Opinion
Civ. 3:20-CV-231
08-05-2022
JEANNE M. HAMILL, Individually and as Administratrix and Administratrix ad Prosequendum of the Estate of Eugene Hamill, Deceased, Plaintiff, v. TWIN CEDARS SENIOR LIVING, LLC d/b/a and a/k/a Twin Cedars Senior Living, et al., Defendants.
Mariani Judge
REPORT AND RECOMMENDATION
Martin C. Carlson United States Magistrate Judge
I. Introduction
This personal injury, wrongful death, and survival action brought by Jeanne Hamill as administratrix of the estate of her late husband, Eugene Hamill, comes before us for consideration of a motion to dismiss certain claims set forth in the plaintiff's second amended complaint. (Doc. 120). This motion to dismiss was filed by defendants Little Walker Holdings, LLC, Shohola Realty, LLC, Jacob Gutman, and Gary Rohinsky and calls upon us to revisit a recurring theme in this litigation; namely, the efforts of the plaintiff to extend liability in this case to parties who had no involvement in the events which allegedly resulted in Eugene Hamill's injuries and death.
As discussed below, it is submitted that the plaintiff's second amended complaint fails to meet federal pleading standards with respect to these named defendants. Therefore, it is recommended that the motion to dismiss, (Doc. 120), be granted.
We note that these defendants have also recently moved for summary judgment in their favor in this case. (Doc. 151). That motion is not yet ripe, and because we find that the plaintiff's fraudulent transfer claim fails as to these defendants on the pleadings we have issue this Report and Recommendation. However, if the district court prefers we will also be pleased to analyze this claim through the lens of Rule 56's summary judgment standard when this summary judgment motion becomes ripe.
II. Background
Jeanne Hamill initially brought this case on behalf of her deceased husband on February 10, 2020. (Doc. 1). Hamill filed an amended complaint on March 17, 2020, (Doc. 17), and a second amended complaint on December 31, 2021, which is currently the operative pleading in this lawsuit. (Doc. 109).
This second amended complaint alleges that Eugene Hamill became a resident of the defendant, Twin Cedars Senior Living, on July 6, 2018. (Id., ¶ 24). Mr. Hamill had several serious medical diagnoses, including hypertension, atrial fibrillation, and coronary artery disease, among others, and was required to wear a cardiac life vest. (Id., ¶ 25). The complaint further alleges that on September 11, 2018, Defendant Tamara Singer, who owned and operated Twin Cedars, made arrangements to discharge Mr. Hamill from that facility. (Id., ¶ 26). These arrangements allegedly included a three-hour Uber ride from Twin Cedars to Mr. Hamill's home in Toms River, New Jersey. (Id., ¶ 27). The second amended complaint further alleges that Defendant Singer was responsible for these arrangements, and that she was told it was an unsafe discharge plan. (Id.) Nonetheless, Mr. Hamill was discharged on September 11, 2018 and an Uber took him to his residence in Toms River.
During the trip to Toms River, Mr. Hamill began vomiting in the Uber and became unresponsive. As his condition deteriorated, Mr. Hamill required an EMS transport to Barnabas Health Community Center where he was intubated, put on a ventilator, and placed in the Intensive Care Unit. (Id., ¶ 28). Mr. Hamill suffered a stroke and a heart attack. (Id., ¶30) Following treatment in the ICU, Mr. Hamill was transferred to a Skilled Nursing Facility, where he remained until he passed away just over a year later on September 26, 2019. (Id., ¶¶ 29, 30).
While these allegations of medical neglect and negligence are set forth in detail in the plaintiff's second amended complaint. (Id., ¶¶ 1-35), notably the only defendants named as participants in these events are Tamara Singer and Twin Cedars. (Id.) Indeed, the first factual averment relating to the moving defendants in this case relates to Little Walker's purchase of the Twin Cedars facility in December of 2019, long after the events which inspired this lawsuit. (Id., ¶¶ 36, 83-88).
On the basis of these allegations of medical neglect and negligence which allegedly resulted in the death of Eugene Hamill, the plaintiff's second amended complaint brings claims of negligence, wrongful death, and a survival action against Twin Cedars and Singer. (Id., Counts I-VI). In addition, the plaintiff's second amended complaint brings a claim against Singer and Twin Cedars under Pennsylvania's Unfair Trade Practices and Consumer Protection Act, 73 Pa.C.S. §201-1. (Id., Count VII).
