Joan H. Lefkow, U.S. District Judge.
This case began in 2012, when a group of limited partners in one or more investment funds (collectively, the "Funds")
Summary judgment obviates the need for a trial where there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a). A genuine issue of material fact exists if "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). To determine whether any genuine fact issue exists, the court must pierce the pleadings and assess the proof as presented in depositions, answers to interrogatories, admissions, and affidavits that are part of the record. Fed. R. Civ. P. 56(c). In doing so, the court must view the facts in the light most favorable to the non-moving party and draw all reasonable inferences in that party's favor. Scott v. Harris, 550 U.S. 372, 378, 127 S.Ct. 1769, 167 L.Ed.2d 686 (2007).
The party seeking summary judgment bears the initial burden of proving there is no genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). In response, "[a] party who bears the burden of proof on a particular issue may not rest on its pleadings, but must affirmatively demonstrate, by specific factual allegations, that there is a genuine issue of material fact which requires trial." Day v. N. Ind. Pub. Serv. Co., 987 F.Supp. 1105, 1109 (N.D. Ind. 1997); see also Insolia v. Philip Morris Inc., 216 F.3d 596, 598 (7th Cir. 2000). If a claim or defense is factually unsupported, it should be disposed of on summary judgment. Celotex, 477 U.S. at 323-24, 106 S.Ct. 2548.
Unless otherwise noted, the facts set out below are taken from the parties' Local Rule 56.1 statements, and are construed in the light most favorable to the non-moving party. The court will address many but not all of the factual allegations in the parties' submissions, as the court is "not bound to discuss in detail every single factual allegation put forth at the summary judgment stage." Omnicare, Inc. v. UnitedHealth Grp., Inc., 629 F.3d 697, 704 (7th Cir. 2011). In accordance with its regular practice, the court has considered the parties' objections to the statements of fact and includes in its opinion only those portions of the statements and responses that are appropriately supported and relevant to the resolution of this motion. Any facts that are not controverted as required by Local Rule 56.1 are deemed admitted.
Preparation of this opinion has been made particularly difficult by plaintiffs' counsel's failure to comply with Local Rule 56.1 in preparing and responding to statements of material facts. This court's standing order directs counsel to read Malec v. Sanford, 191 F.R.D. 581 (N.D. Ill. 2000), and Buttron v. Sheehan, 2003 WL 21801222 (N.D. Ill. Aug. 4, 2003), which detail the oft-occurring pitfalls encountered when preparing summary judgment filings. Plaintiffs' counsel has apparently not recently reviewed Malec or Buttron, since their submissions run afoul of the helpful guidance in those cases: (1) a response to a movant's statement of facts is neither the place for argument nor additional facts that do not actually dispute the factual statement; (2) "a general denial is insufficient to rebut a movant's factual allegations; the nonmovant must cite specific evidentiary materials justifying the denial";
Nutmeg — a registered investment advisor formerly managed by Randall Goulding — was the sole general partner of the Funds, which are limited partnerships under either Illinois or Minnesota law in which plaintiffs are investors. (Dkt. 201, Plaintiffs' Response to Defendants' Local Rule 56.1 Statement of Material Facts ("Pl. Resp.") ¶¶ 1, 4, 15-16.) Among other things, the Funds entered into private-investment-in-public-equity ("PIPE") transactions, providing funding to companies, some of which traded on the sub-penny market at prices less than $0.01 per share, in exchange for convertible debentures that could be converted to stock in that company. (Pl. Resp. ¶¶ 17-21.)
