PAUL G. BYRON, District Judge.
This cause comes before the Court on Defendants Sabrina Barber and Blaker Enterprises LLC's Motion to Dismiss the Complaint (Doc. 32), filed July 14, 2014. On July 28, 2014, Plaintiffs responded in opposition (Doc. 47). Upon consideration, the Court grants in part and denies in part Defendants' motion to dismiss.
This dispute arises out of Plaintiffs/Judgment Creditors', Wells Fargo Bank, N.A. and Regions Bank (collectively, "Plaintiffs"), efforts to enforce a state court judgment against Defendants/Judgment Debtors, Sabrina Barber ("Barber") and Blaker Enterprises, LLC ("Blaker")
First, on an undetermined date prior to April 13, 2009, Barber received $1,000,000.00 from the sale of her former marital home through the dissolution of her marriage. (Id. ¶ 15). Barber deposited these funds into an account with American Momentum Bank, which was designated a "homestead" account. (Id. ¶¶ 16-17). Barber's American Momentum Bank account accrued interest until Barber closed the account on September 21, 2009, at which point the account totaled $1,066,776.85. (Id. ¶¶ 16, 18). Barber then used these funds to purchase a certificate of deposit with American Momentum Bank, also designated as "homestead" proceeds. (Id. ¶ 18).
On February 17, 2010, Barber then transferred the certificate of deposit to an account with AIG Bank ending in 275 (the "AIG-275 account"), again designated as "homestead" proceeds. (Id. ¶ 19). Barber testified at her deposition that she intended to use these funds to purchase a home. (Id. ¶ 20). To that end, Barber withdrew $227,026.20 from the AIG-275 account on April 15, 2010 and used the money to purchase a home in Winter Garden, Florida. (Id. ¶¶ 21-22).
On January 10, 2011, Barber formed Blaker. (Id. ¶ 29). On February 28, 2011, Barber withdrew $641,350.00 from the AIG-275 account and withdrew $228,650.49 from a second AIG account, for a total withdrawal of $870,000.49. (Id. ¶ 25). Barber then deposited these funds into an account with TD Ameritrade ending in 111 established in Blaker's name (the "TD-111 account"). (Id. ¶ 27). At her deposition, Barber described the TD-111 account as an institutional account in which an advisor guides the account's investments. (Id. ¶ 28).
In September 2011, Blaker transferred $275,000.00 from the TD-111 account back to the AIG-275 account. (Id. ¶ 31). Barber's stated reason for the transfer was because she wanted to avoid management fees on the AIG-275 account, which had since dropped to a balance of $13,891.51. (Id. ¶¶ 32-33). On February 9, 2012, Barber transferred $220,000.00 out of the AIG-275 account; however, neither Plaintiffs nor Barber know where this money was transferred to. (Id. ¶ 34). On April 2, 2012, Blaker transferred $110,000.00 from the TD-111 account into a new account with TD Ameritrade ending in 983 (the "TD-983 account"). (Id. ¶ 35).
According to Barber, she has since converted the TD-111 account into a retail investment account, meaning that she, rather than an advisor, controls the account's investments. (Id. ¶ 36). As a result of the change in type of account, the TD-111 account was closed and its funds were transferred into a new account ending
Plaintiffs initiated this lawsuit on June 10, 2014 by filing the Complaint, in which they allege four claims for relief. Count 1 alleges a claim for injunctive relief. (Id. ¶¶ 42-49). Count 2 alleges a claim to foreclose Barber's membership interest in Blaker or, in the alternative, for a charging order against that interest. (Id. ¶¶ 50-54). Count 3 seeks to avoid the fraudulent transfers of Barber and Blaker based on actual fraud. (Id. ¶¶ 55-63). Count 4 seeks to avoid the fraudulent transfers of Barber and Blaker based on constructive fraud. (Id. ¶¶ 64-71). Defendants now move to dismiss the Complaint for lack of subject matter jurisdiction and for failing to state claims upon which relief can be granted. (Doc. 32).
Upon filing the Complaint, Plaintiffs additionally filed an Emergency Motion for Temporary Restraining Order and Preliminary Injunction. (Doc. 2). On June 13, 2014, the Court denied Plaintiffs' request for an emergency temporary restraining order and set the matter for a hearing on the issuance of a preliminary injunction. (Doc. 10). After conducting a hearing on the matter, the Court denied Plaintiffs' request for a preliminary injunction on July 17, 2014. (Docs. 40, 41).
