SANDRA R. KLEIN, Bankruptcy Judge.
The Court's tentative ruling issued on October 2, 2013 was adopted as the Court's final ruling following the October 3, 2013 hearing on the above-captioned motion. A copy of the tentative ruling is attached hereto.
Before the Court is the Chapter 11 Trustee's "Motion for Partial Summary Judgment" (MSJ). AP Docket #96.
On 9/12/13, Argyle Online, LLC, Path Media Holdings, LLC, Joseph R. Francis, Argyle Media Sales, LLC, and Fab Films, LLC (collectively Argyle) filed an opposition to the MSJ (Opposition). AP Docket #116. Argyle submitted the following documents in support of the Opposition: Statement of Genuine Issues in Support of Opposition to Motion for Partial Summary Judgment (SGI), AP Docket #117; Declaration of Christy Snow (Snow 9/11/13 Decl.), AP Docket #118; Declaration of Christopher Dale (Dale 9/11/13 Decl.), AP Docket #119; Declaration of Arthur Greenfield (Greenfield 9/11/13 Decl.), AP Docket #120; and Declaration of Joseph Francis (Francis 9/11/13 Decl.), AP Docket #121.
On 9/19/13, the Trustee filed a "Reply in Further Support of Motion for Partial Summary Judgment" (Reply). AP Docket #123. The Trustee submitted the Supplemental Declaration of Matthew C. Heyn (Heyn 9/19/13 Decl.) in support of the Reply. AP Docket #124. And, the Trustee filed "Evidentiary Objections in Connection with Motion for Partial Summary Judgment" (Objections) to the evidence submitted by Argyle. AP Docket #125. Argyle and the Trustee filed additional pleadings related to the Objections. Those pleadings are discussed in the sham affidavit section of the analysis.
The Court finds that there is no genuine dispute as to the following facts:
GGW Brands, LLC, GGW Direct, LLC, GGW Magazine, LLC, GGW Events, LLC (the Original GGW Debtors), and GGW Marketing, LLC (collectively with the Original GGW Debtors, the Debtors, or the GGW Entities) distribute "Girls Gone Wild" and "Guys Gone Wild" adult entertainment content through various pay-per-view outlets and directly via DVDs, websites, and a magazine. SS ¶ 1; 7/12/13 Declaration of R. Todd Neilson, BK Docket #228 (Neilson 7/12/13 Decl.) ¶ 4. The Debtors' business depends on their ability to use intellectual property (IP) associated with the "Girls Gone Wild" and "Guys Gone Wild" brands. SS ¶ 2; 3/28/13 Declaration of Christopher Dale, BK Docket #46 (Dale 3/28/13 Decl.) ¶¶ 3, 11
FACC ¶ 11.
Before 11/15/11, the Trademarks and URLs were owned by GGW Brands, LLC and GGW Marketing, LLC, but all of the Debtors used the Trademarks.
According to Mandy Isaac, the Debtors' Controller: "[A]lthough GGW Direct, LLC, GGW Events, LLC and GGW Magazine, LLC sold `Girls Gone Wild' products, the accounting records do not reflect any payment to, or money owed to, GGW Marketing,
Until late October/early November 2012, Joseph R. Francis (Francis) was the manager of Pablo Holdings, LLC (Pablo Holdings), which controlled the Debtors. Transcript of 4/10/13 Hearing (Trans. 4/10/13 Hearing), BK Docket #86, 69:3-5. Pablo Holdings' Operating Agreement stated that Pablo's manager — Francis — had unfettered discretion and complete control over Pablo Holdings, which in turn controlled GGW Brands, LLC, the holding company of the other GGW Entities. Id. at 69:13-18. Francis also 1) "had the ultimate say in hiring and firing GGW employees;" 2) "determined how much he would be paid, which was limited only by debtors' income," and 3) "negotiated with and terminated vendors on behalf of the GGW entities." Id. at 69:22-70:19. Further, "GGW funds were used to pay Francis's personal expenses [and] for lawyers who represented him personally." Id. at 70:2-5.
Even though Christopher Dale (Dale) was purportedly promoted to be manager of Pablo Holdings sometime in the fall of 2012, Francis continued to control the Debtors. Id. at 69:6-9. As an initial matter, Dale was Debtors' human resources manager until at least 8/29/12, and he conceded at that time that his "knowledge of and authority over Debtors was extremely limited." Id. at 72:16-19. By late October/early November 2012, Dale had been "elevated" by Asia Trust Limited, as trustee of the Ridgewood Global Trust (Ridgewood), to manage Pablo Holdings and therefore, Debtors. Id. at 72:20-24. Dale did not apply for this position. Id. at 77:17-22. Instead, Dale was notified during a telephone call with Ronald Tym (Tym)
On a 5/15/12 "GGW Org Chart," Francis's title is listed as "Creative Consultant" and his name appears at the very top of the chart. 7/15/13 Declaration of Matthew C. Heyn, BK Docket #228 (Heyn 7/15/13 Decl.) ¶ 9(c), Ex. H. Francis continued to control the GGW Entities even after Dale was appointed as Pablo Holdings' manager. Trans. 4/10/13 Hearing at 83:3-14. On 2/27/13, the date that the Original GGW Debtors filed for bankruptcy, GGW Direct, LLC paid $65,000 to Kiki Entertainment (Kiki). Id. at 73:23-24; 4/8/13 First Supplemental Declaration of Ronald D. Tym, Docket #61 in In re GGW Direct, LLC, 13-15132-SK (Tym 4/8/13 Decl.) ¶ 5.
In October 2011, Francis hired Robert Klueger (Klueger), an attorney who specializes in asset protection. SS ¶ 18; Heyn 7/15/13 Decl. ¶ 7, Ex. J at 3:22 and 5:5-12; SGI ¶ 18 (undisputed). Klueger's 10/4/11 retention letter (Retention Letter), which was addressed to Francis, at GGW Brands, LLC, stated that:
SS ¶ 19; Heyn 7/15/13 Decl. ¶ 8, Ex. I; Heyn 9/19/13 Decl. ¶ 11, Ex. D.
Klueger testified that none of his work was undertaken for tax planning purposes, but rather, to make it "more difficult for a creditor to be able to access the assets" and so that no "creditor of the operating company [could] seize the intellectual property." SS ¶¶ 23, 25; Heyn 5/23/13 Decl. ¶ 7, Ex. J at 7:14-18 and 9:17-18. Klueger formed Path Media, a Nevis entity, in October 2011. SS ¶¶ 24, 25; Heyn 7/15/13 Decl. ¶ 7, Ex. J at 9:23 and 10:5-6; SGI ¶¶ 24, 25. According to Klueger, his approach to asset protection "is part science and part art" and forming Path Media in Nevis made it "[j]ust more difficult for a creditor to be able to access the assets." SS ¶ 25; Heyn 7/15/13 Decl. ¶ 7, Ex. J at 9:12-18.
The Debtors did not receive any consideration for the Assignments. SS ¶ 34; Heyn 5/23/13 Decl. ¶ 25, Ex. V at 11:5-22; Gatien 5/22/13 Decl. ¶ 11; SGI ¶ 34 (undisputed). After the Assignments, the Debtors continued to use the Trademarks without paying any fees or royalties to Path Media. SS ¶ 35; Gatien 5/22/13 Decl. ¶ 7; Pfister 8/22/13 Decl. ¶ 17, Ex. A at 8:8-10.
At the time of the Assignments, the following lawsuits were pending or threatened against the Debtors:
SS ¶ 33; Heyn 5/23/13 Decl. ¶¶ 17-19, Exs. N, O, P.
On 5/4/12, Francis and Klueger filed a Certificate of Cancellation in Delaware for GGW Marketing, LLC. SS ¶ 37; Heyn 5/23/13 Decl. ¶ 11, Ex. H; SGI ¶ 37 (undisputed). On 1/16/13, Dale, as "Manager of GGW Brands, LLC its Manager," filed a Limited Liability Certification of Cancellation for GGW Marketing, LLC in California. Heyn 5/23/13 Decl. ¶ 12, Ex. I.
On 2/25/13, Path Media sent a "Notice of Termination of Licenses" to Debtors terminating their right to use the Trademarks (Termination Notice). SS ¶ 47; Heyn 5/23/13 Decl. ¶ 13, Ex. J; SGI ¶ 47 (undisputed). Tym assisted in the preparation of the Termination Notice. SS ¶ 48; Heyn 8/22/13 Decl. ¶¶ 7, 8, Ex. B; SGI ¶ 48 (undisputed). At that time, Tym represented Francis and the Debtors. SS ¶ 49; Heyn 8/22/13 Decl. ¶ 4, Ex. A; SGI ¶ 49 (undisputed).
On 2/26/13,
The Termination Notice was addressed to GGW Brands, LLC, GGW Direct, LLC, GGW Events, LLC, GGW Magazine, LLC, and GGW Marketing, LLC.
On 2/25/13 — the same date Path Media purportedly sent the Termination Notice to Debtors — Path Media (through its "U.S. Representative Argyle Online, LLC") and GGW Direct, LLC entered into a "Trademark License Agreement" (License Agreement) for use of the Trademarks. SS ¶ 54; Heyn 5/23/13 Decl. ¶ 14, Ex. K; SGI ¶ 54 (undisputed). The License Agreement allowed GGW Direct, LLC to assign its right to use the Trademarks "to a subsidiary, successor-in-interest, or affiliate of [GGW Direct, LLC]." SS ¶ 56; Heyn 5/23/13 Decl. ¶ 14, Ex. K at ¶ 8(I); SGI ¶ 56 (undisputed).
Tym received the Termination Notice and License Agreement (collectively Termination/Re-License) at the same time. Heyn 8/22/13 Decl. ¶ 13, Ex. D (Tym 5/24/13 Depo) at 71:24-25. According to Tym, Path Media, which was previously part of Ridgewood (of which Francis is a principal and beneficiary), was transferred to the Hammersmith Trust, and that was why the License Agreement "was with Path Media Holdings and the Hammersmith Trust." Id. at 71:24-72:11.
Date Amount Transferred 2/19/2013 $209,250.52 2/19/2013 $ 5,000.00 2/25/2013 $ 60,000.00
The Original GGW Debtors had combined assets of $7,211,878.96, combined liabilities of $66,190,850.61, and $1,963 in their checking accounts on 3/13/13, the day they filed their bankruptcy schedules. SS ¶ 58; GGW Brands, LLC Schedules of Assets and Liabilities, BK Docket #23 ($200 in checking account); GGW Direct, LLC Schedules of Assets and Liabilities, Case No. 2:13-bk-15132, Docket #20 ($0 in checking account); GGW Events, LLC Schedules of Assets and Liabilities, Case No. 2:13-bk-15134, Docket #22 ($1,563 in checking account); GGW Magazine, LLC Schedules of Assets and Liabilities, Case No. 2:13-bk-15137, Docket #21 ($200 in checking account). GGW Direct, LLC listed assets of $3,080,112.96 and liabilities of $17,719,828.91 and GGW Marketing, LLC listed assets of $0 and liabilities of $5,812,588.00. GGW Direct, LLC, Schedule B, Case No. 13-bk-15132-SK, Docket #20; GGW Marketing, LLC Schedule B, Case No. 13-bk-23452-SK, Docket #19.
The Debtors did not receive any consideration in connection with the Termination/Re-License.
At time of the Termination/Re-License, in addition to the pending lawsuits listed above, three of the Debtors (GGW Direct, LLC, GGW Brands, LLC, and GGW Events, LLC) were defendants in a Nevada state court action, Wynn Las Vegas LLC d/b/a Wynn Las Vegas v. GGW Direct, LLC et. al., Case No. A-12-66028-B (filed 4/18/12) (Nevada Case). SS ¶ 62; Heyn 5/23/13 Decl. ¶ 6, Ex. C; SGI ¶ 62 (undisputed). In the Nevada Case, the Nevada state court found that the plaintiff, Wynn Las Vegas (Wynn LV) demonstrated a "substantial likelihood of prevailing on the merits" on the claim that the Debtors were the "alter ego" of Francis. Id.
Francis also indirectly owns and controls Argyle Online and Argyle Media Sales (collectively Argyle). SS ¶¶ 65, 66; Heyn 8/22/13 Decl. ¶¶ 4, 6, 15, Exs. A, F. Argyle is Path Media's "U.S. Representative," with the power to enter into agreements and sue on behalf of Path Media. SS ¶ 67; Heyn 5/23/13 Decl. ¶ 14, Ex. K;SGI ¶ 67 (undisputed). Francis's girlfriend, Abbey Wilson (Wilson), is the manager of Argyle. SS ¶ 68; Heyn 5/9/13 Decl. ¶ 20, Ex. P; SGI ¶ 68 (undisputed). In May 2013, Wilson replaced Tym as manager of Argyle. Id.
