JOHN E. WAITES, Bankruptcy Judge.
This matter comes before the Court upon the Motion for Summary Judgment ("Motion") filed by the Chapter 7 Trustee, Robert F. Anderson ("Trustee"). Carroll A. Campbell ("Campbell") and John D. Cattano ("Cattano") filed a response to the Motion, and the Court held a hearing on the matter. Pursuant to Fed. R. Civ. P. 52, which is made applicable to this adversary proceeding by Fed. R. Bankr. P. 7052, the Court makes the following findings of fact and conclusions of law.
1. Campbell and Cattano allege that Christian Jensen ("Jensen") approached Cattano in late 2010 about the opportunity to purchase two companies dealing in natural stone, Triton Stone of Charlotte, Inc. ("TSCLT") and Triton Stone of Myrtle Beach, Inc. ("TSMB"), which Jensen indicated were highly profitable and sound businesses.
2. Campbell and Cattano further allege that in reliance on this financial information, they formed Congaree Triton Acquisitions, LLC ("Debtor") to purchase the assets of TSCLT and TSMB.
3. On December 31, 2010, an initial Operating Agreement was executed for Debtor. On January 4, 2011, Debtor was organized as a limited liability company under the laws of South Carolina. A Certificate of Existence was filed with the Secretary of State of South Carolina on March 4, 2011.
4. On March 1, 2011, Debtor entered into an Asset Purchase Agreement ("A.P.A.") with TSCLT and TSMB to purchase substantially all of the assets of those companies ("Purchase Transaction"). Campbell and Cattano, as individuals, were not parties to the A.P.A.; however, they did sign the A.P.A. in their individual capacities for the sole purpose of acknowledging their liability on certain guaranties, as further described below.
5. To complete the Purchase Transaction, Debtor paid a total of $2,975,000, which consisted of a cash payment of $729,800 and seven notes given to the owners of TSMB and TSCLT or their related entities. These purchase obligations were as follows:
Also as part of the Purchase Transaction, Debtor entered a distribution agreement with Triton Stone Group, LLC ("TSG"), in which Debtor obtained access to TSG's inventory sources and an exclusive distribution territory in exchange for Debtor paying TSG two percent of its gross sales ("Distribution Agreement"). As part of the agreement, Cattano guaranteed to TSG the payment of all sums due to TSG by Debtor, including any of Debtor's outstanding invoices for inventory. The guaranty under the Distribution Agreement as well as the seven guaranties entered to facilitate Debtor's purchase of TSCLT and TSMB's assets are collectively referred to as "Seller Financing Guaranties."
6. The A.P.A. also provided that, with limited exceptions, TSCLT and TSMB would be responsible for any of those companies' liabilities that existed on the closing date of the Purchase Transaction, which was March 11, 2011. Further, the A.P.A. included a disclaimer of representations by TSCLT and TSMB, which stated:
7. On March 9, 2011, Triton Stone Group LLC entered a buy-back agreement with Debtor, in which it agreed to purchase unsold stone slab bundles for 80% of their value ("Buy-Back Agreement"). Campbell and Cattano were not parties to the Buy-Back Agreement.
8. On March 11, 2011, Campbell and Cattano as Chief Executive Officer and Chief Financial Officer of Debtor respectively authorized Debtor to borrow $1.5 million from Greenfield Commercial Credit, L.L.C. As part of this transaction, Campbell and Cattano personally guaranteed the loan.
9. Campbell and Cattano allege that, shortly after the closing of the Purchase Transaction, they discovered that Kessler had issued $600,000 in checks on the TSMB and TSCLT's corporate accounts to vendors and suppliers for liabilities of TSMB and TSCLT days before the closing of the Purchase Transaction. Campbell and Cattano further allege that as result of the Purchase Transaction, TSMB and TSCLT's corporate accounts were closed and the $600,000 in checks were not honored, resulting in the vendors and suppliers making demands for payment on Debtor, Campbell and Cattano. According to the allegations, Kessler refused to make payment on these dishonored checks in violation of the A.P.A. and demanded that Debtor pay these pre-closing liabilities. Debtor eventually paid the liabilities from its funds to maintain good relations with Debtor's vendors and suppliers.
10. Campbell and Cattano also allege that they subsequently discovered that the financial information of TSCLT and TSMB provided to them while they negotiated the Purchase Transaction was fraudulent as the information failed to account for a large number of invoices and other expenses of the companies, which resulted in a significant overvaluation of TSCLT and TSMB.