Motions made pursuant to Federal Rule of Civil Procedure 12(b)(1) attack a district court's subject matter jurisdiction to consider the case at bar. Motions to dismiss under Rule 12(b)(1) come in two forms: "facial attacks" and "factual attacks." Lawrence v. Dunbar, 919 F.2d 1525, 1528-29 (11th Cir.1990). Facial attacks only require the court to determine if the plaintiff has alleged a sufficient basis for subject matter jurisdiction. Id. at 1529. As such, the allegations within the complaint are assumed true for the purpose of the motion. Id. On the other hand, factual attacks challenge the existence of subject matter jurisdiction irrespective of what the complaint alleges. Garcia v. Copenhaver, Bell & Assocs., M.D's, P.A., 104 F.3d 1256, 1260-61 (11th Cir.1997). Accordingly, in a factual attack, courts may consider information outside of the pleadings—including testimony, affidavits, and other evidence—and "may make factual findings necessary to resolve the motion." Hawthorne v. Baptist Hosp., Inc., No. 3:08cv154/MCR/MD, 2008 WL 5076991, at *2 (N.D.Fla. Nov. 24, 2008).
Motions pursuant to Federal Rule of Civil Procedure 12(b)(6) challenge whether the plaintiff has made sufficient factual allegations to state a claim upon which relief can be granted. In order to survive a motion to dismiss made under Rule 12(b)(6), the complaint must "state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 557, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). A claim is plausible on its face when the plaintiff alleges facts that "allow[ ] the court to draw the reasonable inference
Defendants move to dismiss Count 1 on the basis that injunctive relief is not a cognizable claim, but rather a remedy that may be issued upon a finding of liability. (Doc. 32, pp. 4-5). While Plaintiffs do not dispute this principle, Plaintiffs contend that dismissal of Count 1 would be "technical" and would only "amount to form over substance," especially in light of the Court's ruling on Plaintiff's motion for injunctive relief. (Doc. 47, ¶ 3).
The Court disagrees that a dismissal of Count 1 under Rule 12(b)(6) would be merely "technical." It is well-established that each count within a plaintiff's complaint must "withstand scrutiny" under Rule 12(b)(6) by stating a claim for relief. Klay v. United Healthgroup, Inc., 376 F.3d 1092, 1097 (11th Cir.2004). It is equally well-established that injunctive relief is not a proper claim for relief in and of itself, but rather a remedy that is available upon a finding of liability on a claim. Alabama v. U.S. Army Corps of Eng'rs, 424 F.3d 1117, 1127 (11th Cir.2005); Transatlantic, LLC v. Humana, Inc., No. 8:13-CV-1925-T-17TBM, 2014 WL 5039667, at *9 (M.D.Fla. Sept. 30, 2014). Because injunctive relief is not a proper claim, Defendants' motion to dismiss will be granted as to Count 1. Plaintiffs may pursue injunctive relief as a remedy to any of the remaining claims stated in the Complaint.
The Florida Limited Liability Company Act (the "Florida LLC Act"), Fla. Stat. §§ 608.401-.705, provides that a judgment creditor to any member of a limited liability company may obtain a charging order against the member's interest in the company or foreclose that interest in the company under certain circumstances. As to a charging order, the Florida LLC Act provides:
Fla. Stat. § 608.433(4)(a). A charging order issued under this provision acts as a lien on the member's interest in the limited liability company and grants the judgment creditor the right to receive distributions from the company which the member would have otherwise been entitled to receive. Id. § 608.433(4)(b).
Generally, "a charging order is the sole and exclusive remedy by which a judgment creditor . . . may satisfy a judgment" from a member's interest in a limited liability company or distributions therefrom. See id. § 608.433(5). However, where the limited liability company has only one member, the Florida LLC Act allows a judgment creditor to foreclose the member's interest in the company as follows:
Id. § 608.433(6). The purchaser of the member's interest at a foreclosure sale steps into the shoes of the member for all purposes and the member loses all interests and rights in the company. Id. § 608.433(7).
Defendants challenge Count 2 on the grounds that this Court lacks jurisdiction to either foreclose Barber's interest in Blaker or to enter a charging order against that interest. (Doc. 32, pp. 5-7). Defendants' take the position that, because Blaker was organized under the laws of Nevis, it is a foreign limited liability company beyond the in rem or quasi in rem jurisdiction of this Court.
Plaintiffs are correct that Defendants' reliance on Sargeant is misplaced. In Sargeant, the trial court ordered debtors to turn over their stock certificates in a foreign corporation in order to help satisfy a creditor's judgment. Sargeant, 137 So.3d at 433. Just as Defendants argue here, the debtors in Sargeant asserted that the trial court lacked the authority to compel the turnover because the stock certificates were located outside the court's in rem jurisdiction. Id. at 433-34. Upon review, the Fourth District Court of Appeal agreed, holding that courts may only exercise jurisdiction over property of a debtor located within the court's jurisdictional territory. Id. at 435. Because the stock certificates in Sargeant were located in the Bahamas, the Netherlands, Jordan, the Isle of Man, and the Dominican Republic, the Florida trial court erred in compelling their turnover. Id.