Following the Termination/Re-License, Francis and Path Media instructed distributors to pay royalties relating to the Trademarks to Argyle rather than the Debtors. Heyn 5/23/13 Decl. ¶ 26, Ex. W (3/21/13 email sent from GGW Brands, LLC's national sales manager to a Deluxe Distributors accounts payable representative stating "this is to inform you that all Girls Gone Wild and Guys Gone Wild retail products are now being sold under Argyle Online, LLC. Please make note of the company information below for billing purposes and be sure to update your database."). One distributor, iN DEMAND, LLC, filed an Interpleader Complaint alleging that it had been advised by an Argyle representative that it would need to make payments to a new address and that Debtors' representative had asked it to send payment elsewhere. iN DEMAND LLC v. Argyle Media Sales, LLC, et. al., 2:13-ap-01547-SK, Docket #1.
On 2/25/13, Francis directed the Debtors' payment processor, Century Bankcard Services, to re-direct payments from the Debtors to Argyle. SS ¶ 70; Heyn 5/23/13 Decl. ¶ 4, Ex. A; SGI ¶ 70 (undisputed). Francis's email to the payment processor stated that "[GGW] is going away soon." SS ¶ 71; Heyn 5/23/13 Decl. ¶ 4, Ex. A; SGI ¶ 71 (undisputed). A follow-up email from Tym to Francis stated:
Id.
On 2/27/13, the Original GGW Debtors filed chapter 11 bankruptcy cases. SS
During the 4/10/13 Hearing, Wynn LV, the Original GGW Debtors, and the United States Trustee were each given an opportunity to be heard. Trans. 4/10/13 Hearing at 1:6-19. At the conclusion of the 4/10/13 Hearing, the Court granted Wynn LV's Motion for Trustee pursuant to 11 U.S.C. § 1104(a)(1) and 1104(a)(2). Id. at 59:18-20. On 4/12/13, R. Todd Neilson was appointed the Trustee in the Original GGW Cases. BK Docket #82.
On 5/9/13, the Trustee filed a "Motion for Authority to Revoke Cancellation and to File Voluntarily Chapter 11 Petition for Debtors' Subsidiary," in which the Trustee sought authority to revoke the cancellation of GGW Marketing, LLC, to file a chapter 11 petition on behalf GGW Marketing, LLC, and to file an adversary proceeding to avoid the transfer of the Trademarks from GGW Marketing, LLC to Path Media (Revocation Motion). BK Docket #120. PSL, Argyle, and Francis (collectively Francis) filed an "Opposition to Motion for Authority to Revoke Cancellation and to File Voluntary Chapter 11 Petition for GGW Marketing, LLC" (Revocation Opposition). BK Docket #141. The only issue raised in the Revocation Opposition was whether GGW Brands, LLC was a member or a manager of GGW Marketing, LLC. Id. According to Francis, GGW Brands, LLC was only a manager of GGW Marketing, LLC and therefore, it never owned the Trademarks and the Trustee did not have authority to revoke GGW Marketing, LLC's cancellation and to file a bankruptcy case on behalf of GGW Marketing, LLC. Id. Francis acknowledged that if GGW Brands, LLC were a member of GGW Marketing, LLC, it would have an ownership interest in the Trademarks that GGW Marketing, LLC transferred to Path Media in November 2011. Id.
The Revocation Motion came on for hearing on 5/20/13 (5/20/13 Hearing). Counsel for the Trustee and counsel for Francis made appearances at the 5/20/13 Hearing and were given an opportunity to be heard.
At the conclusion of the 5/20/13 Hearing, the Court found that GGW Brands, LLC was a member of GGW Marketing, LLC.
On 5/20/13, the Court entered an "Order Authorizing the Chapter 11 Trustee to Revoke Cancellation and to File Voluntary Petition for GGW Marketing, LLC" (Revocation Order). BK Docket #153. On 5/22/13, the Trustee filed a chapter 11 case on behalf of GGW Marketing, LLC. In re GGW Marketing, LLC, 13-bk-23452-SK, Docket #1.
On 5/22/13, Francis filed an "Emergency Motion ... for Stay Pending Appeal" (Stay Motion). BK Docket #166. On 5/23/13, The Trustee filed an Opposition to the Stay Motion. BK Docket #171. On that same date, the Court set the hearing on the Stay Motion on 5/24/13 (5/24/13 Hearing). BK Docket #174. On 5/23/13, the Court also entered an order granting GGW Marketing, LLC's Motion for Joint Administration. BK Docket #172-1. All of the Debtors' cases are being jointly administered under In re GGW Brands, LLC, 13-bk-15130. BK Docket #172.
Before the 5/24/13 Hearing, the Court issued a tentative ruling in which it denied the Stay Motion. BK Docket #176. During the 5/24/13 Hearing, Francis's counsel submitted on the tentative ruling. At the conclusion of the 5/24/13 Hearing, the Court adopted its tentative ruling as its final ruling. Id.
On 6/3/13, Francis filed a "Notice of Appeal" of the Revocation Order (First NOA), which was blank. BK Docket #178. On that same date, Francis filed a second "Notice of Appeal," which indicated that Francis was appealing the Revocation Order (Second NOA). BK Docket #181. On 6/11/13, the United States District Court issued a "Notice Regarding Appeal from Bankruptcy Court" (Third NOA). BK Docket #200. The Third NOA indicated that: 1) one of the parties had requested that the appeal be heard by the United States District Court for the Central District of California; 2) the appeal had been assigned to District Court Judge Fernando M. Olguin; and 3) the District Court case number was CV13-4162-FMO (Appeal). Id. On 7/2/13, the District Court issued an "Order to Show Cause Re: Dismissal for Lack of Prosecution." District Court Docket #6. On 8/7/13, the District Court entered an order and judgment dismissing the Appeal without prejudice for lack of prosecution. District Court Docket #s 7, 8.
Argyle is Path Media's "U.S. Representative" with the power to enter into agreements and sue on behalf of Path Media. SS ¶ 67; SGI ¶ 67 (undisputed). On 3/22/13, after Wynn LV filed the Motions for Trustee, "at Francis's direction, the Debtors' employees were given new email accounts ending in `@argyleonline.com.'" SS ¶ 84; SGI ¶ 84 (undisputed).
Argyle has asserted that it holds a "license from Path [Media] for the use of the Trademarks in connection with products using such Trademarks ..." and that Path Media had assigned Argyle "the right to bring the causes of action hereunder that would otherwise belong to Path [Media]." AP Docket #1 ¶¶ 11, 14.
On 5/22/13, Argyle filed a complaint (Complaint) that initiated an adversary proceeding (AP) against "R. Todd Neilson solely in his capacity as Chapter 11 Trustee for the estates of GGW Brands, LLC, GGW Direct, LLC, GGW Events, LLC and GGW Magazine, LLC, and related estates." AP Docket #1. The Complaint, which contained causes of action for conversion and slander of title, was based on alleged statements made by the Trustee that Path Media, Argyle's purported assignor, did not have the right to use the Trademarks. Id.
On 5/23/13, the Trustee filed "Counterclaims and Third-Party Complaint to Avoid and Recover Fraudulent Transfers and for Conversion" against Path Media, Francis, Argyle Media Sales, LLC and Fab Films, LLC (collectively Argyle) (Fraudulent Transfer Complaint). AP Docket #4. The Fraudulent Transfer Complaint sought to avoid transfer of, and recover royalties related to, the Trademarks. Id. ¶ 1.
On 5/23/13, the Trustee also filed a "Motion for (1) A Temporary Restraining Order Against Joseph R. Francis and Path Media Holdings, LLC, and (2) An Order to Show Cause Why a Preliminary Injunction Should Not Issue Against Francis, Path Media, Argyle Online, LLC, Argyle Media Sales, LLC, and Fab Films, LLC" (TRO Motion). AP Docket #5. The TRO Motion sought to enjoin Francis and Path Media from taking any further action with respect to the Trademarks. Id. ¶ 1. After a hearing on 5/24/13, the Court entered an order granting the TRO Motion and setting a preliminary injunction (PI) hearing on 6/7/13. AP Docket #21.
On 5/30/13, the parties filed a stipulation to continue the PI hearing to 7/8/13. AP Docket #30. The Court entered an order approving this stipulation on 5/31/13. AP Docket #33. On 6/7/13, the parties filed a stipulation to further continue the PI hearing to 10/22/13. AP Docket #38. On 6/7/13, the Court entered an order approving this stipulation and continuing the PI briefing schedule. AP Docket #40.
On 5/31/13, the Trustee served Brendt Butler (Butler), Argyle's counsel, with the Discovery Requests. Pfister 8/22/13 Decl. ¶ 4, Ex. A. Interrogatory No. 4 sought information regarding "the circumstances (including when, how, who was involved, and what consideration, if any, was exchanged) by which Path Media acquired title to the Trademarks." Id. Interrogatory No. 14 sought information concerning "all business or commercial activities in which [Argyle is] currently engaged or in which [Argyle has been] engaged during this calendar year 2013...." Id.
As discussed below, Butler withdrew from representing Argyle on 7/22/13. On 8/6/13, the Trustee's counsel contacted Michael Kolodzi (Kolodzi), Argyle's new counsel, regarding the Discovery Requests. Pfister 8/22/13 Decl. ¶¶ 11-14, Ex. B. Kolodzi agreed to provide responses to the Discovery Requests by 8/16/13. Id. As of 8/22/13, the Trustee had yet to receive any responses. Pfister 8/22/13 Decl. ¶ 17.
On 6/21/13, the Trustee filed a Motion to Dismiss and/or Strike the Complaint (Trustee MTD/MTS). AP Docket #46. In the Trustee MTD/MTS, the Trustee argued that the Complaint should be dismissed without leave to amend because the litigation privilege barred all of Argyle's
On 6/24/13, the Court entered a scheduling order, setting 7/18/13 as the deadline for filing oppositions to the Trustee MTD/MTS (6/24/13 SO). AP Docket #50.
On 6/28/13, Argyle filed a motion to dismiss the Fraudulent Transfer Complaint (Argyle MTD). AP Docket #53. On 7/3/13, the Court entered a scheduling order regarding the Argyle MTD. AP Docket #56.
Although the 6/24/13 SO set 7/18/13 as the date for filing oppositions to the Trustee MTD/MTS, no oppositions were timely filed.
On 7/18/13, Butler — counsel for Francis, Argyle, and other related parties — filed a "Motion to be Relieved as Counsel of Record" (Withdrawal Motion). AP Docket #61. On 7/19/13, the Court held a hearing on the Withdrawal Motion (7/19/13 Hearing). During the 7/19/13 Hearing, the Court noted that there had been no opposition to the Trustee MTD/MTS. The Court stated that due to the issues raised in the Withdrawal Motion, it would extend the deadline one week — to 7/24/13 — for filing an opposition to the Trustee MTD/MTS. The Court requested that Butler notify Argyle that the deadline for filing an opposition would be extended to 7/24/13. Additionally, the Court stated that there would be no further continuances and, pursuant to Local Bankruptcy Rule (LBR) 9013-1(h), failure to file an opposition would be deemed consent to the relief requested in the Trustee MTD/MTS. The Court also informed Butler that an incorrect CM-ECF event code was used to file the Argyle MTD and that the matter needed to be re-filed using the correct CM-ECF code.
On 7/22/13, Butler filed a "Supplemental Declaration of Brendt C. Butler in Support of Motion to be Relieved as Counsel of Record" (Butler Decl.) AP Docket #68. The Butler Decl. indicated on 7/19/13, Butler informed Francis that the Court had ordered any opposition to the Trustee MTD/MTS to be filed by 7/24/13 and pursuant to the LBRs, failure to file a timely response would be deemed consent to granting the Trustee MTD/MTS. Id. Butler also indicated that the Argyle MTD had to be refiled to reflect the correct CM-ECF code. Id. On 7/22/13, the Court entered an Order granting the Withdrawal Motion. BK Docket #256.
On 7/19/13, the Debtors filed the FACC. AP Docket #63. On 7/19/13, the Debtors also filed a Statement Regarding the FACC and a Request to Deem Moot the Argyle MTD (Statement). AP Docket #64. On 7/22/13, the Court entered an Order: 1) Deeming Moot the Argyle MTD; and 2) Modifying the Briefing Schedule on the Trustee MTD (7/22/13 Order). AP Docket #67. The 7/22/13 Order indicated that the FACC superseded the Complaint and that, as a result, the Argyle MTD was moot. Id. The 7/22/13 Order also memorialized the briefing deadlines the Court set during the 7/19/13 Hearing. Id.