However, the second amended complaint also sets forth in Count VIII a claim naming all of the defendants, including defendants Gutman, Rohinsky, Little Walker Holdings, LLC and Shohola Realty, LLC. (Id., Count VIII). In Count VIII of the second amended complaint, the plaintiff seeks to void the December 2019 sale of the Twin Cedars facility to Little Walker Holdings, LLC, and demands other sweeping injunctive relief including the freezing of assets, and an injunction compelling the parties to place in escrow the proceeds from this December 2019 real estate transaction pending the ultimate outcome of this lawsuit. While it is not entirely clear from the second amended complaint, it appears that the plaintiff asserts this fraudulent transfer claim pursuant to Pennsylvania's Uniform Fraud Transfer Act (“PUVTA”). 12 Pa. Cons. Stat. § 5104.
We say that the precise nature of this claim is not entirely clear from the second amended complaint because that pleading does not cite to Pennsylvania's Uniform Fraud Transfer Act (“PUVTA”). 12 Pa. Cons. Stat. § 5104, although in their pleadings all parties assume that PUVTA is the statutory basis for this claim.
It is this fraudulent transfer claim which the defendants challenge in their motion to dismiss. (Doc. 120). We note that these averments in the plaintiff's second amended complaint are but the latest in a series of persistent efforts by the plaintiff to extend the scope of potential liability in this case to parties who admittedly had no involvement in the matters which led to the death of Eugene Hamill.
These efforts began with Hamill's initial and first amended complaints, both of which named Little Walker Holdings, LLC, as a defendant based upon a successor corporate liability theory due to Little Walker's purchase of Twin Cedars in December of 2019. Upon review of this allegation, we recommended that this claim be dismissed noting that:
In sum, Hamill has not alleged factual averments that are sufficient to support an inference of successor liability against Little Walker, either under a de facto merger theory or a “mere continuation” theory. Rather, the complaint solely alleges that Twin Cedars continues to operate a senior living facility following Little Walker's purchase of its assets. This is simply not enough to state a claim for successor liability against Little Walker.Hamill v. Twin Cedars Senior Living Ctr., No. 3:20-CV-231, 2020 WL 7329228, at *7 (M.D. Pa. Nov. 23, 2020), report and recommendation adopted sub nom. Hamill v. Twin Cedars Senior Living, LLC, No. 3:20-CV-231, 2020 WL 7323870 (M.D. Pa. Dec. 11, 2020). In December of 2020, the district court adopted this recommendation, and Little Walker Holdings, LLC was dismissed as a defendant.
Undeterred, the plaintiff sought to renew claims against Little Walker and others under a slightly different garb. Specifically, in June of 2021, Hamill filed a motion for preliminary injunction and a second motion to amend her complaint. (Docs. 75, 76). In these pleadings, Hamill sought to join Little Walker Holdings, LLC, Shohola Realty, LLC, Jacob Gutman and Gary Rohinsky as defendants. Hamill also requested that we grant her sweeping prayer for preliminary injunctive relief, requesting that the court void the December 2019 transfer of the assets and real property of Twin Cedars, order an accounting of the proceeds of any sales or transfers, and direct that the proceeds from the transfer of Twin Cedars or sale of real property be held in escrow. (Doc. 76).
Upon consideration, we recommended that Hamill's motion for preliminary injunction be denied, finding that:
Here, at this early stage in the litigation where the plaintiff has not yet prevailed on any of her claims, we cannot conclude that the plaintiff will suffer irreparable harm if the preliminary injunction is not granted. The plaintiff has not shown that absent a court order to place the proceeds of these sales or transfers in escrow, there will be insufficient funds to pay a future money judgment if she prevails on her claims. Additionally, as we have noted, Twin Cedars currently has an insurance policy with limits of $1 million dollars. While the plaintiff has demanded $15 million in damages, we are unaware of any similar cases in this district where such a high verdict has been awarded. Moreover, we are constrained to note the possible hurdles the plaintiff may face in terms of proving causation, as the decedent died more than one year after his discharge from Twin Cedars.
In sum, as part of her irreparable injury showing Hamill invites us to make a series of speculative inferences: first, that she will prevail; second, that an award will far excess $1,000,000 and will almost certainly entail up to $15,000,000; and third, that the defendants will be
unable to satisfy such a judgment, when and if this judgment is incurred. On the spare factual record presently before us we cannot conclude that the plaintiff has shown she will be subject to irreparable harm if the injunction is not granted. The plaintiff has provided no evidence at this juncture that absent the injunction, the defendants will be unable to pay any monetary judgment she may be awarded in the future. Accordingly, because the plaintiff has failed to meet the two threshold elements for a preliminary injunction, we recommend that the motion for preliminary injunction be denied.(Doc. 107, at 11-12).
