CHRISTOPHER S. SONTCHI, Bankruptcy Judge.
Before the Court are a series of complaints filed by Capmark Financial Group Inc. ("CFGI") and Capmark Finance LLC ("CFI" and, collectively with CFGI, the "Plaintiffs") against an individual, Dawson Steven Lin ("Lin" or "Defendant") and a series of motions to dismiss those complaints filed by Lin. In the complaints, Plaintiffs seek to recover under federal and state fraudulent conveyance law two payments made to Lin in connection with Lin's resignation from the CFGI and/or CFI — a stock redemption payment of approximately $2.8 million made by CFGI and a severance payment of $600,000 made by CFI.
The procedural posture is somewhat complex and will be discussed more fully below. Broadly speaking, however, Lin seeks dismissal of the claims asserted against him because: (1) the amended complaints filed (without consent or court approval) on June 6 and July 2, 2012, were untimely under Bankruptcy Rule 7015(a) and should be stricken — leaving the Plaintiff with the allegations in the original complaint filed on October 24, 2011; (2) the original complaint should be dismissed pursuant to Bankruptcy Rule 7012(b)(6) for failure to state a claim upon which relief can be granted due to Plaintiffs' bare bone allegations that fail to satisfy the Twombly/Iqbal pleading standards; and (3) the original and/or amended complaints should be dismissed pursuant to Bankruptcy Rule 7012(b)(2) for this Court's lack of personal jurisdiction over Lin.
The Court finds that the July 2nd amended complaint was properly filed under Bankruptcy Rule 7015(a) and, assuming arguendo that it was not, the Court will grant Plaintiffs leave retroactive to July 2, 2012 to amend the complaint. The allegations in the July 2nd Amended Complaint easily satisfy the Twombly/Iqbal pleading standards and the motion to dismiss under Rule 7012(b)(6) will be denied. Finally, the controlling test as to whether this Court has personal jurisdiction over Lin is whether he has minimum contacts with the United States (not, as Lin argues, the State of Delaware). As Plaintiffs have alleged that Lin has minimum contacts with the State of Washington and Lin has not submitted the necessary affidavit disputing his contact with Washington, the motion to dismiss under Rule 7012(b)(2) will be denied.
In order to rule on the motions to dismiss under Rule 7015(a) in this case the Court must start with its determination of the relevant time line (some of these entries are not relevant to the amendment issue but relate to the personal jurisdiction question discussed below).
Date Event 10/24/2011 Complaint filed 10/25/2011 Complaint and Summons served on Lin by U.S. mail at 2801 First Avenue, Apt. #909, Seattle, Washington 98121 ("Apt.909") 12/21/2011 Alias Summons served on Lin by U.S. mail at 2801 First Avenue, Apt. #1209, Seattle, Washington 98121 ("Apt.1209") 2/10/2012 Request for Default and Default Judgment filed and served on Lin by U.S. mail at Apt. 909 and Apt. 1209 2/13/2012 Default and Default Judgment entered against Lin and served upon Lin by U.S. mail at Apt. 909 and Apt. 1209 4/25/2012 Motion to (I) Vacate Default and Default Judgment and (II) Establish Certain Procedures in Connection with Adversary Proceeding filed by Plaintiffs and served upon Lin by hand delivery to Lin's counsel and by U.S. mail at Apt. 909 and Apt. 1209 5/8/2012 Order Granting Motion to (I) Vacate Default and Default Judgment and (II) Establish Certain Procedures in Connection with Adversary Proceeding entered by Court Order specifies that: "Defendant shall be deemed to have been properly served with the Summons, the Alias Summons and the Complaint as of the date of this Order and any further pleadings or other papers in the Adversary Proceeding may be served on Defendant through his counsel ..." "Defendant shall be deemed to have waived his defenses in this Adversary Proceeding (if any) solely pursuant to Federal Rules of Civil Procedure 12(b)(4) and 12(b)(5) ..." 5/9/2012 Order Granting Motion to (I) Vacate Default and Default Judgment and (II) Establish Certain Procedures in Connection with Adversary Proceeding served upon Lin by hand delivery to Lin's counsel and by U.S. mail at Apt. 909 and Apt. 1209 5/29/2012 21st day after entry of Order deeming service to have occurred on 5/8/2012 — last day for Plaintiffs to file an amended complaint under Rule 7015(a)(1)(A) 6/6/2012 Amended Complaint filed and served upon Lin by hand delivery to Lin's counsel 6/7/2012 Lin's deadline to respond to original Complaint as set forth in May 8th order — no response filed 6/7/2012 Plaintiffs' asserted deadline to amend original Complaint — same date as Lin's deadline to respond to original Complaint as set forth in May 8th order 6/20/2012 Lin's Motion to Dismiss the Original and Amended Complaints and supporting brief filed and served upon Plaintiff's counsel — 13 days after June 7th deadline 7/2/2012 Amended Complaint re-filed by Plaintiffs and re-served upon Lin by hand delivery to Lin's counsel (Lin refers to this as Second Amended Complaint) 7/6/2012 Lin's deadline to respond to Amended Complaint filed and served on June 6th 7/16/2012 21st day after filing and service of Lin's Motion to Dismiss the Original and Amended Complaints and supporting brief — last day to amend either the Original or Amended Complaint under Rule 7015(a)(1)(B). Amended Complaint filed 14 days prior to deadline. 7/16/2012 Lin's Motion to Dismiss Second Amended Complaint and supporting brief filed and served upon Plaintiffs' counsel 7/20/2012 Capmark's Memorandum of Law in Opposition to Defendant's Motion to Dismiss filed and served upon Lin's counsel 7/23/2012 Capmark's Amended Memorandum of Law in Opposition to Defendant's Motion to Dismiss filed (with Lin's consent) and served upon Lin's counsel 8/1/2012 Lin's deadline to respond to Amended Complaint (called Second Amended Complaint by Lin) filed and served on July 2nd