The FACC contains the following nine causes of action:
Count Against On Behalf of Basis 1 Path Media and All Debtors Actual Intent Fraudulent Transfer Francis re: Assignments (11 U.S.C. § 548(a)(1)(A)) 2 Path Media and GGW Brands and Actual Intent Fraudulent Transfer Francis GGW Marketing re: Assignments (11 U.S.C. § 548(a)(1)(A)) 3 Path Media and All Debtors Constructive Fraudulent Transfer Francis re: Assignments (11 U.S.C. § 548(a)(1)(B)) 4 Path Media and GGW Brands and Constructive Fraudulent Transfer Francis GGW Marketing re: Assignments (11 U.S.C. § 548(a)(1)(B)) 5 Argyle Online, Path All Debtors Actual Intent Fraudulent Transfer Media and Francis re: Termination/Relicense and License Fee 6 Argyle Online, Path GGW Direct Actual Intent Fraudulent Transfer Media and Francis re: Termination/Relicense and License Fee 7 Argyle Online, Path All Debtors Constructive Fraudulent Transfer Media and Francis re: Termination/Relicense and License Fee 8 Argyle Online, Path GGW Direct Constructive Fraudulent Transfer Media and Francis re: Termination/Relicense and License Fee 9 Path Media, Francis Conversion and Argyle
FACC at 11-20.
On 7/23/13, Argyle filed a "Notice of Dismissal Pursuant to Federal Rules of Civil Procedure 41(a) or (c) and FRBP 7041" (Notice of Dismissal). AP Docket #70.
On 7/24/13, the Court held a status conference regarding the Complaint. During the status conference, counsel for the Trustee appeared but no appearances were made on behalf of Argyle or any other party. The Trustee's counsel indicated that the Trustee intended to proceed with the motion to strike (MTS) portion of the Trustee MTD/MTS despite the dismissal of the Complaint. Counsel indicated that he would brief the issue of whether it was appropriate for the Court to award attorneys' fees based on the MTS even though the Complaint had been dismissed.
On 7/26/13, the Court entered an "Order Following Status Conference" (7/26/13 Order). The 7/26/13 Order indicated that, by 8/5/13, the Trustee could file a supplemental memorandum regarding whether, in light of the Notice of Dismissal, the Court had jurisdiction to order further relief in connection with the MTS and, what, if any, attorneys' fees or other relief was appropriate if the MTS were granted. AP Docket #74. The 7/26/13 Order also indicated that Argyle could file an opposition to the Trustee's supplemental memorandum by 8/12/13. Id. On 8/5/13, the Trustee filed the "Trustee's Supplemental Memorandum in Connection with Motion to Strike" (Supp. Memo.). AP Docket #78.
On 8/29/13, the Court held a hearing on the MTS (8/29/13 Hearing). The day before the 8/29/13 Hearing, the Court issued a tentative ruling that was emailed to counsel for the Trustee and Argyle (Tentative Ruling). In the Tentative Ruling, the Court granted the MTS and awarded the Trustee $35,000 in legal fees. AP Docket #110. During the 8/29/13 Hearing, the Trustee's counsel appeared but there were no appearances for Argyle. The Court then adopted its Tentative Ruling as its final ruling (Ruling). Id. On 9/3/13, the Court entered an order granting the MTS and awarding the Trustee $35,000 in attorneys' fees. AP Docket #113.
On 8/22/13, the Trustee filed the MSJ, in which he seeks a determination that there are no genuine issues of material fact and that he is entitled to judgment as a matter of law regarding counts 1 through 8 of the FACC. AP Docket #96.
The Trustee asserts that even though Francis created a "tangle" of putatively distinct legal entities in an effort to elude his creditors' claims, there is "only one real business enterprise: the Girls Gone Wild franchise" (Franchise). MSJ at 1. According to the Trustee, before November 2011, the Franchise's assets — including the intellectual property rights on which the entire Franchise depends — belonged to the Debtors. Id. Beginning in November 2011, when Francis's creditors were "closing in," he began to "systematically denude the Debtors of their property." Id.
Next, the Debtors assigned the Trademarks to Path Media for no consideration. MSJ at 6. The reason for the Assignments was to "separate the ownership of the intellectual property from the operating companies" — without actually changing the beneficial ownership of the Franchise — so that no "creditor of the operating company [could] seize the intellectual property." MSJ at 1. Notwithstanding the Assignments, the Debtors continued to use and exploit the Trademarks without paying any fees or royalties to Path Media. MSJ at 6.
As a result of the integrated Termination/Re-License, the Debtors' previously unlimited right to use the Girls Gone Wild IP was "sharply curtailed" and the Debtors were drained of virtually all of their cash two days before filing for bankruptcy. MSJ at 1-2. On 2/25/13, Path Media, a Francis controlled entity, acting at the direction of Francis's personal attorney, Tym, purported to terminate the Debtors' right to use the Girls Gone Wild IP and then to re-license the same IP on a short-term, high cost basis: approximately three months of use for $274,250.52, which left Debtors with less than $2,000 in cash when they filed for bankruptcy. MSJ at 2.
Further, because of the Assignments and the Termination/Re-License, the Debtors were effectively set to "self destruct" just three months after filing for bankruptcy. MSJ at 2. According to the Trustee, if the bankruptcy cases did not proceed as Francis and his lawyers planned, the Franchise would "simply be operated by Path Media and/or Argyle (or whatever new entity Francis formed)." Id. The Trustee notes that the day after
The Trustee asserts that even though there are five Debtors, the single business enterprise doctrine allows the court to disregard these purportedly separate legal forms to hold one Debtor liable for the debts of another. MSJ at 13-14. And, the Trustee argues that the Court can also consider and draw an adverse inference from Argyle's failure to respond to discovery and Francis' willful destruction of emails and other electronic evidence. MSJ at 14-15. The Trustee contends that the Court should grant the MSJ because the Assignments and Termination/Re-License are avoidable transfers pursuant to 11 U.S.C. §§ 548(a)(1)(A) and (a)(1)(B). MSJ at 15-24.
According to the Trustee, the Trademarks (including the URLs) and the $274,250.52 Fee are all property of the Debtors and constitute "an interest of the debtor in property" pursuant to § 548(a)(1). MSJ at 16-18. The Trustee notes that the FACC sets out two alternative theories regarding which Debtor(s) owned certain property. MSJ at 17-18. Counts 1, 3, 5, and 7 are pled on behalf of all Debtors as a single business enterprise. Id. Counts 2, 4, 6, and 8 are pled on a traditional entity-by-entity basis. Id. The Trustee claims that he intends to move for substantive consolidation of the Debtors' estates and therefore, it might not be necessary for the Court to rule on the single business enterprise theory. Id. Nevertheless, the Trustee argues that "it is simply indisputable that at all times relevant to this [AP], the Debtors `integrate[d] their resources and operations to achieve a common business purpose.'" Id. According to the Trustee, "[t]he evidence compels the conclusion that there is just one basic business" — the Franchise — and that "inequity would flow" from allowing Francis, Argyle, or Path Media to assert their separateness "to commit frauds and other misdeeds with impunity." MSJ at 18.
The Trustee claims that the Assignments constitute a transfer pursuant to 11 U.S.C. § 548(a)(1) because of "the purported conveyance to Path Media of fee simple title to the Trademarks." Id. Regarding the Termination/Re-License, the transfer was the "sharp curtailment of the Debtors' previously unlimited right to use the Trademarks, together with the payment of $274,250.52 purported licensing fee." Id. The Trustee contends any argument that the Termination/Re-License was not a transfer because Path Media unilaterally sent the Termination Notice must fail. MSJ at 18-19. According to the Trustee, prepetition contractual modifications are transfers of property interests. Id. (citing Greenspan v. Orrick, Herrington & Sutcliffe LLP (In re Brobeck, Phleger & Harrison LLP), 408 B.R. 318, 338-39 (Bankr. N.D.Cal.2009) (law firm's modification of a partnership agreement was a "transfer" within the meaning of section 548); Lehtonen v. Time Warner, Inc. (In re Purchase-Pro.com Inc.), 332 B.R. 417, 430 (Bankr. D.Nev.2005) (termination and modification of a warrant was a transfer of property); In re Robotics Vision Sys., Inc., 322 B.R. 502, 508 (Bankr.D.N.H.2005) (voluntary surrender of rights under technology license was a transfer of property)). The Trustee also notes that the authority to
The Original GGW Debtors filed bankruptcy on 2/27/13 and GGW Marketing, LLC filed bankruptcy on 5/22/13. MSJ at 19-20. The Assignments occurred in November 2011 and the Termination/Re-License occurred in February 2013. Id. Therefore, the Trustee argues that all transfers at issue indisputably occurred "within 2 years before the date of the filing of the petition" as required by § 548(a)(1). Id.
The Trustee contends that the requisite actual intent to hinder, delay, or defraud is evidenced by the sworn testimony of the two attorneys who orchestrated the transactions at issue. MSJ at 20-21. Regarding the Assignments, Klueger testified that his task was "to separate the ownership of the intellectual property from the operating companies" without actually changing the beneficial ownership of the Franchise so that no "creditor of the operating company [could] seize the intellectual property." Id. Klueger also testified that this work was not undertaken for tax planning purposes and that he created the off-shore entities because having assets outside the reach of United States courts makes it "[j]ust more difficult for a creditor to be able to access the assets." Id. Regarding the Termination/Re-License, Tym explained that he did not "want to tie [the intellectual property] up in the bankruptcy" and that Path Media wanted to keep the Debtors on a short leash "to see what life was like dealing with someone in bankruptcy." Id.
The Trustee also asserts that in addition to the above direct evidence of actual intent, a Court can "infer fraudulent intent from the circumstances surrounding the transfer," taking particular note of certain recognized indicia or badges of fraud set forth in Acequia Inc. v. Clinton (In re Acequia, Inc.), 34 F.3d 800, 806 (9th Cir. 1994). MSJ at 21-23. According to the Trustee, all five "badges of fraud" exist in this case. Id.
First, at the time of the Assignments, lawsuits were either pending or soon to be filed against the Debtors. MSJ at 21-22. Additional lawsuits were pending in February 2013, when the Termination/Re-License occurred. Id. And, in the Nevada Case, the Nevada state court found that there was a "substantial likelihood of success on the merits" on the claim that GGW Direct, LLC, GGW Brands, LLC, and GGW Events, LLC were the "alter ego" of Francis. Id. Second, the Assignments and the Termination/Re-License transferred all or substantially all of the Debtors' property. MSJ at 22. Specifically, the Trustee asserts that Debtors' entire business — both individually and as a single enterprise — depends on the use of the Trademarks. Id. Without the Trademarks, the Debtors would have no business. Id.
Third, the Assignments and Termination/Re-License caused insolvency or other unmanageable indebtedness. Id. The Trustee asserts that without the Trademarks, the Debtors had zero or close to zero assets. Id. The Trustee states that GGW Marketing, LLC dissolved shortly after the Assignments and the Original GGW Debtors listed combined assets of $7,211,878.96 and combined liabilities of $66,190,850.61 in their bankruptcy schedules.
Alternatively, the Trustee contends the Assignments and Termination/Re-License transactions are avoidable as constructive fraudulent transfers. MSJ at 23-24. The Trustee first asserts there can be no dispute the Debtors received "less than reasonably equivalent value" because they received nothing in exchange for the Assignments. MSJ at 23. The Trustee contends the Termination/Re-License was similarly one-sided because the Debtors gave Path Media almost $275,000 (virtually all of the Original GGW Debtors' cash) and in return received "a sharply curtailed right to use intellectual property that they had previously never had to pay for." Id.
The Trustee next argues that after the Assignments and Termination/Re-License, the Debtors became insolvent under the three measures of insolvency provided in 11 U.S.C. § 548(a)(1)(B)(ii). MSJ at 23-24.
First, the Trustee asserts that at the time of the Assignments, GGW Marketing, LLC had substantial liabilities in the form of "massive litigation exposure" and no assets. MSJ at 24. Further, the Trustee states that the other Debtors also faced massive litigation exposure, and after the Assignments, had minimal assets, because the Trademarks were their "most important" asset. Id. The Trustee claims these facts show that the Debtors were: 1) insolvent on the date of the Assignments or as a result of the Assignments (11 U.S.C. § 548(a)(1)(B)(ii)(I)), 2) left with unreasonably small capital as a result of the Assignments (11 U.S.C. § 548(a)(1)(B)(ii)(II)), and 3) intending to incur debts beyond their ability to pay as the debts mature (11 U.S.C. § 548(a)(1)(B)(ii)(II)). Id.