In rejecting Hamill's request for this far-reaching preliminary injunctive relief, we also noted that it appeared that the plaintiff was inviting us to draw an inference that the sale of this property was a fraudulent transfer based solely upon the timing of the transfer, which took place four months after plaintiff's counsel served a $15,000,000 demand letter upon Tamara Singer and Twin Cedars. We concluded, however, that other, uncontested evidence largely undermined this causal inference since:
[W]hile these transfers were finalized after the demand letter was received, the process of selling Twin Cedars' assets and property began in December of 2018, well before the demand letter was received. (Doc.86-2, at 3). Indeed, Singer contends that she contacted a real estate attorney in November of 2018; hired a market professional to analyze feasibility in February of 2019; signed a listing agreement with a brokerage firm and contacted an environmental impact group in March of 2019; entered into a listing agreement with a general business broker in June of 2019; and on August 15, 2019- two weeks before the demand letter was received-executed a Letter of Intent with the buyers of Twin Cedars, Jacob Gutman and Gary Rohinsky. (Id.) Accordingly, given the current state of the evidence this factor does not weigh in favor of finding that this transfer was fraudulent.(Id. at 9).
However, in recognition of the policy embodied in Rule 15 of the Federal Rules of Civil Procedure favoring liberal amendment of pleadings, we recommended that Hamill be given leave to amend her complaint in order to try to state a claim upon which relief may be granted. (Id., at 20). The district court adopted this recommendation. (Doc. 108). On December 13, 2021, Hamill complied with this instruction and filed her second amended complaint in this case. (Doc. 109).
With respect to the fraudulent transfer of assets claim against defendants Little Walker, Shohola, Gutman and Rohinsky, the factual narrative set forth in this pleading is somewhat threadbare. In her second amended complaint, Hamill identified the corporate defendants, Little Walker and Shohola, and stated that Mr. Gutman and Mr. Rohinsky were the owners and organizers of these two companies. (Id., ¶¶16-18). The plaintiff then alleges in a cursory fashion that on August 19, 2019, Tamara Singer and Twin Cedars received a $15,000,000 demand letter from plaintiff's counsel. (Id., ¶84). According to Hamill, four months later, in December of 2019, Little Walker acquired ownership of the Twin Cedars facility. (Id., ¶¶ 85, 86).
Notably missing from Count VIII of this second amended complaint was any reference to Pennsylvania's Uniform Fraud Transfer Act (“PUVTA”). 12 Pa. Cons. Stat. § 5104. Moreover, this count of the second amended complaint did not even directly allege any fraud on the part of the defendants. Instead, it simply averred that Defendants Little Walker, Shohola, Gutman and Rohinsky acquired this property “with knowledge, actual or constructive, of the Plaintiff's pending claim and potential legal action.” (Id., ¶88). It is upon these thin reeds that the plaintiff once again attempts to assert legal claims against these parties who had absolutely no involvement in the seminal events giving rise to this lawsuit.
In their motion to dismiss, Defendants Little Walker, Shohola, Gutman and Rohinsky challenge the legal sufficiency of these allegations to state a fraudulent transfer claim under 12 Pa. Cons. Stat. § 5104. (Doc. 120). This motion is fully briefed, (Docs. 121, 129, 130), and is, therefore, ripe for resolution. For the reasons set forth below, it is recommended that this motion to dismiss be granted.
III. Discussion
A. Sufficiency of Pleadings: Rules 9 and 12(b)(6)
A motion to dismiss tests the legal sufficiency of a complaint. Under Rule 12(b)(6) of the Federal Rules of Civil Procedure a complaint is subject to dismissal when it fails to state a claim upon which relief can be granted. Fed.R.Civ.P. 12(b)(6). With respect to this benchmark standard for the legal sufficiency of a complaint, the United States Court of Appeals for the Third Circuit has aptly noted the evolving standards governing pleading practice in federal court, stating that:
Standards of pleading have been in the forefront of jurisprudence in recent years. Beginning with the Supreme Court's opinion in
Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), continuing with our opinion in Phillips [v. County of Allegheny, 515 F.3d 224, 230 (3d Cir. 2008)], and culminating recently with the Supreme Court's decision in Ashcroft v. Iqbal, BU.S-, 129 S.Ct. 1937 (2009), pleading standards have seemingly shifted from simple notice pleading to a more heightened form of pleading, requiring a plaintiff to plead more than the possibility of relief to survive a motion to dismiss.Fowler v. UPMC Shadyside, 578 F.3d 203, 209-10 (3d Cir. 2009).