8/13/2012 Reply Brief In Support Of Defendant Dawson Stephan Lin's Motion To Dismiss The Original And Amended Complaints And Defendant Dawson Stephen Lin's Motion To Dismiss The Second Amended Complaint filed and served Plaintiffs' counsel
It is certainly a tangled web. Lin takes the position that Plaintiff's filing and service of the Amended Complaint on June 6th (without consent or Court approval) was 8 days late and, thus, void. Under Rule 7015(a)(1)(A), Plaintiffs had 21 days from service of the Complaint, which was deemed to occur on May 8th, to file an amended complaint without consent of the parties or approval of the Court. That time expired on May 29th. Defendant counters that, even though the May 8th order is silent on this issue, they had until Lin's response deadline under the May 8th order, which was thirty days after service or June 7th, to amend the complaint without consent or Court order. The asserted logic behind Plaintiff's position is that absent a Court order otherwise the deadlines for responding to a complaint and amending the same complaint are identical, i.e., 21 days from service, and that implicit in any modification of the response deadline is a commensurate modification of the deadline to amend the complaint.
There are two holes in Plaintiffs' argument. First, it is not true that under the Bankruptcy Rules the deadlines for responding to a complaint and amending the same complaint are identical. While the baseline response deadline under Federal Rule 12(a)(1)(A)(i) is 21 days from issuance of the Summons — identical to the time period to amend under Bankruptcy Rule 7015(a)(1)(A) — the deadline to respond to a complaint under Bankruptcy Rule 7012(a) is thirty days from issuance of the summons.
Second, Plaintiffs' argument does not comport with what actually happened in this case. There was a Court order in this instance entered with the parties' consent that "extended" Lin's response deadline to 30 days. But, the response was due in 30 days from service of the summons. The import of the May 8th order was to set the service date. Once that was set the deadlines to amend and to respond were set by the Bankruptcy Rules at 21 and 30 days, respectively. The default period of 21 days under the amendment rules remains in place and the amendment on June 6th was, indeed, 8 days late.
So, Defendants' June 6th amendment of the complaint was without effect.
Under Rule 7012(a)(1)(B), Plaintiffs had until 21 days after the service of Lin's Motion to Dismiss the Original and Amended Complaints to amend the complaint. That is to say they had until July 16th. Plaintiffs easily met that deadline by re-filing and re-serving the Amended Complaint on July 2nd. Lin takes the position, however, that this re-filing without consent or Court order is also defective. Why? Because "a plaintiff may amend its pleading once as a matter of course."
In the alternative, assuming arguendo that the July 2nd Amended Complaint was an impermissible second bite at the apple and was void, this Court grants Plaintiffs leave to file an amended complaint — retroactive to July 2nd. Bankruptcy Rule 7015(a)(2) provides that the "Court should freely give leave [to amend] when justice so requires." This is such an instance. The practical motivation behind Lin's motion under Bankruptcy Rule 7015 is to stick Plaintiffs with the "bare bone" allegations in the original Complaint and, thus, increase the likelihood that the Complaint will be dismissed under Rule 7012(b)(6). There are deficiencies with the allegations in the original Complaint that very well might lead to its dismissal under the Twombly/Iqbal standards. But, Lin is not prejudiced by allowing amendment. His participation in this case has been short and the action has not proceeded beyond the motions before the Court. Were this Court to dismiss the original Complaint it would almost certainly do so without prejudice and allow Plaintiffs to file an amended complaint. Also, as set forth below, the Amended Complaint easily survives a motion to dismiss. In short, Lin is exactly where he would have been had the Court granted his motions under Rule 7012 and 7015 — there is an Amended Complaint before the Court that survives a motion to dismiss under Bankruptcy Rule 7012(b)(6). Granting leave to amend retroactive to July 2nd is consistent with Bankruptcy Rule 7015(b)'s admonition to "freely give leave [to amend] when justice so requires."
Plaintiffs timely and properly filed the Amended Complaint on July 2nd. In the alternative, Plaintiffs are given leave to file the Amended Complaint retroactive to
A motion under Rule 7012(b)(6)
In Iqbal, the Supreme Court makes clear that the Twombly "facial plausibility" pleading requirement applies to all civil suits in the federal courts.
After Iqbal, the Third Circuit has instructed this Court to "conduct a two-part analysis. First the factual and legal elements of a claim should be separated. The [court] must accept all of the complaint's well-pleaded facts as true, but may disregard any legal conclusions."