Second, the Trustee asserts the Termination/Re-License occurred at most two days before the Original GGW Debtors filed bankruptcy and that the Original GGW Debtors listed combined assets of $7,211,878.96 and combined liabilities of $66,190,850.61 in their schedules. Id. The Trustee argues these facts demonstrate: 1) "obvious" insolvency under 11 U.S.C. § 548(a)(1)(B)(ii)(I) and (III), and 2) "unmanageable indebtedness" under 11 U.S.C. § 548(a)(1)(B)(ii)(II). Id.
On 9/12/13, Argyle filed the Opposition in which it disputes several facts and argues that because these disputes create genuine issues of material fact, the Court cannot grant the MSJ. AP Docket #116.
As a preliminary matter, Argyle argues that GGW Marketing, LLC's bankruptcy petition is null, void, and of no legal force or effect. Opposition at 10. Argyle contends that GGW Brands, LLC did not have authority to file bankruptcy on behalf of GGW Marketing, LLC because GGW Brands, LLC was neither a member nor a manager of GGW Marketing, LLC. Opposition at 10-14. According to Argyle, Francis "is and always has been" the manager of GGW Marketing, LLC and only GGW Global Brands, Inc. could file such a petition because GGW Global Brands, Inc. was the sole member of GGW Marketing,
Next, the Opposition argues that GGW Marketing, LLC was not part of a "single business operation" with the Original GGW Debtors. Opposition at 6. Argyle claims that GGW Marketing, LLC never commingled its business with the business of the Original GGW Debtors and that it "kept books and records separate from those entities." Id.
With respect to the Assignments, Argyle argues there were only two lawsuits pending or known to GGW Marketing, LLC at the time of the Assignments and GGW Marketing LLC's counsel advised that it had no significant exposure in these lawsuits. Opposition at 14-15. Argyle asserts that the Trademarks were transferred so that one entity would hold all of the trademarks rather than to hinder, delay, or defraud creditors. Opposition at 7-8. Further, Argyle contends that GGW Marketing, LLC was not insolvent at the time of the Assignments nor did it become insolvent as a result of the Assignments. Opposition at 15. Argyle also claims that GGW Marketing, LLC was not engaged in a business for which it retained unreasonably small capital and it did not intend to incur, or believe it would incur, debts beyond its ability to pay. Opposition at 14-15.
Argyle also disputes the ownership of the URLs at the time of the Assignments. Opposition at 5-6. According to Argyle, GGW Marketing, LLC, rather than GGW Brands, LLC, owned the URLs and GGW Marketing, LLC transferred the URLs at the same time it transferred the Trademarks to GGW Direct, LLC. Id. Argyle admits that GGW Brands, LLC paid the "maintenance fees for the [URLs]," but claims that GGW Brands, LLC never had title to the URLs. Opposition at 6.
With respect to the Termination/Re-License, Argyle initially argues that the Original GGW Debtors had no property rights in the Trademarks. Opposition at 16. Argyle contends the Original GGW Debtors and GGW Marketing, LLC operated pursuant to an oral licensing agreement (OLA) until the Assignments, and that GGW Marketing, LLC deferred charging the Original GGW Debtors a $150,000 monthly fee for use of the Trademarks.
On 9/19/13, the Trustee filed the Reply, arguing that Argyle did not present admissible evidence or otherwise demonstrate why the Court should not grant the MSJ.
According to the Trustee, Argyle did not challenge any of the legal standards and conceded numerous facts establishing that the Assignments and Termination/Re-License are fraudulent transfers. Reply at 1-2, 3-9. The Trustee asserts that Argyle did not dispute that: 1) the Original GGW Debtors were part of a single business enterprise, 2) all the Debtors used the Trademarks as part of their adult entertainment enterprise, 3) the Trademarks were owned by the Debtors prior to the Assignments, 4) the Trademarks were transferred to Path Media, 5) Klueger made the Assignments, 6) the Termination/Re-License was a single transaction, 7) the Termination/Re-License was entered into two days before the Original GGW Debtors filed bankruptcy, and 8) Tym's statements concerning the purpose of the Termination/Re-License. Reply at 3-9.
By Argyle conceding these facts, the Trustee contends he is entitled to judgment as a matter of law. According to the Trustee, Klueger's statements, as well as the "badges of fraud" support the conclusion the Assignments were a fraudulent transfer. Reply at 6-7.
The Trustee argues that contrary to Argyle's position, GGW Marketing, LLC was insolvent at the time of or as a result of the Assignments. Reply at 10-11. In support, the Trustee cites Francis's 9/13/13 Rule 2004 examination (2004 Exam), during which Francis stated that "GGW Marketing didn't have any assets at the time it was closed or canceled." Reply at 11; Heyn 9/19/13 Decl. ¶ 9, Ex B at 129:17-21. According to the Trustee, this statement demonstrates that GGW Marketing, LLC was insolvent on the date of the Assignments because with no assets, any liability would render GGW Marketing, LLC insolvent under 11 U.S.C. § 101(32). Reply at 11. Therefore, he argues that the Assignments were also a constructive fraudulent transfer. Reply at 7.
With respect to the Termination/Re-License, the Trustee contends that Tym's statements, as well as the "badges of fraud" meet the requirements for an actual fraudulent transfer. Reply at 8-9. Further, the fact that the Debtors received no consideration for, and were insolvent at the time of, the Termination/Re-License, demonstrate that this transaction was a constructive fraudulent transfer. Reply at 9.
The Trustee further argues that Francis's 9/11/12 Decl. should be disregarded as a "sham declaration." According to the Trustee, Francis's statements regarding his knowledge of GGW Marketing, LLC's and Path Media's business are wholly inconsistent with Francis's prior deposition testimony, during which he stated he did not have any knowledge of GGW Marketing, LLC or Path Media. Reply at 9-12.
Turning to Argyle's argument that GGW Marketing, LLC was not validly in bankruptcy, the Trustee contends that res judicata bars Argyle from relitigating this issue.
FRBP 7056 provides that FRCP 56 applies to motions for summary judgment in adversary proceedings. "The court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." FRCP 56(a). A fact is "material" for purposes of Rule 56 if it "might affect the outcome of the suit under the governing law...." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The dispute is genuine "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Id. When the movant has carried its burden, the opponent "must do more than simply show that there is some metaphysical doubt as to the material facts.... Where the record taken as a whole could not lead a rational trier of fact to find for the non-moving party, there is no `genuine issue for trial.'" Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986).
"Credibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts are jury functions, not those of a judge ... ruling on a motion for summary judgment." Rezner v. Bayerische Hypo-Und Vereinsbank AG, 630 F.3d 866, 871 (9th Cir.2010) (quoting Anderson, 477 U.S. at 255, 106 S.Ct. 2505). The sham affidavit doctrine, however, prevents a party who has been examined during a prior deposition from "rais[ing] an issue of fact simply by submitting an affidavit contradicting his own prior testimony," which "would greatly diminish the utility of summary judgment as a procedure for screening out sham issues of fact." Yeager v. Bowlin, 693 F.3d 1076, 1080 (9th Cir.2012) (quoting Kennedy v. Allied Mut. Ins. Co., 952 F.2d 262, 266 (9th Cir.1991)).
"When opposing parties tell two different stories, one of which is blatantly contradicted by the record, so that no reasonable jury could believe it, a court should not adopt that version of the facts for purposes of ruling on a motion for summary judgment." Scott v. Harris, 550 U.S. 372, 380, 127 S.Ct. 1769, 167 L.Ed.2d 686 (2007); In re Machuca, 483 B.R. 726, 737-738 (9th Cir. BAP 2012) (finding creditors' assertion they reasonably relied on Debtor's income representation could not be believed because it was "wholly undermined" by undisputed facts in the record showing "red flags" in connection with loan agreement).
The "party seeking summary judgment always bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of `the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any,' which it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) (quoting FRCP 56). If the moving party carries its burden, summary judgment should not be granted if the non-moving party can point to "sufficient evidence supporting the claimed factual dispute" such that a factfinder is needed to "resolve the parties' differing versions of the truth at trial." Anderson, 477 U.S. at 249, 106 S.Ct. 2505 (internal quotation marks omitted). In
Pursuant to 11 U.S.C. § 548(a), the Trustee "may avoid any transfer ... of the debtor in property ... that was made or incurred ... within 2 years before the date of the filing of the petition if the debtor voluntarily ...:"
To prevail on the § 548(a)(1)(A) claim, the Trustee must prove, by a preponderance of the evidence, the following:
In re Wheeler, 444 B.R. 598, 605 (Bankr.D.Idaho 2011); Greenspan v. Orrick Herrington & Sutcliffe, LLP (In re Brobeck Phleger & Harrison, LLP), 408 B.R. 318, 338-39 (Bankr.N.D.Cal.2009); In re Roca, 404 B.R. 531, 538 (Bankr.D.Ariz. 2009).
"It is often impracticable, on direct evidence, to demonstrate an actual intent to hinder, delay or defraud creditors. Therefore, as is the case under the common law of fraudulent conveyance, courts applying Bankruptcy Code § 548(a)(1) frequently infer fraudulent intent from the circumstances surrounding the transfer, taking particular note of certain recognized indicia or badges of fraud." In re Acequia, Inc., 34 F.3d 800, 805-06 (9th Cir.1994)(internal quotation marks omitted). These circumstances include:
Id.
The "confluence" of several of these circumstances can constitute conclusive evidence of actual intent to defraud. Id.
To prevail on a § 548(a)(1)(B) claim, the Trustee must prove, by a preponderance of the evidence, the following:
In re Heddings Lumber & Bldg. Supply, Inc., 228 B.R. 727, 729 (9th Cir. BAP 1998); In re Brobeck Phleger & Harrison LLP, 408 B.R. at 340-41.
In support of the Opposition, Argyle submitted the Francis 9/11/13 Decl., in which Francis makes numerous representations regarding his knowledge of, and involvement with, GGW Marketing, LLC, including:
During Francis's 4/18/12, deposition, taken in connection with the California Marker Judgment Litigation, Francis testified, under oath, that he had "Never heard of GGW Marketing, LLC. He also testified that he did not "do any work" for GGW Marketing, LLC. Heyn 7/15/13 Decl. ¶ 12(d), Ex. E at 5:16-21 and 70:20-21.
Further, in the Francis 9/11/13 Decl., Francis stated the following regarding Path Media and Argyle:
During Francis's 7/12/13 Deposition, taken in connection with California Marker Judgment Litigation, however, Francis answered the following questions in the following manner:
Heyn 9/19/13 Decl. ¶ 10, Ex. C at 6:21-28 and 12:20-24.
On 9/19/13, the Trustee filed the Objections, in which he asserts numerous evidentiary objections to the Francis 9/11/13 as well as the Snow 9/11/13 Decl., Dale 9/11/13 Decl., and Greenfield 9/11/13 Decl.
On 9/26/13, Argyle filed a "Response to Evidentiary Objections Raised by Movants" (REO), AP Docket #127, as well as a Declaration of Joseph R. Francis (Francis 9/26/13 Decl.). AP Docket #128. Although the REO purportedly responds to the Objections filed by the Trustee, it also contained arguments related to res judicata and insolvency. Id. at 5, 7-10. On 8/23/13, the Court entered an Order (8/23/13 Order), which set the MSJ for hearing on 10/3/13, and provided the deadlines for filing an opposition and reply to the MSJ. AP Docket #106. The 8/23/13 Order stated explicitly that "No further
The Court, however, does believe it is appropriate to consider the arguments in the REO, which respond to the Trustee's Objections. In the REO, Argyle contends that the Trustee's Objections "mischaracteriz[e]" Francis's testimony and that the Francis 9/11/13 Decl. does not conflict with either his 4/18/12 or 7/12/13 deposition testimony. REO at 1. To support this contention, Argyle cites the Francis 9/26/13 Decl., in which Francis states that during his 4/18/12 deposition he was deposed as the person most knowledgeable about Mantra Films, Inc. and he was not prepared to answer questions about any other entity. Francis 9/26/13 Decl. ¶ 4. Francis claims during that deposition, the attorney asked about each of the GGW entities "in rapid fire succession" and that when the attorney came to GGW Marketing, LLC, he initially mistakenly began to answer "Never heard of ..." but then caught himself and before completing the sentence, he stated, "I don't do any work" for GGW Marketing, LLC. Id. According to Francis, this was true because GGW Marketing, LLC ceased all operations after the Assignments. Francis claims that he was also asked about his "then current relationships" with the GGW Entities and he was speaking in the present tense when he said "I don't do any work" for GGW Marketing, LLC.