On March 23, 2009, the Securities and Exchange Commission ("SEC") filed suit against Nutmeg, Goulding, and others. See SEC v. Nutmeg, LLC, No. 09 C 1775 (N.D. Ill. Mar. 23, 2009). The SEC subsequently filed a motion requesting the appointment of a receiver for Nutmeg who would "review and exercise independent judgment on pending and future transactions involving the Funds' assets." (Pl. Resp. ¶ 26; Dkt. 183, Def. Ex. 22; SEC dkt. 48 ¶ 4.) The court granted the motion and entered an order appointing Weiss as receiver in August 2009 ("Appointment Order"). (Pl. Resp. ¶¶ 27-28; Dkt. 183, Def. Ex. 23; SEC dkt. 66.) The Appointment Order specified that Weiss would be "the agent of this Court and solely the agent of this Court in acting as Receiver" and would "oversee all aspects of Nutmeg's operations and business which include, but are not limited to, serving as general partner and investment advisor to" the Funds. (Dkt. 183, Def. Ex. 23 §§ II.A, II.B.1.) The Appointment Order also vested Weiss with authority to, among other things:
The court ordered Crowe Horwath LLP ("Crowe") to continue as the court-appointed accountant for Nutmeg and the Funds, required Weiss to file periodic reports detailing her acts and transactions in her capacity as receiver, and determined that the receiver and retained personnel were entitled to reasonable compensation and expense reimbursement from Nutmeg and the Funds' assets. (Id. §§ II.B.7, II.D, II. E.) Weiss and any retained personnel also received the following protection:
(Id. § II.G.)
After being appointed receiver, Weiss began filing periodic reports with the court as required by the Appointment Order.
As authorized by the Appointment Order, Weiss also retained professionals including investment advisors and lawyers to assist her in carrying out her duties. These included, among others, William Schur to act as Weiss's counsel in proposed litigation and McClendon, Morrison & Partners, LLC ("MMP"), with whom Weiss consulted frequently. (Pl. Resp. ¶ 41-42.) In general, Weiss pursued certain opportunities and declined to pursue others throughout the course of the receivership. The details of these opportunities and Weiss's decision-making process are detailed below.
All remaining claims arise under a breach of fiduciary duty theory of liability.
Because Weiss was acting in her capacity as receiver when she engaged in the conduct at issue, state partnership statutes are inapplicable. The Appointment Order makes clear that Weiss "shall be the agent of this Court and solely the agent of this Court in acting as Receiver." (Dkt. 183, Def. Ex. 23 § II.A.) Thus, although the Appointment Order indicates that Weiss "shall oversee all aspects of Nutmeg's operation and business," including "serving as general partner," when acting as receiver (id. § II.B.1), Weiss could not have been an agent of Nutmeg bound by state law as if she were a general partner.
Further, the court considered Section G of the Appointment Order at the motion to dismiss stage when resolving the contours of the willful and deliberate standard. (Dkt. 55.)
At the outset, the parties attempt to create a framework for Weiss's intent. Defendants contend there is no reason Weiss would have intentionally breached her fiduciary duties because any fees Weiss could recover for the estate would enhance her professional reputation, potentially lead to more receivership work, and help ensure the estate had sufficient assets to cover fees awarded pursuant to her fee petitions. Plaintiffs counter that (a) Weiss's malice toward Goulding caused her to breach her fiduciary duties toward the Nutmeg investors and (b) Weiss wanted to ingratiate herself with the SEC to obtain more receivership work in the future. (Dkt. 212, Defendants' Response to Plaintiffs' Local Rule 56.1 Statement of Material Facts) ("Def. Resp.") ¶¶ 1-18.) Neither of plaintiffs' manufactured motives finds support in the record.
For example, plaintiffs attempt to show Weiss's malice toward Goulding by pointing to the fact that Weiss disseminated to investors a Schedule K-1 (Form 1065) tax form, which incorrectly stated that Goulding "had been taken into custody" in connection with the SEC's case against him. (Def. Resp. ¶ 17; Dkt. 201, Pl. Ex. 1.) But plaintiffs fail to mention that Weiss relied, in good faith, on an accountant when preparing the statement and promptly sent investors an amended Schedule K-1. (Dkt. 214, Def. Ex. 136.) Further, in the SEC case, the court found that with regard to the K-1 issue, "nothing ... indicates that the Receiver acted other than in good faith in the discharge of her fiduciary duties." SEC v. Nutmeg Grp., LLC, No. 09 C 1775, 2011 WL 5042092, at *4 (N.D. Ill. Oct. 19, 2011).