In considering whether a complaint fails to state a claim upon which relief may be granted, the court must accept as true all allegations in the complaint and all reasonable inferences that can be drawn therefrom are to be construed in the light most favorable to the plaintiff. Jordan v. Fox, Rothschild, O'Brien & Frankel, Inc., 20 F.3d 1250, 1261 (3d Cir. 1994). However, a court “need not credit a complaint's bald assertions or legal conclusions when deciding a motion to dismiss.” Morse v. Lower Merion Sch. Dist., 132 F.3d 902, 906 (3d Cir. 1997). Additionally, a court need not “assume that a . . . plaintiff can prove facts that the . . . plaintiff has not alleged.” Associated Gen. Contractors of Cal. v. California State Council of Carpenters, 459 U.S. 519, 526 (1983). As the Supreme Court held in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), in order to state a valid cause of action, a plaintiff must provide some factual grounds for relief which “requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of actions will not do.” Id., at 555. “Factual allegations must be enough to raise a right to relief above the speculative level.” Id.
In keeping with the principles of Twombly, the Supreme Court has underscored that a trial court must assess whether a complaint states facts upon which relief can be granted when ruling on a motion to dismiss. In Ashcroft v. Iqbal, 556 U.S. 662 (2009), the Supreme Court held that, when considering a motion to dismiss, a court should “begin by identifying pleadings that, because they are no more than conclusions, are not entitled to the assumption of truth.” Id., at 679. According to the Supreme Court, “[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Id., at 678. Rather, in conducting a review of the adequacy of a complaint, the Supreme Court has advised trial courts that they must:
[B]egin by identifying pleadings that because they are no more than conclusions are not entitled to the assumption of truth. While legal conclusions can provide the framework of a complaint, they must be supported by factual allegations. When there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief.Id., at 679.
Thus, following Twombly and Iqbal, a well-pleaded complaint must contain more than mere legal labels and conclusions; it must recite factual allegations sufficient to raise the plaintiff's claimed right to relief beyond the level of mere speculation. As the United States Court of Appeals for the Third Circuit has stated:
[A]fter Iqbal, when presented with a motion to dismiss for failure to state a claim, district courts should conduct a two-part analysis. First, the factual and legal elements of a claim should be separated. The
District Court must accept all of the complaint's well-pleaded facts as true, but may disregard any legal conclusions. Second, a District Court must then determine whether the facts alleged in the complaint are sufficient to show that the plaintiff has a “plausible claim for relief.” In other words, a complaint must do more than allege the plaintiff's entitlement to relief. A complaint has to “show” such an entitlement with its facts.Fowler, 578 F.3d at 210-11.
As the court of appeals has observed:
The Supreme Court in Twombly set forth the “plausibility” standard for overcoming a motion to dismiss and refined this approach in Iqbal. The plausibility standard requires the complaint to allege “enough facts to state a claim to relief that is plausible on its face.” Twombly, 550 U.S. at 570, 127 S.Ct. 1955. A complaint satisfies the plausibility standard when the factual pleadings “allow[ ] the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 129 S.Ct. at 1949 (citing Twombly, 550 U.S. at 556, 127 S.Ct. 1955). This standard requires showing “more than a sheer possibility that a defendant has acted unlawfully.” Id. A complaint which pleads facts “merely consistent with” a defendant's liability, [ ] “stops short of the line between possibility and plausibility of ‘entitlement of relief.' ”Burtch v. Milberg Factors, Inc., 662 F.3d 212, 220-21 (3d Cir. 2011), cert. denied, 132 S.Ct. 1861 (2012).
In practice, consideration of the legal sufficiency of a complaint entails a three-step analysis:
First, the court must “tak[e] note of the elements a plaintiff must plead to state a claim.” Iqbal, 129 S.Ct. at 1947. Second, the court should identify allegations that, “because they are no more than conclusions, are not entitled to the assumption of truth.” Id., at 1950. Finally, “where there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement for relief.”Santiago v. Warminster Twp., 629 F.3d 121, 130 (3d Cir. 2010) (quoting Iqbal, 129 S.Ct. at 1950).