11. Debtor, Campbell and Cattano, as co-plaintiffs, filed an action, with the assistance of counsel, in the Court of Common Pleas for Horry County on November 21, 2011 ("First State Court Action") against several defendants, including Triton Stone Group, LLC, Triton Stone Management, LLC, Triton Stone Southhaven, LLC, Kessler, Mathis, Gary Sena, Triton Stone Group New Orleans, LLC, Jensen, Jack Jensen, TSCLT, TSMB, FGSW, LLC, 9002 Dunes, LLC, Natural Stone Holdings, LLC, Federico Gildmeister, and Michella Williams (collectively "State Court Defendants").
12. On January 26, 2012, Debtor, through Cattano, filed a petition for relief under Chapter 11 of the Bankruptcy Code and continued to operate, for a time, as a debtor-in-possession.
13. Debtor filed schedules and statements on February 23, 2012, which were amended on March 13, 2012. Debtor's amended Schedule B lists the following under "Other contingent and unliquidated claims of every nature":
Attached to the amended Schedule B is a detailed list of all the alleged payments made by Debtor totaling approximately $1.8 million to vendors that it asserts were applied to TSMB and TSCLT's pre-closing liabilities.
14. On April 20, 2012, the First State Court Action was removed by Triton Stone Group, LLC to the United States District Court for the District of South Carolina.
15. After motion and a hearing and upon a finding of cause, Debtor's bankruptcy case was converted to Chapter 7 on June 29, 2012, and the Trustee was appointed.
16. On March 1, 2013, the First State Court Action was voluntarily dismissed without prejudice with the consent of, among others, the Trustee, Campbell and Cattano.
17. On March 7, 2014, Campbell and Cattano, individually, filed a complaint in the Court of Common Pleas for Richland County against the same State Court Defendants ("Second State Court Action"). The factual basis of the Second State Court Action includes the alleged misrepresentations of TSCLT and TSMB's financial information during the negotiations of the Purchase Transaction and the alleged issuance of $600,000 in checks by Kessler shortly before the closing of the A.P.A. The Second State Court Action was subsequently transferred to the Court of Common Pleas for Horry County.
18. Three days later, on March 10, 2014, the Trustee commenced an adversary proceeding in Debtor's bankruptcy case against several of the State Court Defendants ("Purchase Transaction Adversary"). The Purchase Transaction Adversary included several ex rel. claims brought as a result of Debtor's standing as the successor in interest to the assets of TSMB and TSCLT. These claims were based in part on TSMB and TSCLT's insolvency at the time of the Purchase Transaction and Kessler's issuance of $600,000 in checks to TSMB and TSCLT's vendors and suppliers shortly before the closing of the A.P.A.
19. On April 24, 2014, Campbell and Cattano filed an amended complaint in the Second State Court Action, which included the following claims: fraud, constructive fraud, fraudulent concealment, negligent misrepresentation, unfair trade practices, unjust enrichment, civil conspiracy, breach of fiduciary duty, indemnification, fraudulent inducement to create a limited liability company and malicious prosecution.
20. On July 9, 2014, the court in the Second State Court Action entered an Order Granting Defendants' Motions to Dismiss in Part and Denying in Part. In this order the court held that Campbell and Cattano raised certain colorable individual claims; however, the court dismissed their claims based on civil conspiracy, breach of fiduciary duty and fraudulent inducement to create a limited liability company because they failed to state a claim under South Carolina law.
21. On September 12, 2014, after notice and a hearing, including the consideration of the objection of Campbell and Cattano, the Court entered an Order Approving Settlement between the Trustee and Inga R. Ivey, Michella I. Williams and 9002 Dunes, LLC regarding certain claims raised in the Purchase Transaction Adversary ("9/12/14 Order"). The general terms of the settlement provided that Inga R. Ivey, Michella I. Williams and 9002 Dunes, LLC would pay $5,000 to the estate and subordinate their claims in Debtor's case, and the Trustee would release any claims Debtor may have possessed at the time of petition against Inga R. Ivey, Michella I. Williams and 9002 Dunes, LLC. No party appealed the 9/12/14 Order.