Argyle also asserts that the Francis 9/11/13 Decl. is not contradictory to the testimony that Francis gave during his 7/12/13 deposition regarding Path Media. REO at 6-7. In the Francis 9/26/13 Decl., Francis claims that his management of Path Media ended in November 2012 and his deposition testimony — that he did not know anything about the owners, members or managers of Path Media — was true because he did not know who the owners, members or managers "presently were." Francis 9/26/13 Decl. ¶ 6. Francis also claims that since his deposition was taken on 7/12/13, he has "come to learn that Path Media is managed by AsiaTrust and owned by the Hammersmith Trust." Id. According to Francis, the question "What is Path Media Holdings?" was vague and he understood it to be asking whether he knew what type of entity Path Media was and where it was formed, Id. at ¶ 7. Francis claims that he did not remember that information, and therefore, he answered that he did not know. Id.
On 9/27/13, the Court entered an "Order Setting Final Briefing Deadlines" related to the MSJ (9/27/13 Order). AP Docket #131. In the 9/27/13 Order, the Court indicated that: 1) it would consider the arguments in the REO that responded to the Objections, and 2) the Trustee would have until 9/30/13 at noon to respond to the issues raised in the REO related to the Objections, Id. at 2. On 9/30/13, the Trustee filed a timely "Reply in Further Support of Evidentiary Objections" (Reply Objections). AP Docket #133. In the Reply Objections, the Trustee contends that "no
Although credibility determinations and weighing evidence are not appropriate when adjudicating a motion for summary judgment, the sham affidavit doctrine prevents a party who has been examined during a prior deposition from "rais[ing] an issue of fact simply by submitting an affidavit contradicting his own prior testimony," because it would "greatly diminish the utility of summary judgment as a procedure for screening out sham issues of fact." Yeager, 693 F.3d at 1080 (quoting Kennedy, 952 F.2d at 266).
To trigger the sham affidavit rule, the Court must determine that: 1) the contradiction between the deposition and the declaration or affidavit is a sham, and 2) the inconsistency between the deposition testimony and subsequent affidavit is clear and unambiguous. Assuming these factors are met, the Court can disregard the declaration. Yeager, 693 F.3d at 1080. A non-moving party can attempt to explain or clarify prior deposition testimony and "minor inconsistencies that result from an honest discrepancy [or] a mistake" are insufficient to warrant application of the sham affidavit rule. Van Asdale v. Int'l Game Tech., 577 F.3d 989, 999 (9th Cir.2009).
The Court finds that it is appropriate to apply the sham affidavit rule. First, it is clear to the Court that the contradiction between Francis's 4/18/12 deposition testimony and his 9/11/13 declaration regarding GGW Marketing, LLC is a sham. It is impossible to reconcile Francis's earlier deposition testimony that he had never heard of GGW Marketing, LLC and that he did not do any work for that entity with his current statements that he signed GGW Marketing, LLC's operating agreement in 2006, that he has been GGW Marketing, LLC's manager since 2006, and that he has detailed knowledge of GGW Marketing, LLC's business and operations.
Similarly, the Court finds that Francis's statements in his declaration regarding Argyle and Path Media are also a sham. During Francis's 7/12/13 deposition, he claimed that he was not familiar with a company named Argyle and that he did not know anything about Path Media. These statements cannot be reconciled with his 9/11/13 declaration in which he claims that he was the manager of Path Media and that he knew who its member was and who controlled it. See e.g., Yeager, 693 F.3d at 1080 (noting that a court may "find a declaration to be a sham when it contains facts that the affiant previously testified he could not remember"); Kennedy, 952 F.2d at 266-67 (holding that a court may discount a "sham" declaration that flatly contradicts earlier deposition testimony).
Second, the inconsistencies between Francis's 4/18/12 and 7/12/13 deposition testimony and his 9/11/13 declaration are clear and unambiguous. A year-and-one-half ago, Francis claimed that he had never heard of, and did not do any work for, GGW Marketing, LLC. And, a few months ago, Francis stated that he was not familiar
Although a non-movant can attempt to explain or clarify inconsistencies between prior deposition testimony and a more recent declaration, Francis does not attempt to explain minor inconsistencies and honest discrepancies but instead tries to explain glaringly discordant statements.
As an initial matter, Francis was represented by counsel during both his 4/18/12 and 7/12/13 depositions. Francis and his counsel could have asked for clarification of any vague question and Francis could have clarified any answer to ensure that his answers did not create an incorrect perception. See Colantuoni v. Alfred Calcagni & Sons, Inc., 44 F.3d 1, 5 (1st Cir. 1994) (finding debtor could not "manufacture a disputed issue of material fact by contradicting his own prior sworn testimony" and noting that the declarant's attorney was present during the declarant's prior deposition testimony and he "had the opportunity to clarify any incorrect impressions."). Further, in the Francis 9/11/13 Decl., Francis could have explained why that declaration, which was submitted in support of the Opposition, contradicted his prior deposition testimony. Francis did not do so. Instead, it was only after the Trustee filed the Objections that Francis advanced an explanation for the contradictions between his 4/18/12 and 7/12/13 deposition testimony and the Francis 9/11 /13 Decl. See Colantuoni, 44 F.3d at 5 (applying the sham affidavit rule and finding significant that an affidavit contradicting prior testimony was only offered after the filing of a motion for summary judgment).
Any argument that Francis did not realize the Trustee would raise issues related to his 4/18/12 deposition testimony would be unavailing. Francis was made aware of the Trustee's suspicion regarding the conflict between Francis's prior testimony related to GGW Marketing, LLC and his more recent testimony regarding Francis's intimate, firsthand knowledge of GGW Marketing, LLC on 7/26/13 — approximately one month before the MSJ was filed — when the Trustee filed the "Ex Parte Application to Continue Response Times and Hearing on GGW Global Brands, Inc.'s Motion to Dismiss." BK Docket #274. And, the proximity of Francis's 7/12/13 deposition (during which he claimed to have no knowledge of Argyle and Path Media) to the Francis 9/11/13 Decl. (in which he admits that he was manager of Path Media and he knows the owner and manager of Argyle and how the manager "runs" that entity) would belie any assertion that he did not expect the Trustee to raise those inconsistencies in the context of the MSJ.
Additionally, Francis's attempt to explain his 7/12/13 testimony related to Path Media — that he stopped managing Path Media in November 2012 and therefore, he did not know who the owners, members, or managers were of that entity at the time of his deposition — is contrary to the evidence in the record. See 4/10/13 Trans, at 82:18-19
Francis's explanation that his answer related to GGW Marketing, LLC was true because he "caught himself after stating that he "[n]ever heard of GGW Marketing, LLC and that he interpreted the question to mean whether he presently worked for that entity is not plausible. As the Trustee argues persuasively, Francis does not deny that he testified he had never heard of GGW Marketing, LLC. And, Francis had an opportunity to correct "the form or the substance" of any answer that he gave during his 4/18/12 deposition, but he did not do so. See CCP § 2025.520. The Court finds that no reasonable jury could conclude that Francis had "[n]ever heard of GGW Marketing, LLC.
Further, contrary to Francis's testimony, GGW Marketing, LLC did not cease all operations after the Assignments. In fact, just two weeks after Francis's 4/18/12 deposition testimony, Francis signed the Certificate of Cancellation that purportedly cancelled GGW Marketing, LLC. Heyn 5/23/13 Decl. ¶ 11, Ex. H. Approximately three months after GGW Marketing, LLC was "cancelled," GGW Marketing, LLC, GGW Brands, LLC and other entities filed a pleading in the District of Utah. Heyn 5/9/13 Decl. ¶ 19, Ex. O. Further evidence that GGW Marketing, LLC did not "cease all operations" after the Assignments is the fact that the 2/25/13 Termination Notice, which was prepared by Tym — who was acting as Francis's personal counsel and counsel for the Debtors, SGI ¶ 49 (undisputed) — was addressed to all of the Debtors, including GGW Marketing, LLC. Therefore, Francis's explanation that he did not do any work for GGW Marketing, LLC because GGW Marketing, LLC ceased all operations by 4/18/12, when his deposition was taken, is implausible. Yeager v. Bowlin, 693 F.3d 1076, 1080 (9th Cir.2012) (applying the sham affidavit rule because a reasonable jury could find that the declarant's "weak explanation" for his "sudden ability to remember answers" to important questions was not plausible).
Although Francis claims that the question "What is Path Media Holdings?" was vague, neither he nor his attorney asked for clarification regarding the question. Further, in the Francis 9/26/13 Decl. ¶ 7, Francis states that he understood that question "to be asking me if I knew what
On 4/10/13, the Court found that Francis controlled Path Media, and through his control of Path Media, exercised complete control over the Debtors. On 4/26/13, Francis sent an email to Adrian Taylor, the Managing Director of Asiaciti Trust Pacific Ltd., with the subject line "RE: Path Media Holdings, LLC" in which Francis demanded that Tym be fired and replaced with Wilson. On 5/22/13, Argyle filed the Complaint against the Trustee, alleging Path Media is the registered owner of the Trademarks and that Path Media assigned to Argyle the right to bring causes of action that would otherwise be-long to Path Media.
The Court finds that Francis's last minute explanation for his conflicting testimony is not believable and he has not provided a plausible, satisfactory explanation regarding the reason his testimony changed. See Yeager v. Bowlin, 693 F.3d 1076, 1080 (9th Cir.2012) (finding explanation for discrepancies between deposition testimony and declaration submitted in support of a motion for summary judgment was "unbelievable"); Campana v. Pilavis (In re Pilavis), 244 B.R. 173, 176 (1st Cir. BAP 2000) (applying the sham affidavit rule and noting that the non-movant could not "manufacture a disputed issue of material fact" by contradicting his prior testimony because he did not offer a "satisfactory explanation" regarding the change in his testimony).
Because the Court finds that the requirements of the sham affidavit rule are met, it is sustaining the Trustee's Objections to the Francis 9/11/13 Decl. on that basis. The Court is disregarding the portions of the Francis 9/11/13 Decl. (and exhibits authenticated by Francis), to which the Trustee objects related to Francis's knowledge of GGW Marketing, LLC and Argyle. In addition to the Court's
STATEMENT OBJECTION RULING
1. Francis MSJ Declaration, Page 2, ¶ 3 ("GGW Sham Affidavit Rule; Sustained.
Global Brands, Inc. (formerly known as GGW contradicts Francis's
Brands, Inc.) has been the sole Member of GGW 4/18/12 Deposition.
Marketing, LLC since the date of the creation of
GGW Marketing, LLC in 2006.... The owners
of GGW Global Brands, Inc. have been Kaafu
Technologies, LLC (2013) and Aero Falcons, LLC
(2006-2012).").
2. Francis MSJ Declaration, Exhibit B (Unsigned Hearsay, Fed.R.Evid. Sustained.
letter from Michael Kerry Burke stating, 802.
inter alia, that "GGW Brands, Inc. is the 100%
owner of GGW Marketing, LLC").
3. Francis MSJ Declaration, Page 3, ¶ 5 ("I have Sham Affidavit Rule; Sustained.
been the Manager of GGW Marketing, LLC since contradicts Francis's
the date of its formation in 2006."). 4/18/12 Deposition.
4. Francis MSJ Declaration, Page 3, ¶ 6 ("GGW Sham Affidavit Rule; Sustained.
Brands, LLC was never a Manager nor was it contradicts Francis's
ever a Member of GGW Marketing, LLC"). 4/18/12 Deposition.
5. Francis MSJ Declaration, Page 3, ¶ 9 ("At the Sham Affidavit Rule; Sustained.
time of the cancellation of GGW Marketing, LLC contradicts Francis's
in Delaware and California in 2012, GGW 4/18/12 Deposition.
Marketing, LLC was not involved in the
distribution of adult entertainment content.").
6. Francis MSJ Declaration, Pages 3-4, ¶ 11 Sham Affidavit Rule; Sustained.
("The business of GGW Marketing, LLC which contradicts Francis's
began four years prior to the creation of the 4/18/12 Deposition. Conclusory.
Debtors, was never commingled with the businesses Statement utterly
of the Debtors, never operated as a single discredited by the
business with the Debtors, and GGW Marketing, record.