In considering a motion to dismiss, the court generally relies on the complaint, attached exhibits, and matters of public record. Sands v. McCormick, 502 F.3d 263, 268 (3d Cir. 2007). The court may also consider “undisputedly authentic document[s] that a defendant attached as an exhibit to a motion to dismiss if the plaintiff's claims are based on the [attached] documents.” Pension Benefit Guar. Corp. v. White Consol. Indus., 998 F.2d 1192, 1196 (3d Cir. 1993). Moreover, “documents whose contents are alleged in the complaint and whose authenticity no party questions, but which are not physically attached to the pleading, may be considered.” Pryor v. Nat'l Collegiate Athletic Ass'n, 288 F.3d 548, 560 (3d Cir. 2002); see also U.S. Express Lines, Ltd. v. Higgins, 281 F.3d 382, 388 (3d Cir. 2002) (holding that “[a]lthough a district court may not consider matters extraneous to the pleadings, a document integral to or explicitly relied upon in the complaint may be considered without converting the motion to dismiss in one for summary judgment”). However, the court may not rely on other parts of the record in determining a motion to dismiss, or when determining whether a proposed amended complaint is futile because it fails to state a claim upon which relief may be granted. Jordan v. Fox, Rothschild, O'Brien & Frankel, 20 F.3d 1250, 1261 (3d Cir. 1994).
Moreover, when a plaintiff is making allegations of fraud in a complaint, there are additional requisites which must be satisfied in order to state a claim. Rule 9 of the Federal Rules of Civil Procedure prescribes what must be pleaded to assert a claim of fraud in federal court and sets a heightened standard for pleading allegations of fraud. Under Rule 9: “In alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake.” Fed.R.Civ.P. 9(b). In this regard, it is well-settled that:
[T]he rules governing specificity of pleading fraud in federal court call for much greater clarity in pleading and proof to sustain such grave allegations. As the United States Court of Appeals for the Third Circuit has observed:
[Allegations of fraud must comply with Federal Rule of Civil Procedure 9(b), which requires that allegations of fraud be pled with specificity. In order to satisfy Rule 9(b), plaintiffs must plead with particularity “the 'circumstances' of the alleged fraud in order to place the defendants on notice of the precise misconduct with which they are charged, and to safeguard defendants against spurious charges of immoral and fraudulent behavior.” Plaintiffs may satisfy this requirement by pleading the “date, place or time” of the fraud, or through “alternative means of injecting precision and some measure of substantiation into their allegations of fraud.” Plaintiffs also must allege who made a misrepresentation to whom and the general content of the misrepresentation.
Lum v. Bank of America, 361 F.3d 217, 223-4 (3d Cir.2004) (citations omitted, emphasis added).
Thus, “[p]ursuant to Rule 9(b), a plaintiff averring a claim in fraud must specify ‘ “the who, what, when, where, and how: the first paragraph of any newspaper story.”' Advanta Corp. Sec. Litig., 180 F.3d 525, 534 (3d Cir.1999) (quoting DiLeo v. Ernst & Young,
901 F.2d 624, 627 (7th Cir.1990)). ‘Although Rule 9(b) falls short of requiring every material detail of the fraud such as date, location, and time, plaintiffs must use “alternative means of injecting precision and some measure of substantiation into their allegations of fraud.”' In re Rockefeller Ctr. Props. Secs. Litig., 311 F.3d 198, 216 (3d Cir.2002) (quoting In re Nice Sys., Ltd. Secs. Litig., 135 F.Supp.2d 551, 577 (D.N.J.2001), emphasis supplied).” Animal Science Products, Inc. v. China Nat. Metals & Minerals Import & Export Corp., 596 F.Supp.2d 842, 878 (D.N.J.2008).Angino v. Wells Fargo Bank, N.A., No. 1:15-CV-418, 2016 WL 787652, at *10 (M.D. Pa. Feb. 19, 2016), report and recommendation adopted, No. 1:15-CV-418, 2016 WL 759161 (M.D. Pa. Feb. 26, 2016), affd, 666 Fed.Appx. 204 (3d Cir. 2016).
The requirements of Rule 9(b) apply to fraudulent transfer claims under Pennsylvania's Uniform Fraud Transfer Act (“PUVTA”). 12 Pa. Cons. Stat. § 5104. Therefore, in order to state such a claim a party must “plead the circumstances constituting the alleged fraudulent conveyances with particularity.” In re Roman Cath. Diocese of Harrisburg, 640 B.R. 59, 73 (Bankr. M.D. Pa. 2022); In re BG Petroleum, LLC, No. AP 19-07014-JAD, 2021 WL 5749839, at *3 (Bankr. W.D. Pa. Dec. 2, 2021).