Although Defendants repeatedly refer to Blaker as a "foreign corporation," (see Doc. 32, pp. 6, 7), Blaker is not a corporate entity, but a limited liability company. (Doc. 1-1, Ex. J). Unlike stock certificates in a corporation, a membership interest in a limited liability company is intangible personal property, which "accompanies the person of the owner."
Defendants additionally challenge Count 2 for failing to state a claim. Specifically, Defendants contend that any charging order against or foreclosure of a membership interest in Blaker must be made pursuant to Nevis law, as that is the body of law that governs Blaker. (Doc. 32, pp. 7-8). As such, it appears that the Court is confronted with a conflict-of-laws issue as to whether it may apply the Florida LLC Act or whether it must apply Nevis law—in this case, the Nevis Limited Liability Company Ordinance of 1995 (hereinafter referred to and cited as the "Nevis LLC Ordinance").
The first step in analyzing a potential conflict-of-laws question is to examine the different laws at issue and determine whether those laws are in actual conflict. Cooper v. Meridian Yachts, Ltd., 575 F.3d 1151, 1171 (11th Cir.2009). When the laws of the competing jurisdictions are substantially similar or identical, a "false conflict" exists and "the court should avoid the conflicts question and simply decide the issue under the law of each of the interested states." Id. (internal quotation marks omitted).
As discussed above, the Florida LLC Act provides up to two avenues for a judgment creditor to recover from a judgment debtor's membership interest in a limited liability company. First, the judgment creditor may apply to a court for a charging order to receive distributions from the company to which the judgment debtor would otherwise be entitled. Fla. Stat. § 608.433(4). Second, in cases where the judgment debtor is the sole member of the limited liability company, the judgment creditor may apply to a court to foreclose the judgment debtor's interest in the company upon the proper showing. Id. § 608.433(6).
By comparison, the Nevis LLC Ordinance also allows for the entry of a charging order against a judgment debtor's membership interest in a limited liability company:
Nevis LLC Ordinance § 43(1). However, Nevis law is clear that such a charging order "shall be the sole remed[y] available to any creditor of a member's interest," thus excluding foreclosure of the membership interest regardless of the circumstances. Id. § 43(3). Moreover, Nevis law allows the non-charged members of the limited liability company to redeem a
When confronted with a "true" conflict-of-laws question, a federal court sitting in diversity must apply the forum state's choice of law rules. Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941). "As a preliminary matter, the court must characterize the legal issue and determine whether it sounds in torts, contracts, property law, etc." Grupo Televisa, S.A. v. Telemundo Commc'ns Grp., Inc., 485 F.3d 1233, 1240 (11th Cir.2007). Once the legal issue has been characterized, the court applies the choice of law rules that the forum state applies to that category. Id.
Here, the legal issue is best described as whether a membership interest in a limited liability company can be used to satisfy the judgment of a creditor of the member who owns that interest. As noted earlier, both the Florida LLC Act and the Nevis LLC Ordinance characterize membership interests in limited liability companies as personal property. Fla. Stat. § 608.431; Nevis LLC Ordinance § 38. Therefore, the legal issue in this case sounds in property. In Florida, the law of the situs of the property controls. Wells Fargo Bank, N.A. v. Scalercio, No. 11-60498-CIV., 2011 WL 6840583, at *2 (S.D.Fla. July 1, 2011) (citing Quintana v. Ordono, 195 So.2d 577, 579 (Fla.Dist.Ct. App.1967)); In re Hillsborough Holdings Corp., 207 B.R. 299, 302 (Bankr.M.D.Fla. 1997). As described more fully above, since Barber resides in Florida, so does her membership interest in Blaker. See Nelson, 68 So.2d at 611; cf. Restatement (Second) of Conflict of Laws § 65 & cmt. a. Therefore, the situs of the property at issue in this case is Florida and Florida law applies. See Scalercio, 2011 WL 6840583, at *2. As a result, the Court will analyze Count 2 under the Florida LLC Act.