In counts V, VII, X, XI, XII, XIII, XIV, XVI, XVIII, and XX, plaintiffs allege that Weiss breached her fiduciary duties by either failing to pursue or actively pursuing certain opportunities to the detriment of the estate. Even viewed in the light most favorable to plaintiffs, no reasonable jury could find that Weiss intentionally breached her fiduciary duties with regard to these claims; a receiver cannot be held liable for "exercise of poor judgment," In re Kids Creek, 248 B.R. at 559-561, and the record is devoid of evidence demonstrating that Weiss intentionally harmed the estate by choosing to pursue or not to pursue certain litigation, judgments, and claims.
Counts X and XIV allege that Weiss breached her fiduciary duties by not pursuing litigation against Nanobac Pharmaceutical, Inc. ("Nanobac") and Asia American Petroleum Corp. ("Asia American") and its principals, respectively, which was pending when she became receiver. In Nanobac, Weiss disclosed to the court in her periodic reports that she had obtained copies of the pleadings from the court files to evaluate the efficacy of the claims and at some point thereafter made a decision not to pursue them because she believed they were unlikely to be collectable and that the cost of litigation was not worth pursuing on an hourly basis. Plaintiffs' bald assertion that Weiss failed to conduct any examination before deciding not to pursue the litigation is belied by Weiss's sworn declarations and periodic reports to the court. Similarly, in Asia American, Weiss disclosed to the court that she would not pursue certain litigation given issues such as the cost of litigation, defenses raised, and the apparent financial condition of the defendants. Here, Goulding admits that Asia American lacked sufficient assets to pay all judgments against it. Although the parties disagree about the validity of Weiss's reasons for not pursuing these claims, no reasonable jury could find that her decision was motivated by an intent to harm the estate.
Count XX alleges that Weiss breached her fiduciary duties by attempting to convert debt that Gold Coast Mining Corp. ("Gold Coast") owed to Nutmeg rather than converting debt Gold Coast owed to the Funds. Plaintiffs concede they were not injured by Weiss's conduct because Gold Coast dishonored Nutmeg's conversion notice but now attempt to raise a new argument at summary judgment — that Weiss did not pursue a lawsuit against Gold Coast based on the failure to convert after obtaining a court order allowing contingency counsel to bring suit. This is an impermissible attempt to constructively amend the complaint and therefore need not be considered at summary judgment. See Abuelyaman v. Ill. State Univ., 667 F.3d 800, 814 (7th Cir. 2011) ("It is well settled that a plaintiff may not advance a new argument in response to a summary judgment motion."). Even if the court were to consider this argument, there is no evidence that Weiss intended to breach her fiduciary duties by not filing suit. Plaintiffs assert that her willful nature is evidenced by the fact that after deciding not to bring a claim, Weiss never reported that fact to the court. To the contrary, in a status report filed on December 2, 2013, Weiss disclosed that contingency counsel spent considerable time investigating the matter but ultimately decided it would not be prudent to pursue the claim. (Dkt. 214, Def. Ex. 153 at 3.)