For her part, Hamill contends that Rule 9's pleading requirements do not apply to this state law PUVTA claim, citing two Common Pleas Court decisions from 1982 and 1954. As a matter of federal practice this argument is unpersuasive since:
It is established law, . . ., that Rule 9(b)'s particularity requirement applies to state-law causes of action. “[W]hile a federal court will examine state law to determine whether the elements of fraud have been pled sufficiently to state a cause of action, the Rule 9(b) requirement that the circumstances of the fraud must be stated with particularity is a federally imposed rule.” Hayduk v. Lanna, 775 F.2d 441, 443 (1st Cir.1985) (emphasis in original). See also Jenkins v. Commonwealth Land Title Ins. Co., 95 F.3d 791, 796 (9th Cir. 1996) (applying Rule 9(b) to pleading of state-law cause of action); Minger v. Green, 239 F.3d 793, 800 (6th Cir.2001) (same); Roberts v. Francis, 128 F.3d 647, 650-51 (8th Cir.1997) (same).Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1103 (9th Cir. 2003)(emphasis in original).
These are the legal benchmarks which we apply when evaluating the sufficiency of Hamill's fraudulent transfer claim against Defendants Little Walker, Shohola, Gutman and Rohinsky. Judged by these guideposts, we submit that the second amended complaint fails to state a claim upon which relief may be granted.
B. The Plaintiff's Fraudulent Transfer Claim Fails With Respect to Defendants Little Walker, Shohola, Gutman and Rohinsky.
In this case, Hamill's fraudulent transfer claim against Defendants Little Walker, Shohola, Gutman and Rohinsky fails on several scores. While the second amended complaint is not entirely clear on this point, it seems that the plaintiff asserts this fraudulent transfer claim pursuant to Pennsylvania's Uniform Voidable Transactions Act (“PUVTA”). 12 Pa. Cons. Stat. § 5104. This Act provides that:
A transfer made or obligation incurred by a debtor is voidable as to a creditor, whether the creditor's claim arose before or after the transfer was made or the obligation was incurred, if the debtor made the transfer or incurred the obligation:
(1) with actual intent to hinder, delay or defraud any creditor of the debtor; or
(2) without receiving a reasonably equivalent value in exchange for the transfer or obligation, and the debtor:
(i) was engaged or was about to engage in a business or a transaction for which the remaining assets of the debtor were unreasonably small in relation to the business or transaction; or
(ii) intended to incur, or believed or reasonably should have believed that the debtor would incur, debts beyond the debtor's ability to pay as they became due.12 Pa. Cons. Stat. § 5104 (a).
In order to show that a transfer of assets or property is voidable under PUVTA, a plaintiff must demonstrate that there was either an actual intent to hinder or defraud the transferor's creditors, or that the effect of the transfer frustrates future creditors because the transfer rendered the debtor unable to pay. See 12 Pa. Cons. Stat. § 5104(a)(1)-(2); Agri-Marketin g, Inc. v. ProTerra Solutions, LLC, 2018 WL 1444167, at *9 (E.D. Pa. Mar. 22, 2018). The first method requires actual intent to defraud, and the second “‘presumes constructive fraud' where the plaintiff has established the elements specified in § 5104(a)(2).” Agri-Marketing, Inc., 2018 WL 1444167, at *9; see 12 Pa. Cons. Stat. § 5104(a)(2) (requiring a showing that the debtor did not receive a reasonable equivalent value in exchange for the transfer and intended to incur debts beyond his or her ability to pay).
Here, Hamill insists that she is proceeding on a claim of actual, rather than constructive, fraud, stating that the plaintiff is “alleging that this transfer was done with the actual intent to defraud ” (Doc. 129, at 10). Given the nature of Hamill's claim, it is then incumbent upon the plaintiff to satisfy Rule 9's requirements and plead “with particularity the circumstances constituting fraud or mistake.” Fed.R.Civ.P. 9(b). Pennsylvania's Uniform Voidable Transactions Act, in turn, states that allegations of actual fraud typically should be accompanied by well-pleaded facts asserting specific “badges of fraud”, including:
(1) the transfer or obligation was to an insider;
(2) the debtor retained possession or control of the property transferred after the transfer;
(3) the transfer or obligation was disclosed or concealed;
(4) before the transfer was made or obligation was incurred, the debtor had been sued or threatened with suit;
(5) the transfer was of substantially all the debtor's assets;
(6) the debtor absconded;
(7) the debtor removed or concealed assets;
(8) the value of the consideration received by the debtor was reasonably equivalent to the value of the asset transferred or the amount of the obligation incurred;
(9) the debtor was insolvent or became insolvent shortly after the transfer was made or the obligation was incurred;
(10) the transfer occurred shortly before or shortly after a substantial debt was incurred; and
(11) the debtor transferred the essential assets of the business to a lienor who transferred the assets to an insider of the debtor.12 Pa. Cons. Stat. § 5104 (b). Under Rule 9 “boilerplate and conclusory allegations will not suffice. . . . Plaintiffs must accompany their legal theory with factual allegations that make their theoretically viable claim plausible.” In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1418 (3d Cir. 1997).