Based on the allegations contained in the Complaint, the Court is satisfied that Plaintiffs are plausibly entitled to enforce the Deficiency Judgment by foreclosing Barber's interest in Blaker, or in the alternative, by charging Barber's membership interest in Blaker. Plaintiffs have attached both the underlying state court judgment and the Deficiency Judgment to the Complaint. (Doc. 1-1, Ex. A). Further, the Deficiency Judgment reflects an unsatisfied balance of $62,491,162.98 (id. at p. 3), leading the Court to reasonably infer that a charging order will not satisfy the Deficiency Judgment within a reasonable time, even considering any amounts Plaintiffs may recover from Defendants' other various bank accounts. Finally, there is no dispute that Barber is the sole member of Blaker, thus permitting foreclosure as a possible remedy. (Doc. 1, ¶ 12; Doc. 1-1, Ex. J, p. 14, § 3.1). For these reasons, Plaintiffs sufficiently allege a claim for foreclosure of interest, or in the alternative, for a charging order. The motion to dismiss will be denied as to Count 2.
The Florida Uniform Fraudulent Transfer Act ("FUFTA"), Fla. Stat. §§ 726.101-.201, provides creditors with various forms of relief to avoid a debtor's fraudulent transfer of assets or funds. Of importance to Count 3, a creditor may avoid a debtor's transfer where the creditor shows that the transfer was made
Id. §§ 726.105(2)(a)-(k). The Court may additionally consider any other factor it deems relevant and should look to the totality of the circumstances in determining actual fraud. Gen. Trading Inc. v. Yale Materials Handling Corp., 119 F.3d 1485, 1498 (11th Cir.1997). "The existence of badges of fraud creates a prima facie case and raises a rebuttable presumption that the transaction is void." Wiand v. Lee, 753 F.3d 1194, 1200 (11th Cir.2014) (quoting Gen. Elec. Co. v. Chuly Int'l, LLC, 118 So.3d 325, 327 (Fla.Dist.Ct.App. 2013)) (internal quotation marks omitted).
FUFTA also allows a creditor to avoid a debtor's transfer that is constructively fraudulent. In order to establish a prima facie case for avoidance based on constructive fraud, the creditor must show that the debtor did not receive reasonable value for the transfer and either (1) the debtor was engaged or was about to engage in a business or transaction for which the debtor's remaining assets were unreasonably small in relation, (2) the debtor intended to, believed, or reasonably should have believed that she would incur debt beyond what she could pay as the debt became due, or (3) the debtor was insolvent at the time of the transfer. Wiand v. Morgan, 919 F.Supp.2d 1342, 1355 & n. 14 (M.D.Fla.2013); see also Fla. Stat. §§ 726.105(1)(b), 726.106(1).
Defendants attack Counts 3 and 4 on two grounds. First, Defendants argue that Plaintiffs' factual allegations are insufficient to plead either actual or constructive theories of fraud. (Doc. 32, pp. 9-12). Specifically, Defendants assert that although Plaintiffs have alleged some badges of fraud, they have ignored others that Defendants believe weigh against Plaintiffs' case. (Id. at p. 10). For example, Barber has not absconded, has not concealed or removed assets, and voluntarily disclosed the status of her assets at her deposition. (Id. at pp. 10-11). As to her transfers to Blaker, Barber states that these transfers were made for legitimate investment purposes. (Id. at p. 11).
However, it is not for the Court to weigh the parties' respective cases on a motion to dismiss, but rather to determine whether Plaintiffs, accepting the factual allegations
Due to the badges of fraud demonstrated by the Complaint and the totality of the circumstances relating to Barber's transfers to Blaker, Plaintiffs have plausibly alleged a prima facie claim for avoidance based on actual fraud. For the same reasons, Plaintiffs have demonstrated that Barber did not receive sufficient consideration from Blaker for the transfers and that Barber was insolvent at the time of the transfers, thus alleging a prima facie claim for avoidance based on constructive fraud. Morgan, 919 F.Supp.2d at 1355 & n. 14.
Second, Defendants submit that Counts 3 and 4 are barred by collateral estoppel. (Doc. 32, pp. 12-13). Defendants contend that the Court's June 13, 2014 Order on Plaintiffs' Emergency Motion for Temporary Restraining Order and Preliminary Injunction constitutes a final resolution of the merits of Plaintiffs' fraudulent transfer claims. (Id.). However, it is well-settled Florida law that orders on motions for preliminary injunctive relief are afforded no such preclusive effect. David Vincent, Inc. v. Broward Cnty., Fla., 200 F.3d 1325, 1331 (11th Cir.2000); Eisenberg v. City of Miami Beach, No. 13-23620-CIV, 54 F.Supp.3d 1312, 1321-22, 2014 WL 4681027, at *6 (S.D.Fla. Sept. 19, 2014).
For the aforementioned reasons, it is