Finally, Count XII alleges that Weiss breached her fiduciary duties by failing to enforce $36,000 of a $56,000 settlement related to a state-court case one of the Funds brought against individual Jack Freedman and allowing the relevant state-court lawsuit to be dismissed before Freedman paid the full settlement amount. Defendants assert that after sending a handful of emails to Freedman's counsel in an attempt to collect the funds owed and receiving no response, Weiss decided not
Count V alleges that Weiss breached her fiduciary duties by failing to enforce a $2.9 million judgment against RMD Entertainment Group, Inc. ("RMD"), despite Goulding's urging her to do so. Defendants contend that after conducting research and receiving independent advice, Weiss concluded that the RMD judgment was not worth pursuing. Plaintiffs counter that Weiss did not enforce the RMD judgment because her animosity toward Goulding caused her to automatically reject his suggestions and because she was working with the SEC on its case against Goulding. Plaintiffs cite no relevant evidence in support of this contention. To the contrary, the evidence shows that RMD told Weiss it had no assets in the United States and that the validity of the judgment was defective. (Dkt. 201, Pl. Ex. 61.) Weiss did not simply accept this assertion
Count VII alleges that Weiss breached her fiduciary duties by not pursuing a $120,000 claim against Sanswire for its alleged default under a note. Defendants assert that Weiss's decision not to pursue a claim was based on, among other things, a Sanswire representative stating that the note had been "converted out in full" and that there was "nothing owing to Nutmeg," as well as a lack of documentation to verify the estate's claim. (Pl. Resp. ¶¶ 74, 76; Dkt. 183, Def. Exs. 35, 36.) Further, because Weiss could not verify evidence of a pay-off, she threatened litigation and sent Sanswire a settlement demand. (Pl. Resp. ¶ 75; Dkt. 183, Def. Exs. 38, 39.) Plaintiffs agree that Sanswire personnel made the representation but contend that Weiss knew it to be an incorrect and self-serving statement. In support, plaintiffs point to a spreadsheet that Goulding allegedly sent to Weiss, which allegedly established that part of the debt remained. (Dkt. 201, Pl. Ex. 70.) Even if Goulding did send Weiss a spreadsheet that established part of the debt remained, this fact adds nothing to the discussion. Weiss recognized that there may be outstanding debt and thus continued to pursue the matter when she threatened litigation and sent the settlement demand. Accordingly, plaintiffs contention is not only incorrect, but certainly does not create a genuine issue of fact with respect to Weiss's intent, as required here.
Count XI alleges Weiss breached her fiduciary duties by failing to follow Goulding's advice with respect to the course of action pursued after North Bay Resources, Inc. ("NBR") defaulted on a convertible note. Goulding recommended that Weiss negotiate new terms or obtain NBR stock. Weiss's duty as receiver does not include an obligation to heed Goulding's advice or pursue a course of action recommended by him. Indeed, the SEC's motion to appoint Weiss receiver contemplated that she would "review and exercise independent judgment on pending and future transactions involving the Funds' assets." (Pl. Resp. ¶ 26; Dkt. 183, Def. Ex. 22; SEC dkt. 48 ¶ 4) (emphasis added.) To that end, Weiss and MMP contacted NBR and were informed that there was nothing due on the note because the shares issued to Nutmeg fully satisfied the note. Weiss later discovered that the note had not
Accordingly, defendants are entitled to judgment as a matter of law on counts V, VII, X, XI, XII, XIII, XIV, XVI, XVIII, and XX.
In counts VI, VIII, and XVII, plaintiffs allege that Weiss breached her fiduciary duties by failing to convert certain debt owed to Nutmeg or the Funds into stock to be sold on the open market. Weiss asserts that she exercised her business judgment after seeking professional investment advice and conducting a cost-benefit analysis. She contends that this analysis led her to determine that the conversion and sale process was too risky given Nutmeg's financial condition, the poor documentation reflecting the Funds' investments, and the lack of organization of the companies owing the debt. Plaintiffs counter that Weiss's professed belief is pure pretext and they provide a lengthy explanation of the way in which such debts are typically converted and of the risks associated with non-conversion/sale. Even when viewed in the light most favorable to plaintiffs, facts related to what is "typically" done or those indicating that someone else "might" have considered a different course of action are speculative and, while possibly relevant to a negligence theory, do not create a triable issue of fact as to Weiss's intent to breach her fiduciary duties. See Barrios v. Fashion Gallery, Inc., 255 F.Supp.3d 728, 734 (N.D. Ill. 2017) (granting summary judgment and asserting that "speculation without evidence... is not sufficient in a summary judgment proceeding"). As discussed below, plaintiffs also set forth additional facts specific to each of the failure-to-convert claims, but such facts do not change the court's view that there is no genuine issue of material fact as to these claims.