In the instant case, we conclude that Hamill's second amended complaint has not met Rule 9's particularity requirement with respect to these fraud allegations. Indeed, Count VIII of the second amended complaint does not even directly assert that the defendants acted with fraudulent intent. Further, many of §5104(b)'s “badges of fraud” seem to have no application here since there are no allegations that this was an illicit insider transaction, involving highly suspicious timing or extensive evidence of flight and concealment. Quite the contrary, it is evident from Hamill's pleadings that the plaintiff was aware of Little Walker's acquisition of Twin Cedars from the inception of this litigation since Hamill alluded to this fact in her initial complaint filed in February of 2020. (Doc. 1, ¶¶ 35, 36).
Instead, the plaintiff simply alleges that Little Walker acquired these assets some four months after the plaintiff's counsel issued a demand letter to Tamara Singer and Twin Cedars, and suggests that the defendants should have had actual or constructive knowledge of Hamill's demand when these acquired this property. In our view, the plaintiff may not rely upon this tenuous chronology of events to satisfy her obligation to plead fraud with particularity. Moreover, given the plaintiff's insistence that this claim proceeds solely upon an actual fraud theory, a claim of constructive knowledge of Hamill's claims, standing alone, is insufficient to establish fraudulent intent. In light of Rule 9's heightened pleading requirements, more is needed here in order to state a plausible claim of fraud against Defendants Little Walker, Shohola, Gutman and Rohinsky.
While the plaintiff attempts to bolster this legally infirm claim by referring to some matters outside the pleadings, it is well-settled that a plaintiff cannot amend a complaint through the filing of a brief, or through arguments set forth in a brief opposing a dispositive motion. Indeed, "[i]t is axiomatic that the complaint may not be amended by the briefs in opposition to a motion to dismiss." Pennsylvania ex rel. Zimmerman v. Pepsico, Inc., 836 F.2d 173, 181 (3d Cir. 1988) (quoting Car Carriers, Inc. v. Ford Motor Co., 745 F.2d 1101, 1107 (7th Cir. 1984)); cf. Frederico v. Home Depot, 507 F.3d 188, 202 (3d Cir. 2007) ("[W]e do not consider after-the-fact allegations in determining the sufficiency of [a] complaint under Rules 9(b) and 12(b)(6).").
Furthermore, with respect to the individual defendants, Mr. Gutman and Mr. Rohinsky, there is yet another obstacle to Hamill maintaining this fraudulent transfer claim. The well-pleaded facts in the second amended complaint simply allege that the Twin Cedars property was sold to a separate corporation, Little Walker Holdings, LLC, in December of 2019. Mr. Gutman and Mr. Rohinsky, in turn, are merely alleged to be the owners of Little Walker. Therefore, in order to sustain this claim against the individual defendants Hamill's second amended complaint seems to invite us pierce the corporate veil in order to hold these individuals liable.
This we cannot do based upon the threadbare allegations in the second amended complaint. On this score, it is well-settled that:
Courts do not lightly entertain requests to set aside corporate structures and pierce the corporate veil. Quite the contrary, courts have found corporate veil piercing to be appropriate only “when the court must prevent fraud, illegality, or injustice, or when recognition of the corporate entity would defeat public policy or shield someone from liability for a crime,” Pearson v. Component Tech. Corp.,
247 F.3d 471,484-85 (3d Cir.2001) (quoting Zubik v. Zubik, 384 F.2d 267, 272 (3d Cir.1967)), or when “the parent so dominated the subsidiary that it had no separate existence [.]” Id. (quoting New Jersey Dep't of Envtl. Prot. v. Ventron Corp., 94 N.J. 473, 468 A.2d 150, 164 (N.J.1983)). Veil piercing is not a remedy to be taken lightly, but should only be used as an “extraordinary equitable remedy.” Shenango, Inc. v. American Coal Sales Co., No. 6-149, 2007 WL 2310869 at *3(W.D.Pa. Aug.9, 2007) (emphasis added). The Third Circuit has enumerated eight . . . factors to analyze when determining if the corporate veil can be pierced:
gross undercapitalization, failure to observe corporate formalities, nonpayment of dividends, insolvency of debtor corporation, siphoning of funds from the debtor corporation by the dominant stakeholder, nonfunctioning of officers and directors, absence of corporate records, and whether the corporation is merely a facade for the operations of the dominant stakeholder.Pearson, 247 F.3d at 484-85. J.B. Hunt Transp., Inc. v. Liverpool Trucking Co., No. 1:11-CV-1751, 2013 WL 3208586, at *9 (M.D. Pa. June 24, 2013).