LLC kept hooks and records separate and distinct
from the Debtors.").
7. Francis MSJ Declaration, Page 4, ¶ 12 ("In Sham Affidavit Rule; Sustained.
November, 2011, as Manager of GGW Marketing, contradicts Francis's
LLC, I executed an assignment of intellectual 4/18/12 Deposition,
property owned by GGW Marketing, LLC to Path Statement utterly discredited
Media Holdings, LLC. This was merely a mechanism by the record,
to facilitate all intellectual property, both Conclusory statement,
domestic and international, being held by one
entity.").
8. Francis MSJ Declaration, Page 4, ¶ 12 ("[The Sham Affidavit Rule; Sustained.
transfer of the Trademarks to Path Media] was contradicts Francis's
not done with the intent to hinder, delay or 4/18/12 Deposition,
defraud creditors of GGW Marketing, LLC") Statement utterly discredited
by the record.
Conclusory statement.
9. Francis MSJ Declaration, Page 4, ¶ 12 ("GGW Hearsay, Fed.R.Evid. Sustained.36
Marketing was not insolvent at the time [of the 802. Sham Affidavit
transfer of the Trademarks to Path Media] or Rule; contradicts rendered insolvent by the transfer. Indeed, I had Francis's 4/18/12 Deposition. been advised by counsel representing GGW Conclusory. Marketing, LLC that GGW Marketing, LLC had no significant exposure in either of two lawsuits then pending against GGW Marketing, LLC. ..."). 10. Francis MSJ Declaration, Page 4, ¶ 14 ("I Sham Affidavit Rule; Sustained. am not currently the Manager of Path Media contradicts Francis's Holdings, LLC. To my knowledge, Asia Trust is 7/12/13 Deposition, the current Manager of Path Media Holdings, LLC and Hammersmith Trust is the sole Member. I am neither the settlor nor a beneficiary of the Hammersmith Trust. I have never controlled Path Media. When I was Manager of Path Media, it was controlled by AsiaTrust on behalf of Ridgewood Global Trust, the Member at the time.").11. Francis MSJ Declaration, Page 5, ¶ 15 Sham Affidavit Rule; Sustained. ("From the time of creation of [the Original Debtors] contradicts Francis's in 2010, to the date of transfer of the trademarks 4/18/12 Deposition, by GGW Marketing, LLC to Path Media Holdings, LLC in November, 2011, the Debtors were permitted by GGW Marketing, LLC, pursuant to an oral intellectual property licensing agreement, to use the intellectual property owned by GGW Marketing, LLC, and licensing fees for such use, at the rate of $150,000 per month, were deferred. This was intended as a temporary arrangement until the Debtors had a chance to get their businesses fully functional and at maximum profitability. It was a voluntary accommodation that could be terminated at any time. As Manager of GGW Marketing, LLC, I had agreed to this because years earlier I had founded the Girls Gone Wild brand and established the trademarks and other intellectual property and I wanted to see the brand continue. It was never intended to be a permanent arrangement or to obligate successor owners of the intellectual property to continue such arrangement.").12. Francis MSJ Declaration, Page 5, ¶ 16 Sham Affidavit Rule; Sustained. ("Argyle Online is owned by Hammersmith Trust, contradicts Francis's of which I am neither settlor nor beneficiary. The 7/12/13 Deposition, manager of Argyle Online is Abbey Wilson. While she and I have a personal relationship, she independently runs Argyle Online and I do not control her or her decisions.").13. Francis MSJ Declaration, Page 5, ¶ 17 ("Following Sham Affidavit Rule; Sustained. the Assignments of intellectual property by contradicts Francis's GGW Marketing, LLC to Path Media, neither I 7/12/13 Deposition, nor Path Media instructed distributors to remit Royalties arising out of or relating to the intellectual
property to Argyle rather than to the Debtors."). 14. Francis MSJ Declaration, Page 5, ¶ 19 ("At Sham Affidavit Rule; Sustained. the time GGW Marketing, LLC transferred the contradicts Francis's intellectual property to Path Media Holdings, 4/18/12 Deposition. LLC, GGW Marketing, LLC was not engaged or Conclusory. was about to engage in a business or transaction for which the remaining assets of GGW Marketing, LLC were unreasonably small in relation to the business or transaction. At the time GGW Marketing, LLC transferred the intellectual property to Path Media, GGW Marketing, LLC did not intend to incur, or believe or have reason to believe that it would incur, debts beyond the its [sic ] ability to pay as they became due.").15. Francis MSJ Declaration, Page 6, ¶ 21 ("The Sham Affidavit Rule; Sustained. url's utilized by [the Original Debtors] were never contradicts Francis's owned by any of those entities. They were owned 4/18/12 Deposition, by GGW Marketing, LLC and then transferred by Conclusory. GGW Marketing, LLC to Path Media in 2011 when the trademarks were transferred. As part of the oral licensing arrangement between GGW Marketing, LLC and GGW Brands, LLC, maintenance fees for the url's were paid by GGW Brands, LLC, but GGW Brands, LLC was never given title to such url's.").
A significant portion of the Opposition focuses on Argyle's argument that GGW Brands, LLC was neither a member nor a manager of GGW Marketing, LLC. Therefore, according to Argyle, the Trustee, on behalf of GGW Brands, LLC, did not have authority to file a bankruptcy on behalf of GGW Marketing, LLC. Opposition at 10-11. This argument is barred by the law of the case doctrine and collateral estoppel.
The law of the case doctrine provides that a "court is generally precluded from reconsidering an issue that has already been decided by the same court, or a higher court in the identical case." Thomas v. Bible, 983 F.2d 152, 154 (9th Cir.1993). Stated alternatively, "a court should not reopen issues decided in earlier stages of the same litigation." Agostini v. Felton, 521 U.S. 203, 236, 117 S.Ct. 1997, 138 L.Ed.2d 391 (1997). "The doctrine is grounded in the need for litigation to come to an end." Disimone v. Browner, 121 F.3d 1262, 1266 (9th Cir.1997). For the law of the case doctrine to apply, "the issue in question must have been decided either expressly or by necessary implication in the previous disposition." Thomas, 983 F.2d at 154 (internal quotation marks omitted).
Here, it is undisputed that PSL, Argyle, and Francis filed an Opposition to the Revocation Motion, and counsel representing these parties appeared at the 5/20/13 Hearing. During the 5/20/13 Hearing, the Court granted the Revocation Motion, finding that GGW Brands, LLC was a member of GGW Marketing, LLC. Alternatively, the Court found that even if
Further, it is undisputed 1) Path Media is controlled by Francis; 2) Argyle is Path Media's "U.S. Representative;" and 3) Fab Films, LLC is the alleged successor of Argyle. It follows that Path Media and Fab Films, LLC were adequately represented during the hearing on the Revocation Motion. Therefore, the Court finds that the law of the case doctrine bars any argument that GGW Brands, LLC did not have the authority to revoke the cancellation of, and file bankruptcy on behalf of, GGW Marketing, LLC.
The Court previously decided that GGW Brands, LLC was a member of GGW Marketing, LLC. Alternatively, the Court determined that even if GGW Brands, LLC were only GGW Marketing, LLC's manager, it would still have authority to file bankruptcy on behalf of GGW Marketing, LLC. Therefore, the federal standard of issue preclusion, which is also referred to as collateral estoppel, applies in this case. Oyeniran v. Holder, 672 F.3d 800, 806 (9th Cir.2012) (noting that collateral estoppel is the same as issue preclusion); McQuillion v. Schwarzenegger, 369 F.3d 1091, 1096 (9th Cir.2004) ("Where a federal court has decided the earlier case, federal law controls the collateral estoppel analysis."). Pursuant to federal law, four factors must be present for collateral estoppel to apply: 1) the issue at stake was identical to the issue in the previous proceeding; 2) the issue was actually litigated and decided in the prior proceeding; 3) there was a full and fair opportunity to litigate the issue; and 4) the issue was necessary to decide the merits. Oyeniran, 672 F.3d at 806.
During the 5/20/13 Hearing, after considering the relevant pleadings and providing the Trustee and Francis (defined above as PSL, Argyle, and Francis) an opportunity to be heard, the Court expressly found that: 1) GGW Brands, LLC was a member of GGW Marketing, LLC; and 2) even if GGW Brands, LLC were only a manager of GGW Marketing, LLC, it would still have authority to revoke GGW Marketing, LLC's cancellation. The issue whether GGW Brands, LLC was a member of GGW Marketing, LLC is identical to the issue raised in the Opposition,
Additionally, for collateral estoppel to apply, the party against whom it is asserted must be "a party or in privity with a party at the first proceeding." Hydranautics v. FilmTec Corp., 204 F.3d 880, 885 (9th Cir.2000). "Privity is a legal conclusion designating a person so identified in interest with a party to former litigation that he represents precisely the same right in respect to the subject matter involved." United States v. Bhatia, 545 F.3d 757, 759 (9th Cir.2008) (internal quotation marks omitted). "[A] nonparty may be bound by a judgment because she was adequately represented by someone with the same interests who was party to the suit." Taylor v. Sturgell, 553 U.S. 880, 893-95, 128 S.Ct. 2161, 171 L.Ed.2d 155 (2008) (internal quotation marks omitted).
Argyle and Francis were both parties in the first proceeding. And, as noted above, because of Path Media and Fab Films, LLC's relationship with Francis and Argyle, Path Media and Fab Films, LLC's interests were adequately represented during litigation of the Revocation Motion. Accordingly, the Court finds that collateral estoppel also applies in this case and bars Argyle from attempting to relitigate the issue whether the Trustee had the authority to revoke GGW Marketing, LLC's cancellation and file a bankruptcy on its behalf.
The Trustee argues that the Debtors should be treated as a single business enterprise for the purpose of determining whether the Assignments and Termination/Re-License are fraudulent transfers. MSJ at 13-14.
California law recognizes the "single business enterprise" doctrine. Toho-Towa Co., Ltd. v. Morgan Creek Prods., Inc., 217 Cal.App.4th 1096, 159 Cal.Rptr.3d 469, 480 (2013). This equitable doctrine is "applied to reflect partnership-type liability principles when corporations integrate their resources and operations to achieve a common business purpose." Id. Specifically, this doctrine allows a court to "disregard the corporate form in order to hold one corporation liable for the debts of another affiliated corporation when the latter is so organized and controlled, and its affairs are so conducted, as to make it merely an instrumentality, agency, conduit,
The party seeking a determination that two or more corporations are a "single enterprise" must demonstrate that there is: 1) "such a unity of interest and ownership that the separate corporate personalities are merged, so that one corporation is a mere adjunct of another or the two companies form a single enterprise," and 2) "an inequitable result if the acts in question are treated as those of one corporation alone." Tran v. Farmers Group, Inc., 104 Cal.App.4th 1202, 128 Cal.Rptr.2d 728, 740 (2002). Courts can consider several factors when making this determination, including: 1) the commingling of funds and assets of the entities, 2) the treatment by an individual of the assets of the entities as his own, 3) identical equitable ownership in the entities, employment of the same employees and/or attorney, and 4) the diversion of assets from the entity to another entity to the detriment of creditors. Greenspan v. LADT LLC, 191 Cal.App.4th 486, 121 Cal.Rptr.3d 118, 138-39 (2010); Troyk v. Farmers Group. Inc., 171 Cal.App.4th 1305, 90 Cal.Rptr.3d 589, 619 (2009). "No single factor is determinative, and instead a court must examine all the circumstances to determine whether to apply the doctrine." Greenspan, 121 Cal.Rptr.3d at 139.
The Trustee argues and Argyle agrees that the Original GGW Debtors acted as a single enterprise. Therefore, the only remaining question is whether GGW Marketing, LLC was part of this enterprise. Here the undisputed facts demonstrate that all the Debtors, including GGW Marketing, LLC, operated as a single business enterprise.
Although the Trademarks were originally owned by GGW Brands, LLC and GGW Marketing, LLC, all of the Debtors used the Trademarks. Even after the Assignments, the Debtors continued to use and pay the registration fees for the Trademarks. Further, Path Media addressed the Termination Notice to each of the Debtors and collectively referred to "GGW Brands, LLC, GGW Direct, LLC, GGW Events, LLC, GGW Magazine, LLC and GGW Marketing, LLC" as the "GGW Entities." Heyn 5/23/13 Decl. ¶ 13, Ex. J. In the Termination Notice, Path Media did not draw any distinctions between the Debtors regarding their prior use of the Trademarks. Further, Argyle does not dispute that all of the Debtors, including GGW Marketing, LLC, used the Trademarks as part of "their adult entertainment business enterprise." SS ¶ 16; SGI ¶ 16 (undisputed). Therefore, Path Media and Argyle treated all of the Debtors, including GGW Marketing, LLC as a single business enterprise. There is no reason for the Court to disregard Path Media and Argyle's treatment of all of the Debtors as a single business enterprise for purposes of adjudicating the MSJ.