Count VI alleges that Weiss intentionally breached her fiduciary duties by settling rather than converting into stock $40,000 of a $50,000 debt owed by GoIP Global, Inc. ("GoIP"). To convert debt to stock, Weiss would initially need to send a conversion notice to the company owing the debt. After issuing a notice, Weiss could either wait to receive the stock certificates before selling the stock or sell the stock before receiving physical stock certificates. Defendants assert that Weiss believed it would be risky to sell stock without holding stock certificates because had she done so and the company failed to timely deliver certificates, the estate could have been required to purchase enough additional stock to provide certificates to the purchaser. Weiss did not want to take this risk because she believed Nutmeg did not have sufficient liquidity to effectuate such purchases. She therefore decided to settle the GoIP debt. Plaintiffs argue that because Weiss owned some GoIP stock, she would not have needed to purchase in the market (at a potentially higher price) to cover in the event of a dishonored conversion notice, and thus the risk Weiss perceived was unfounded. Plaintiffs also contend that Weiss breached her fiduciary duties because, among other things, Goulding had advised Weiss to convert and sell in a gradual fashion, and Weiss could have taken advantage of SEC rules that allow a holder of stock to convert immediately after sending a conversion notice to the issuer.
In contrast to In re Consupak, Inc., 87 B.R. 529, 544 (Bankr. N.D. Ill. 1988), on which plaintiffs rely, where the trustee
Plaintiffs also claim that Weiss breached her fiduciary duties by placing a GoIP stock certificate in a vault for four months instead of immediately sending the certificate to a broker so the GoIP debt could be converted into stock. This argument is a red herring. The stock certificate and alleged delay relates to the $10,000 that Weiss did convert and sell at a profit, not the remaining $40,000 at issue in this case. Even assuming Weiss did intentionally place the stock certificate in a vault for four months, which is not clear from the record, this would at most establish that Weiss committed a willful act, rather than a willful and deliberate violation of her duties as is required for personal liability to attach. (See dkt. 55 at 15.) Further, it is not clear that this act would have resulted in harm given that, as plaintiffs contend, Weiss could have sold the stock without the underlying certificate.
Count VIII alleges that Weiss breached her fiduciary duties by (a) failing to timely sell certain Secured Financial stock, which harmed the estate given the declining stock value during the delay, and (b) selling rather than converting a Secured Financial note. With regard to the alleged failure to sell, defendants assert that any delay in selling the stock resulted from incorrect information provided by Secured
With respect to the alleged failure to convert, plaintiffs argue (as they did of count VI) that because Weiss held Secured Financial stock, any risk Weiss perceived from having to cover the stock in a rising market if Secured Financial dishonored a conversion notice was feigned naiveté and that she should have converted and sold sequentially. This argument is addressed in Section III(A) above and is no more successful at creating an issue of fact here than it was in the case of GoIP. Defendants also note that MMP negotiated settlement of the Secured Financial debt and never advised Weiss against selling the note rather than converting it. Plaintiffs respond that Weiss's reliance on MMP is insufficient to sustain a business judgment defense. In support, plaintiffs mistakenly rely on Hanson Tr. PLC v. ML SCM Acquisition, Inc., 781 F.2d 264, 274 (2d Cir. 1986), which applied a reasonable diligence standard to the question of whether directors breached their fiduciary duties by failing to scrutinize certain information they received. This distracts from the standard applied to receivers such as Weiss and the evidence does not raise a genuine issue of material fact with regard to Weiss's intent in her dealings with Secured Financial.
Count XVII alleges that Weiss breached her fiduciary duties by not converting debt held by the Funds and owed by Mike the Pike, Inc. ("MTP") into stock and selling the resulting stock. Like Counts VI and VIII, plaintiffs similarly assert that Weiss's perceived risk of the estate's being unable to cover should a conversion notice be dishonored was baseless, and that she should have converted and sold MTP stock in a gradual fashion, as Goulding advised. Plaintiffs, however, do not allege that Weiss held MTP stock that could be used to cover, but instead assert that if a notice was dishonored, Weiss could have threatened suit to put the company on notice that if it did not deliver promptly, the mix of public information would soon indicate that the company had defaulted.