In the instant case, Hamill's second amended complaint is completely devoid of any well-pleaded facts which would justify the extraordinary remedy of piercing the corporate veil. There are simply no factual averments which would suggest that the corporate form of Little Walker Holdings, LLC, should be disregarded. Thus, Hamill has not stated any facts showing gross undercapitalization of this corporation, misuse or disregard of corporate formalities, siphoning of corporate funds, or any other malfeasance by Mr. Gutman or Mr. Rohinsky. In such circumstances, where a request to pierce the corporate veil is unaccompanied by well-pleaded facts justifying this relief, courts have frequently granted motions to dismiss based solely upon a speculative invitation to discount the corporate form. Id. at *9 (citing Patroski v. Ridge; No. 11-105, 2011 WL 4955274 (W.D.Pa.2011) (count dismissed when complainant “provided little or nothing in the way of factual allegations to support her contention that liability should be imposed ... to pierce the veil.”); Essex Insurance Co. v. Miles, No. 10-3598, 2010 WL 5069871 (E.D.Pa. December 3, 2010) (holding that averments based on information and belief that the defendants “failed to observe corporate formalities, intermingled funds, used corporate property for personal expenses, left [the company] grossly undercapitalized, and used [the company] as a ‘facade' or ‘alter ego[,]' ” was “merely a ‘formulaic recitation of the elements of a cause of action' for piecing the corporate veil.”); Preferred Real Estate Investments, LLC v. Lucent Technologies, Inc., No. 07-5374, 2009 WL 1748954, (D.N.J. June 19, 2009) (dismissing count to pierce the corporate veil when complainant alleged common ownership, common principal place of business, common email addresses, common corporate letterhead, and funds of principals of one company were used to make payments to the other company.); Lumax Indus. ., Inc. v. Aultman, 543 Pa. 38, 669 A.2d 893, 895 (Pa.1995) (finding that in order to withstand a motion to dismiss, the pleader must state what the defendant allegedly did that would bring his actions within the parameters of a cause of action based on a theory of piercing the corporate veil)).
Accordingly, entirely aside from the failure to adequately allege this claim of fraud, Hamill's second amended complaint fails with respect to the individual defendants, Mr. Gutman and Mr. Rohinsky, because the plaintiff has failed to state well-pleaded facts which would justify piercing the corporate veil of Little Walker Holdings, LLC. Therefore these individual defendants are entitled to be dismissed from this action.
Because we conclude that this fraudulent transfer claim fails on its merits with respect to these individual defendants, we do not need to reach the personal jurisdiction argument advanced by Defendants Gutman and Rohinsky.
IV. Recommendation
For the foregoing reasons, IT IS RECOMMENDED THAT the motion to dismiss certain claims set forth in the plaintiff's second amended filed by defendants Little Walker Holdings, LLC, Shohola Realty, LLC, Jacob Gutman and Gary Rohinsky, (Doc. 120), be GRANTED.
The parties are further placed on notice that pursuant to Local Rule 72.3:
Any party may object to a magistrate judge's proposed findings, recommendations or report addressing a motion or matter described in 28 U.S.C. § 636 (b)(1)(B) or making a recommendation for the disposition of a prisoner case or a habeas corpus petition within fourteen (14) days after being served with a copy thereof. Such party shall file with the clerk of court, and serve on the magistrate judge and all parties, written objections which shall specifically identify the portions of the proposed findings, recommendations or report to which objection is made and the basis for such objections. The briefing requirements set forth in Local Rule 72.2 shall apply. A judge shall make a de novo determination of those portions of the report or specified proposed findings or recommendations to which objection is made and may accept, reject, or modify, in whole or in part, the findings or recommendations made by the magistrate judge. The judge, however, need conduct a new hearing only in his or her discretion or where required by law, and may consider the record developed before the magistrate judge, making his or her own determination on the basis of that record. The judge may also receive further evidence, recall witnesses or recommit the matter to the magistrate judge with instructions. The failure to timely object may constitute a waiver of any future right to object or appeal this issue.
Submitted this 5th day of August 2022.