Moreover, Francis exercised complete control and decision making authority over all of the Debtors, including hiring and firing Debtors' employees, negotiating with vendors on behalf of all the Debtors, and determining how much he would be paid. At least as of 5/15/12, he was listed at top of the GGW Org Chart, demonstrating that even though his title was "Creative Consultant," he was at the helm of the GGW Entities and all employees reported to him. Even after Dale was appointed as the manager of Pablo Holdings, Francis continued to control the GGW Entities, which is evidenced by his utilizing the GGW Direct, LLC bank account to transfer money from Argyle to Kiki on the date
Tym represented Francis and all of the Debtors at the time of the Termination/Re-License. Further, on 8/10/12, three months after GGW Marketing, LLC's purported cancellation in Delaware, GGW Brands, LLC, GGW Marketing, LLC, and other entities, who were represented by the same lawyer, filed a "Defendants' Response to Plaintiff Etagz, Inc.'s Surreply in Opposition to Defendants' Motion to Dismiss Third Amended Complaint" in Etagz, Inc. v. Conrey Publications, Inc., et al., Case No. 2:10-cv-01266, in the District of Utah. Heyn 5/9/13 Decl. ¶ 19, Ex. O.
To support its position that GGW Marketing, LLC did not operate as a single business enterprise with the Original GGW Debtors, the Opposition cites to the Declaration of Christopher Dale, who states he never had business dealings with GGW Marketing, LLC during his time as manager of GGW Brands, LLC. Dale 9/11/13 Decl. ¶ 6.
Second, the undisputed facts show there would be an inequitable result if: 1) the Assignments are attributed solely to GGW Marketing, LLC and GGW Brands, LLC; and 2) the Termination/Re-License is attributed solely to GGW Direct, LLC. "It would be unjust to permit those who control companies to treat them as a single or unitary enterprise and then assert their corporate separateness in order to commit frauds and other misdeeds." Las Palmas, 1 Cal.Rptr.2d at 317. Several lawsuits were threatened or pending against the Debtors (individually and collectively) at the time of the Assignments and Termination/Re-License. Klueger formed Path Media for the purpose of shielding Francis's and the GGW Entities' assets from
The Trustee next argues that this Court should consider Argyle's "continued failure to respond to discovery" and Francis's "willful destruction of emails and electronic records" in determining whether the Assignments and Termination/Re-License are fraudulent transfers. MSJ at 14-15. Argyle does not address the Trustee's request that the Court draw an adverse inference from Argyle's failure to comply with its discovery obligations. Argyle does, however, contend that Francis "never instructed employees to destroy or delete files of the Debtors." SGI ¶ 83.
11 U.S.C. § 105(a) allows a court to "tak[e] any action or [make] any determination necessary or appropriate to enforce or implement court orders or rules, or to prevent an abuse of process." Where a party has breached a discovery obligation by failing to produce evidence, a court has "broad discretion in fashioning an appropriate sanction." Residential Funding Corp. v. DeGeorge Fin. Corp., 306 F.3d 99, 107 (2d Cir.2002); accord In re Rimsat, Ltd., 212 F.3d 1039, 1047 (7th Cir.2000); In re Eddy, 339 B.R. 8, 14 (Bankr.D.Mass.2006). A party can seek an adverse inference instruction on "the basis that the evidence was not produced...." Residential Funding Corp., 306 F.3d at 107. A party seeking an adverse inference based on a failure to respond to discovery must show that: 1) "the party with control over the evidence had an obligation to timely produce it;" 2) "the party that failed to timely produce the evidence had `a culpable state of mind;'" and 3) "the missing evidence is `relevant' to the party's claim or defense such that a reasonable trier of fact could find that it would support that claim or defense." Id.; accord In re Napster, Inc. Copyright Litigation, 462 F.Supp.2d 1060, 1078 (N.D.Cal. 2006). Where evidence is not provided through gross negligence or bad faith, the state of mind of the non-responding party is sufficient to draw an adverse inference that the missing evidence is unfavorable to that party. Residential Funding Corp., 306 F.3d at 108-09.
On 5/31/13, the Trustee served Argyle with the Discovery Requests but as of 8/22/13, the Trustee had not received any response to those requests. Pfister 8/22/13 Decl. ¶ 17. Therefore, the Trustee seeks an adverse inference against Argyle based on its failure to respond to Interrogatory Nos. 4 and 14. Interrogatory No. 4 seeks information regarding "the circumstances (including when, how, who was involved, and what consideration, if any, was exchanged) by which Path Media acquired title to the Trademarks." Pfister 8/22/13 Decl. ¶ 4, Ex. A. Interrogatory No. 14 seeks information concerning "all business or commercial activities in which [Argyle is] currently engaged or in which [Argyle has been] engaged during this calendar year 2013...." Id. The Trustee asserts that failure to respond to these requests should lead to an inference that Path Media and Argyle had no legitimate business operations other than replacing the Debtors as the entities through which Girls Gone Wild is operated.
It is also undisputed that Argyle failed to timely produce the evidence with a culpable state of mind. After Butler withdrew from representing Argyle on 7/22/13, the Trustee's counsel contacted Kolodzi, Argyle's new counsel regarding the Discovery Requests. Pfister 8/22/13 Decl. ¶¶ 11-14, Ex. B. Kolodzi agreed to provide responses to the Discovery Requests by 8/16/13 but never did. Id. These facts demonstrate that the failure to respond rises above mere negligence. Argyle knew of the Discovery Requests, agreed to provide responses, but failed to do so. Accordingly, Argyle was grossly negligent in failing to respond to the Discovery Requests.
Finally, the interrogatories themselves, and the circumstances surrounding the failure to respond, establish that the Discovery Requests are relevant to the Trustee's fraudulent transfer claims. Therefore, the requirements for drawing an adverse inference are met and this Court finds that Path Media and Argyle had no legitimate business operations other than replacing the Debtors as the entities through which Girls Gone Wild Franchise is operated. Id. at 107 (holding that a court has "broad discretion in fashioning an appropriate sanction" for breaching a discovery obligation); In re Rimsat, Ltd., 212 F.3d at 1047 (upholding sanctions against attorneys for conduct during depositions and for delaying compromise hearing); In re Eddy, 339 B.R. at 14 (upholding entry of default judgment for failure to comply with discovery timeline).
The Trustee seeks an adverse inference based on Francis's destruction of the Debtors' e-mails and legal records. MSJ at 14-15. According to the Trustee, on 3/22/13, after Wynn LV filed the Motion for Trustee, Francis called several of Debtors' employees into a meeting in his office. During that meeting, Francis told employees to "go through the Debtors' electronic files and delete email messages and legal records." MSJ at 11. At Francis's direction, Debtors' employees were given new email accounts ending in "@argyleonline.com." MSJ at 11; SS ¶ 84; SGI ¶ 84 (undisputed). The Trustee contends that this indicated that Argyle "had already been selected by Francis as the replacement legal entity" to operate the Franchise. MSJ at 11.
In the Opposition, Argyle does not address or argue that the Court should not draw an adverse inference from the destruction of documents. Instead, in the SGI, Argyle claims that this fact is disputed and relies on one sentence in the Francis 9/11/13 Decl., which states that "I have never instructed employees of the Debtors to destroy or delete files of the Debtors." Francis 9/11/13 Decl. ¶ 18.
As previously noted, credibility determinations and the weighing of the evidence are not appropriate when "ruling on a motion for summary judgment." Rezner v. Bayerische Hypo-Und Vereinsbank AG, 630 F.3d 866, 871 (9th Cir.2010) (quoting Anderson, 477 U.S. at 255, 106 S.Ct. 2505). Here, Argyle challenges the Trustee's assertion
The Trustee moves for summary judgment regarding Counts 1 through 8 of the FACC. MSJ at 3. Counts 1 through 4 seek avoidance and recovery of the Assignments.
Pursuant to 11 U.S.C. § 548(a), the Trustee "may avoid any transfer ... of the debtor in property ... that was made or incurred ... within 2 years" if the transfer was made with (A) actual intent to hinder, delay, or defraud creditors or (B) if the debtor received less than reasonably equivalent value and was insolvent because of the transfer.
Title 11, United States Code, § 541(a)(1) defines property of the estate broadly, as "all legal or equitable interests of the debtor in property as of the commencement of the case." Property of the debtor means property that would have been part of the debtor's estate had it not been transferred before commencement of the bankruptcy proceedings. Begier v. I.R.S., 496 U.S. 53, 59, 110 S.Ct. 2258, 110 L.Ed.2d 46 (1990). It is undisputed that the Trademarks are property and that GGW Brands, LLC and GGW Marketing, LLC owned the Trademarks before 11/15/11. Cal. Civ.Code § 655 (West 2013) (stating trademarks are property); Butner v. United States, 440 U.S. 48, 55, 99 S.Ct. 914, 59 L.Ed.2d 136 (1979) ("Property interests are created and defined by state law."). And, as analyzed above, because the Debtors operated as a single business enterprise, the Trademarks were also the property of all the GGW Entities.
Title 11, United States Code, § 101(54)(D) defines a transfer as "each mode, direct or indirect, absolute or conditional, voluntary or involuntary, of disposing of or parting with (i) property; or (ii) an interest in property." The Assignments were made by GGW Marketing, LLC and GGW Brands, LLC and disposed of all of the Debtors' interest in the Trademarks. Accordingly, the Assignments are transfers under § 548(a)(1).
The Assignments occurred on 11/15/11. The Original GGW Debtors filed bankruptcy on 2/27/13. The Trustee filed a bankruptcy on behalf of GGW Marketing, LLC on 5/22/13. Therefore, the Assignments
To prevail on the § 548(a)(1)(A) claims (actual intent fraudulent transfer), the Trustee must prove the Debtors made the Assignments with actual intent to hinder, delay, or defraud the Debtors' creditors. The Trustee argues that the Retention Letter and Klueger's testimony, the pending and threatened lawsuits, the importance of the Trademarks to the Debtors' business, Francis's relationship with the Debtors, and the Debtors' continued use of the Trademarks after the Assignments support his § 548(a)(1)(A) claims. Argyle counters that the Assignments were made to facilitate all IP being held in one entity and that it was not done with the intent to hinder, delay or defraud.
The Debtors' business depends on the ability to use the Trademarks. Notwithstanding that fact, the Debtors transferred the Trademarks to Path Media for no consideration. As indicated in the Retention Letter, Klueger formed Path Media for the purpose of "acting as the holder of [Francis's] IP, including, copyrights, trademarks, URL's, scripts, source codes, etc." And, other "offshore entity or entities" would act as "holding companies" to "insulate" Francis's ownership. The Retention Letter also indicated that a "foreign trust" would be formed in a "jurisdiction that is friendly to you and hostile to your creditors," and that the "foreign trust will own the offshore entities." Although Klueger testified under oath that he did no work on behalf of Francis for tax planning purposes, the Retention Letter states, "we will assure that any and all corporate reorganizations that we undertake is explainable by you as legitimate corporate planning and legal tax planning." Klueger acknowledged that he formed Path Media in Nevis because that made it "[j]ust more difficult for a creditor to be able to access the assets." Therefore, it is beyond dispute that Path was created to shield the GGW Entities' assets from creditors.
Even after transferring the Trademarks to Path Media, the Debtors continued using the Trademarks just as they had before the Assignments. Francis controlled and was the beneficial owner of Path Media. Until late October/early November 2012, Francis also managed Pablo Holdings, which controlled the Debtors.
When the Assignments occurred, two lawsuits had been filed and two lawsuits were threatened against the GGW Entities. Francis's control of the GGW Entities, through his ownership of Path Media and management of Pablo Holdings, the proximity of the Assignments with the actual litigation, the Debtors' continued use of the Trademarks after the Assignments, and Klueger's acknowledgement that he formed Path Media to make it more difficult for a creditor to access and seize the IP demonstrate that Francis intended the GGW Entities to continue operating the Franchise while the GGW Entities only real asset — the Trademarks — were held in the name of another entity.