In addition to the risk Weiss perceived, defendants also assert that Weiss decided not to collect the MTP debt given that, among other reasons, Weiss offered the debt to various purchasers (including Goulding) and none was willing to buy it. Plaintiffs counter that Weiss should have taken some steps to obtain the MTP shares, citing to In re San Juan Hotel Corp., in which the court found a trustee had willfully violated his fiduciary duties
Of the remaining claims, IV, IX, XV, and XIX, the parties agree that summary judgment should be entered on count XV, and the court finds that summary judgment is appropriate for the remaining three claims; as discussed below, there are no genuine issues of material fact that require trial.
Count IV alleges that Weiss breached her fiduciary duties by paying Crowe fees in excess of a $150,000 cap ordered by the court in the SEC case. Defendants admit that Weiss paid Crowe in excess of the initial fee cap but assert that she did so because she believed she had court approval. In support, defendants point to (1) Crowe's fee estimate indicating that it would need an additional $168,631.50 in fees, which was filed at the court's request on January 29, 2010, after $126,857.73 had already been incurred (Dkt. 183, Def. Ex. 99); (2) a court hearing held in the SEC case on February 24, 2010, in which Crowe's additional work and costs were discussed, and the court concluded the hearing by saying that "it appears that we are talking about maybe continuing the case for about 60 days, by which time we should be able to get some additional input from the Crowe work, and hopefully continue to make some progress towards seeing the end of the rainbow here someplace" (Dkt. 183, Def. Ex. 81 at 16:19-23); and (3) Weiss's periodic reports filed with the court, in which she disclosed that Crowe's work was ongoing and provided the amounts she was paying Crowe. (See Pl. Resp. ¶ 236.)
Plaintiffs admit that the court's comments at the February 24, 2010 hearing indicate a willingness to allow Crowe some additional fees but contend that these comments do not reflect a decision to allow payment of the entire $168,631.50 without further review and approval by the court. They argue that Crowe's fee estimate expanded Crowe's duties such that the firm effectively assumed the role of the SEC's accounting experts in its case against Goulding. Plaintiffs also contend that, pursuant to the SEC's Billing Instructions for Receiver's in Civil Actions, Weiss should have submitted separate fee applications for court approval for Crowe's fees, apart from her periodic reports, and that she allegedly knew these rules applied to Crowe's fees because she requested a second copy of the rules in October 2009. Finally, plaintiffs argue that because Barnes had a close relationship with Crowe, having employed the firm as its own accountant, Weiss's decision to pay Crowe the additional fees without court
Although there is some ambiguity as to whether the court intended to approve the entire $168,631.50, no reasonable jury could find that Weiss intentionally breached her fiduciary duties by paying Crowe the additional fees. Weiss believed the court had approved Crowe's additional fees and proceeded accordingly. Plaintiffs' bald assertion that Weiss paid Crowe to assume the role of the SEC's experts in an attempt to curry favor with the SEC has no support in the record. To the contrary, the SEC hired its own accountant who prepared expert reports. Nor does the evidence support plaintiffs' contention that Weiss expanded Crowe's duties to assist the SEC with its case against Goulding. As Crowe explained in its fee estimate, "Because of the nature and extent of co-mingling of investors' funds in Nutmeg's bank account and the transactions involving Nutmeg ... the scope of work cannot be limited to analyses of the Funds' activities." (Dkt. 183, Def. Ex. 99 at 1.) Plaintiffs' argument related to the SEC's billing guidelines is another red herring. Even if Weiss knew about the guidelines and failed to follow them, there is no evidence that she did so intending to harm the estate. Indeed, Weiss disclosed to the court the amounts she was paying Crowe in her periodic reports. Finally, the court appointed Crowe before Weiss became receiver and ordered her to continue using Crowe. There is no evidence that Barnes's prior relationship with Crowe has any bearing on the present case.
