (7th Cir. 1997). Viewed in this regard, the trustee's complaint pleads the essential facts with sufficient particularity to satisfy Rule 9.
Defendants' motion to dismiss is DENIED. They shall file an answer to the plaintiff's complaint within fourteen (14) days of this date.
SO ORDERED.
/s/ Robert E . Grant
Chief Judge, United States Bankruptcy Court