Six months after the Assignments, Francis and Klueger cancelled GGW Marketing, LLC's certification of formation in Delaware, indicating they did not wish to leave in existence the entity that transferred the Trademarks to Path Media. The act of cancelling GGW Marketing, LLC, in conjunction with Klueger's testimony that he formed Path Media so that no creditor could "seize the intellectual property," demonstrates that Klueger and Francis sought to ensure the Trademarks could not easily revert back to the transferor,
Further, the circumstances surrounding the Assignments prove the Debtors assigned the Trademarks with the intent to hinder, delay, or defraud creditors. The Debtors were named as defendants in two lawsuits and were threatened with additional lawsuits when the Assignments occurred. The Debtors transferred the Trademarks — which were essential to the Franchise's operation — to Path Media for no consideration. Although there is insufficient direct evidence in the record demonstrating that on 11/15/11, Debtors were insolvent or became insolvent as a result of the Assignments, it is reasonable to assume this is true because the Trademarks were essential to the operation of the Debtors' business — without the Trademarks, the Debtors could not generate revenue. The Trademarks were the Debtors' most important and valuable asset, and the transfer of the Trademarks would undoubtedly lead to insolvency.
Additionally, it is beyond dispute that there was a special relationship between the Debtors and Path Media. Francis controlled both the Debtors and Path Media. Klueger formed Path Media for the purpose of shielding Francis's and the Debtors' assets from creditors. Path Media was owned by Ridgewood, and Francis is a principal and a beneficiary of Ridgewood. Finally, after the Assignments, the Debtors continued to use the Trademarks without paying any fees or royalties to Path Media. The Debtors also maintained the Trademarks by paying registration fees and making payments to attorneys for Path Media regarding the Trademarks. This use continued for more than a year-and-a-half, until 2/25/13 or 2/26/13, when the Termination Notice was sent to the Debtors one or two days before the Original GGW Debtors filed bankruptcy.
To prevail under § 548(a)(1)(B) (constructive fraudulent transfer), the Trustee must prove that the Debtors received less than reasonably equivalent value in exchange for the Trademarks, and were insolvent. Because the Debtors did not receive any consideration for the Assignments, it is undisputed that the Debtors received less than reasonably equivalent value in exchange for the Trademarks.
The Trustee argues the Assignments left the Debtors insolvent under § 548(a)(1)(B)(ii)(I) because the Debtors all faced "massive litigation exposure" and lost their "most important asset" as a result of the Assignments. MSJ at 24. Section
The Trustee next asserts that the Assignments left the Debtors with unreasonably small capital to engage in business or a transaction, under § 548(a)(1)(B)(ii)(II), because the Debtors faced "massive litigation exposure" and by transferring their "most important asset," the Debtors could have that asset "pulled away ... for any reason or for no reason at all." MSJ at 24. There is no evidence in the record, however, demonstrating what the value of the Debtors' remaining capital was after the Assignments. Without this evidence, the Court cannot determine whether the remaining capital was "unreasonably small."
Last, the Trustee argues as a result of the Assignments, the Debtors intended to incur, or believed that they would incur, debts that would be beyond the Debtors' ability to pay as the debts matured under § 548(a)(1)(B)(ii)(III), because the Debtors "were reduced to operating at the sufferance of Path Media" and could not be "genuinely solvent" if their right to use intellectual property essential to their business could be terminated at any time "for no reason at all." MSJ at 24. The Trustee has not demonstrated that as a result of the Assignments, the Debtors intended to incur debts beyond their ability to pay. The Trustee notes the Debtors faced "massive litigation exposure" but does not provide evidence quantifying the litigation exposure or the amount of the Debtors' assets at the time of the Assignments. Without such evidence, the Court cannot determine whether the debts the Debtors believed they would incur were beyond the Debtors' ability to pay.
The Trustee relies on Francis's statement made during the 2004 Exam that "GGW Marketing didn't have any assets at the time it was closed or canceled," to demonstrate that GGW Marketing, LLC was insolvent at the time of, or as a result of, the Assignments. Reply at 11. As discussed above, the Court finds that much of the Francis 9/11/13 Decl. falls within the purview of the "sham affidavit rule" regarding Francis's knowledge of, and involvement with, GGW Marketing, LLC. Francis's statement made during the 2004 Exam also concerns his familiarity with the business of the GGW Marketing, LLC. It would not be appropriate to allow the Trustee to use Francis's statements as a sword and a shield: to rely on Francis's knowledge of GGW Marketing, LLC's financial position to support the Trustee's position regarding insolvency while at the same time, asking the Court to find that the vast majority of Francis's 9/11/13 Decl. should be stricken as a sham based on his 4/18/12 deposition testimony that he had never heard of, and did not do any work for, GGW Marketing, LLC.
Even if, however, this Court were to consider Francis's statement made during the 2004 Exam, that GGW Marketing, LLC did not have any assets at the time it was closed or cancelled, it would not alter the analysis. As noted previously, GGW Marketing, LLC was cancelled on 5/4/12 in Delaware and on 1/16/13 in California.
It is beyond dispute that the Fee that was paid as part of the Termination/Re-License was property of GGW Direct, LLC.
GGW Direct, LLC paid Argyle $274,250.52 in three separate payments in February 2013 for use of the Trademarks through 5/31/13.
The Termination/Re-License is dated 2/25/13, although as noted above, there is an issue regarding when it was actually executed. The Original GGW Debtors filed bankruptcy on 2/27/13 and GGW Marketing, LLC filed bankruptcy on 5/22/13. Therefore, the Termination/Re-License was made within two years of the date that all Debtors filed for bankruptcy.
To prevail on the § 548(a)(1)(A) claims, the Trustee must prove the Debtors entered into the Termination/Re-License
Tym's deposition testimony supports the Trustee's § 548(a)(1)(A) claims. Tym stated the purpose of the Termination/Re-License was for Asiaciti Trust, the trustee for Path Media, through its U.S. Representative, to see "what life was like dealing with somebody in bankruptcy" and that he did not "want to tie [the intellectual property] up in the bankruptcy." Moreover, Tym told Francis on 2/26/13, "the IP license agreement will not be between Path Media and Pablo because we do not want the GGW entities to have access to those licenses" and "I have had Path Media (AsiaCiti) terminate all licenses that were held by [sic] GGW entities." In the Termination Notice, Path Media referred to all of the Debtors collectively as the "GGW Entities."
Tym's 2/26/13 email to Francis also substantiates the Trustee's § 548(a)(1)(A) claims. In that email, Tym expressed concern that the "switchover" might not be completed before the Original GGW Debtors filed bankruptcy and he stated he did not understand why certain people could not "understand that the business is staying the same, and GGW is not really shutting down, it is just that a significant portion of the business is going to Argyle for corporate restructuring purposes."
Combined, Tym's statements made during his deposition and his email to Francis make clear that the Termination/Re-License did not change the way the Debtors did business. Rather, he sought to ensure the GGW Entities held no interest in the IP when they filed bankruptcy.
Further, the circumstances surrounding the Termination/Re-License demonstrate that the Debtors intended to hinder, delay, or defraud creditors at the time of the Termination/Re-License. In re Acequia, Inc., 34 F.3d 800, 805-06 (9th Cir.1994). The Debtors faced five pending lawsuits and nearly emptied their bank accounts on the eve of filing bankruptcy by paying Argyle, an entity controlled by Francis, almost all of the Debtors' cash. Further, the Debtors made the bulk of these payments a week before the Termination/Re-License was executed, showing that the Debtors planned to deplete their bank accounts before filing bankruptcy. After the Fee was paid, the Original GGW Debtors had $1,963 in their bank accounts and on the date that they filed their schedules, they had combined assets of $7,211,878.96 and combined liabilities of $66,190,850.61. The Fee was paid to Argyle, the "U.S. Representative" of Path Media. As stated above, Francis owned and controlled Path Media. And, until the Trustee was appointed, Francis, through his control of Path Media and the Trademarks, also controlled the Debtors. Further, after paying the Fee, the Debtors continued to use the Trademarks the same as they had before the Termination/Re-License. Therefore, the circumstances indicate the Debtors entered into the Termination/Re-License with the intent to hinder, delay, or defraud creditors.
To prevail under § 548(a)(1)(B) (constructive fraudulent transfer), the Trustee must prove that the Debtors received less than reasonably equivalent value for the Termination/Re-License, and were insolvent.
The Trustee first argues that the Debtors received less than reasonably equivalent value in exchange for the Fee because previously, they did not have to pay to use the Trademarks. MSJ at 23.
The bulk or possibly all of $274,250.52 Fee was paid before the date that the Termination/Re-License was executed. Accordingly, GGW Direct, LLC (and as a single business enterprise, the Debtors), could not have received reasonably equivalent value in exchange for the Fee because the Fee purported to pay for use of the Trademarks before the Termination/Re-License was executed. Further, accepting Francis's opinion to be true — that the $274,250.52 Fee was fair value for the use of the IP from late February 2013 to 5/31/13, Francis 9/11/13 Decl. ¶ 20 — does not alter the result. As analyzed above, the Termination/Re-License was a single, integrated transaction. As the Trustee notes correctly, although Francis's statement might prove that the Debtors received reasonably equivalent value in exchange for the use of the Trademarks for a three-month period, the Termination/Re-License also terminated the Debtors' previous interest in the free and unrestricted use of the IP. Francis's statement does not prove that the Debtors received reasonably equivalent value in exchange for this contractual modification. Accordingly, the Court finds that the Trustee has demonstrated that GGW Direct, LLC (and all of the Debtors) received less than reasonably equivalent value under § 548(a)(1)(B)(i).
Even if this Court were to consider the Francis 9/11/13 Decl. regarding the OLA, it would not change the result. The Opposition's argument that the $150,000 per month deferred fee under the OLA proves the Fee was reasonably equivalent value for the use of the Trademarks fails. In the Francis 9/11/13 Decl., Francis stated that the OLA between GGW Marketing, LLC and the Debtors was not intended to bind any successors of GGW Marketing, LLC. Francis 9/11/13 Decl. ¶ 15. It follows the OLA did not bind the Debtors' use of the Trademarks after the Assignments.
The Trustee next argues the Termination/Re-License was entered into while the Debtors were insolvent because the Termination/Re-License took place one or two days before the Original GGW Debtors filed bankruptcy and left the Original GGW Debtors with combined assets of $7,211,878.96 and combined liabilities of $66,190,850.61. MSJ at 24.
The undisputed facts demonstrate that the sum of the Debtors' debts far exceeded the sum of the Debtors' property and therefore, the Debtors were insolvent under § 101(32)(A). 11 U.S.C. § 101(32)(A) (defining insolvency as when the sum of an "entity's debts is greater than all of such entity's property, at a fair valuation...."). Further, GGW Direct, LLC listed assets of $3,080,112.96 and liabilities of $17,719,828.91 and GGW Marketing, LLC listed assets of $0 and liabilities of $5,812,588. Accordingly, GGW Direct, LLC and all of the Debtors collectively were insolvent at the time of the Termination/Re-License under § 548(a)(1)(B)(ii)(I).
Last, the Trustee argues the Debtors intended to incur, or believed they would incur, debts beyond their ability to pay at the time of the Termination/Re-License. MSJ at 23-24. Specifically, the Trustee contends that the Debtors' total assets and liabilities show "unmanageable indebtedness" and that the Debtors were operating "at the sufferance of Path Media." MSJ at 24. The Trustee is correct that the Debtors' total assets and liabilities demonstrated insolvency and indebtedness. The Debtors' schedules, however, do not, by themselves, demonstrate that the Debtors intended or believed they would incur debts beyond their ability to pay.
It is true that after paying the Fee, the Debtors retained minimal cash. And, to continue using the Trademarks after 5/31/13, they would be required to enter into another license agreement. These facts demonstrate that on the date the Original GGW Debtors filed for bankruptcy, they must have known they would incur additional significant debt — a licensing fee — in approximately three months. But the Debtors continued to operate the Franchise after the Termination/Re-License, and presumably, expected to make money doing so. This money could have been used to pay any future license fee or other debt. Accordingly, without more evidence regarding the amount of money that the Debtors made each month and the amount of any additional licensing fee that would be charged for use of the Trademarks after 5/31/13, this Court cannot find the Debtors intended to incur, or believed they would incur, debts beyond their ability to pay as those debts became due.
For the reasons stated above, the MSJ is GRANTED as to Counts 1, 2, 5, 6, 7 and 8. The MSJ is DENIED as to Counts 3 and 4. Pursuant to LBR 9021-1(b)(1)(B), movant must serve and lodge a proposed order via LOU within 7 days of the hearing. Appearances required.