Count IX alleges that Weiss breached her fiduciary duties by terminating a transaction that would have enabled INverso Corp. ("INverso"), a corporate shell owned by several of the Funds, to be used as a vehicle for an initial public offering ("IPO") and thereby lost millions of dollars. In the SEC's motion to appoint a receiver, the SEC flagged the INverso transaction and asserted that a receiver was "needed to review the transaction and determine whether it actually benefits Nutmeg" and the Funds. (Dkt. 183, Def. Ex. 22 ¶ 5.C.) The court made clear that it was Weiss's responsibility, not Goulding's, to determine whether the transaction should move forward. (Dkt. 183, Def. Ex. 85 at 4:18-25.) The SEC's motion also stated that "Goulding would turn over INverso to new management." (Dkt. 183, Def. Ex. 22 ¶ 5.C.) Goulding resigned on September 9, 2009 and new directors were appointed; Weiss did not oppose Goulding's resignation.
At some point, Weiss evaluated the transaction by reviewing the business plan for the new company that would be formed through the INverso transaction. Weiss believed the plan had no chance of success and suspected that the new company was trying to implement a pump-and-dump scheme. Despite this conclusion, the SEC subsequently determined that Goulding had assisted third parties in seizing control of INverso in order to sell INverso shares over Weiss's objections. The SEC filed a motion for rule to show cause against Goulding for violating the court's preliminary injunction order, which prohibited Goulding from transferring or otherwise disposing of Nutmeg's and the Funds' assets. (Dkt. 183, Def. Ex. 84.)
Plaintiffs now claim that because Weiss was anxious to assist the SEC with its case against Goulding and because of a desire to harm Goulding, Weiss and her lawyer sent Goulding a letter (cited by the SEC in its motion for rule to show cause) which falsely asserted that Weiss opposed Goulding's resignation and appointment of new directors. This unsupported argument is
(Dkt. 183, Def. Ex. 86) (emphasis added.) Plaintiffs conflate Goulding's resignation and appointment of new directors with Weiss's opposition to the transaction. The letter does not assert that Weiss opposed Goulding's resignation or appointment of new directors; rather, it points to Weiss's opposition to the INverso transaction as structured. There is no evidence that Weiss initially approved the transaction and later opposed it to help the SEC or harm Goulding.
Plaintiffs' other arguments are similarly unavailing. They seem to argue, among other things, that Weiss would have protested the transfer of control to new directors if she truly opposed the transaction, that she could have done additional research outside the business plan or recommended changes to the business plan, and that she misread the business plan. What Weiss would have or could have done might support a negligence theory but does not demonstrate that the path she chose was meant to intentionally harm the estate. Further, even if Weiss misread the business plan (which is not clear from the record) this too might support a negligence theory but does not create a fact issue with regard to Weiss's intent.
Count XIX alleges that Weiss and Barnes breached their fiduciary duties by filing a rule to show cause motion against Goulding to compel him to produce certain documents that she had in her possession. Defendants assert that at the time Weiss filed the motion for rule to show cause against Goulding (April 9, 2010), Weiss did not believe that she or Barnes had the relevant documents; there were allegedly tens of thousands of disarrayed documents collected from Nutmeg. Defendants also point to the court's February 6, 2013 order in the SEC action, noting that when denying Goulding's motion for sanctions against Weiss (which he brought in response to Weiss's show cause motion), the court found "no evidence of an intentional fraud, concealment or conspiracy here," despite the fact that Weiss had possession of the documents she sought from Goulding. (Dkt. 183, Def. Ex. 119.) Plaintiffs counter that Goulding told Weiss the documents were in her possession and later discovered the documents himself while reviewing documents at Barnes's office. They also contend that Weiss made no effort to locate the documents before filing the motion and that she filed the motion simply to prove she could help the SEC. Although
For the foregoing reasons, defendants' motion for summary judgment (dkt. 180) is granted, and the case is dismissed in its entirety.