Lin seeks dismissal of the original Complaint for failure to state a claim. He rightly argues that the Complaint was formulaic and merely a recitation of the statutory components of the asserted causes of action. The Amended Complaint, however, cures these deficiencies. The Amended Complaint thoroughly sets forth the relationship between the parties and the facts and circumstances surrounding the alleged fraudulent transfer. (Amended Complaint ¶¶ 9-15). It also identifies and even quotes from the operative documents and sets forth the date and amount of the transfers. (Id.). The Amended Complaint also identifies in detail the date and the reasons Plaintiffs became insolvent. (Id. At ¶¶ 16-19). There is no question that the Amended Complaint satisfies the notice pleading standard set forth in Twombly, Iqbal and Fowler. The motion to dismiss for failure to state a claim will be denied.
Lin has moved under Bankruptcy Rule 12(b)(2) for dismissal of the Amended Complaint because this Court lacks personal jurisdiction over him. As set forth below, Lin was properly served with the original Complaint. In addition, the proper inquiry as to whether Lin has minimum contacts with the Court is whether he has minimum contacts with the United States — not Delaware as Lin asserts. Plaintiffs have alleged that Lin has minimum contacts with the State of Washington and Lin has not submitted the necessary affidavit disputing his contact with Washington. Thus, for purposes of this motion, Lin has minimum contacts with Washington, the United States and, thus, Delaware. Finally, hailing Lin into this Court is consistent with the Constitution and principles of fair play and justice. The motion to dismiss for lack of personal jurisdiction will be denied.
Pursuant to Rule 7004(f) of the Federal Rules of Bankruptcy Procedure, this Court has personal jurisdiction over a party if "(i) service of process has been made in accordance with Bankruptcy Rule 7004 [or Fed. R.Civ.P. 4, (ii)] the court has subject matter jurisdiction under section 1334 of the Code, and (iii) exercise of jurisdiction is consistent with the Constitution and laws of the United States."
"To survive a motion to dismiss for lack of personal jurisdiction, a plaintiff bears the burden of establishing the court's jurisdiction over the moving defendants."
Lin contends that he is not subject to the personal jurisdiction of this Court because the May 8th order merely "deems service to have occurred," without adjudicating whether service of the original Complaint complied with Federal Rule 4 or Bankruptcy Rule 7004. That is incorrect. The May 8th order plainly states that "Defendant shall be deemed to have been properly served with the Summons." (emphasis added). It further states that "Defendant shall be deemed to have waived his defenses in this Adversary Proceeding... pursuant to Federal Rules of Civil Procedure 12(b)(4) [insufficient process] and 12(b)(5) [insufficient service of process]...." Having consented to the May 8th order, Lin may not relitigate the issue of whether or not he was properly served.
Courts in this district apply the "fair play and substantial justice" standards of the Fifth Amendment's Due Process Clause to determine whether service of process comports with the United States Constitution.
For more than a decade, this Court has consistently held that, because Bankruptcy Rule 7004(d) provides for nationwide service of process, this Court's personal jurisdiction may be assessed on the basis of a defendant's contacts with the United States as a whole, rather than with any particular state.
Lin contends that those cases were wrongly decided. He argues that personal jurisdiction may not rest upon an alien defendant's aggregated contacts with the United States absent a governing federal statute providing for nationwide service of process, and that Bankruptcy Rule 7004(d) is not such a statute. This exact argument has consistently been "soundly rejected" by this Court.
As support for his argument Lin cites a 1985 opinion of the Third Circuit stating that "in the absence of a governing federal statute providing for nationwide service of process, [personal] jurisdiction may not rest upon an alien defendant's aggregated contacts with the United States."
It is well-established that a person's residency within the United States constitutes sufficient minimum contacts for the Bankruptcy Court to exercise personal jurisdiction over that person in an action arising under the Bankruptcy Code.
The Amended Complaint further alleges that Lin was an employee and officer of CFI and a shareholder of CFGI — both U.S. companies. (Amended Complaint ¶¶ 9, 11, 12). Lin has offered no evidence contradicting those allegations. Those contacts are sufficient in this case to establish personal jurisdiction over Lin. Indeed, the matter before the court — recovering payments made to Lin directly resulting from his status as an employee and shareholder — arises out of those very United States contacts.
Once a prima facie case of minimum contacts has been made, the burden shifts to the moving party to "present a compelling case that the presence of some other considerations would render jurisdiction unreasonable and would make litigation so gravely difficult and inconvenient that a party unfairly is at a severe disadvantage in comparison to his opponent."
In contrast, Capmark and this Court have strong interests in litigating in this forum. The federal bankruptcy system was designed to provide "one forum for adjudicating almost all disputes arising in or out of a particular case."
Thus, this Court has personal jurisdiction over Lin and his Motion to Dismiss under Bankruptcy Rule 7012(b)(2) will be denied.
For the reasons set forth above, the Motion to Dismiss the Original and Amended Complaints and the Motion to Dismiss Second Amended Complaint will be denied in their entirety. An order will be issued.