22. On June 8, 2015, after notice and a hearing, including the consideration of the objection of Campbell and Cattano, the Court entered an Order Approving Settlement between the Trustee and Triton Partners Management Group d/b/a Triton Stone Management Group of Charlotte, LLC, d/b/a Triton Stone Management, LLC d/b/a Triton Stone Group of Charlotte, LLC, Triton Stone Group, LLC, Triton Stone Southaven, and Kessler regarding certain claims raised in the Purchase Transaction Adversary ("6/8/15 Order"). The general terms of the settlement provided that these defendants in the Purchase Transaction Adversary would pay the estate $250,000 and waive or withdraw the proof of claims they may have against the Estate, and the Trustee would release any claims involving the Purchase Transaction that Debtor may have possessed at the time of petition against those defendants, their representatives and agents. According to the settlement, Randy Mathis, Christian Jensen, Jack Jensen and Gary Sena also received releases from liability No party appealed the 6/8/15 Order.
23. On July 15, 2015, the Trustee filed the present adversary proceeding seeking declaratory judgments and permanent injunctive relief against Campbell and Cattano to prevent continuation of the Second State Court Action. The Trustee alleges that Campbell and Cattano's Second State Court Action involves derivative claims, which are property of the estate under 11 U.S.C. § 541, were previously settled or released by the Trustee as a result of the Court's prior final orders and that the prosecution thereof is in violation of the automatic stay under 11 U.S.C. § 362(a)(3).
24. On September 4, 2015, Campbell and Cattano filed a motion to dismiss the present adversary proceeding as well as a request for the Court, in its discretion, to abstain from hearing the matter. After a hearing, the Court denied the motion to dismiss and determined that, at that time, the Court would not abstain from the present adversary. The Court also stayed the Second State Court Action on an interim basis to the extent provided under 11 U.S.C. § 362.
25. Thereafter, the parties conducted discovery in this adversary proceeding pursuant to the Court's scheduling order entered on March 1, 2016. The scheduling order provided that:
No party has filed a motion regarding the Court's authority to enter final orders or judgments.
26. On June 1, 2016, Campbell and Cattano filed a Motion to Compel Complete Discovery Responses and Table of Authorities, which alleged that the Trustee had not fully complied with their discovery requests. This Motion to Compel was subsequently withdrawn on June 28, 2016.
27. Also on June 1, 2016, the Trustee filed the Motion, requesting the Court grant summary judgment on all of his claims in the present adversary proceeding.
28. Campbell and Cattano filed a response to the Motion on June 14, 2016, alleging that the Trustee has not satisfied his burden because there are disputed material facts relevant to this action. Attached to the response were two affidavits executed by Campbell and Cattano, which attested, among other things, that: (1) Kessler, Mathis and Jensen proposed that Campbell and Cattano form Debtor during their negotiations; (2) Campbell and Cattano received false financial statements about TSMB and TSCLT during the negotiations of the Purchase Transaction; (3) Campbell and Cattano were uncomfortable with personally guaranteeing the liabilities of Debtor and would not proceed with the purchase of TSMB and TSCLT; (4) to reduce Campbell and Cattano's concerns and to induce them to proceed with the Purchase Transaction, certain of the State Court Defendants agreed to execute the Buy-Back Agreement with Debtor and to personally indemnify Campbell and Cattano for any losses they incurred as a result of their personal guaranties; and (5) certain of the State Court Defendants did not honor their agreements under the A.P.A., the buy-back agreement, and the indemnification agreements.
29. In their responses to the Trustee's interrogatories, which were included as an exhibit to the Trustee's Motion, Campbell and Cattano assert that their injuries in the Second State Court Action are their: (1) loss of investment, (2) lost opportunity costs and time, (3) losses as a result of their personal guaranties, and (4) damages to personal credit, reputation and other financial hardships.
30. During the course of the present adversary proceeding, it was indicated to the Court that the Trustee commenced this proceeding, in part, to fulfill his obligations under the Settlement Agreement approved by the 6/8/15 Order. Specifically, the settlement agreement provides that:
The Trustee alleges in the Motion that summary judgment is appropriate as to all his claims because: (1) the undisputed facts demonstrate that all of the claims asserted in the Second State Court Action are entirely derivative claims and property of the estate; (2) Campbell and Cattano are judicially estopped from denying the estate's ownership of the claims in the Second State Court Action; (3) the Trustee is entitled to a permanent injunction barring Campbell and Cattano from prosecuting the Second State Court Action; (4) Campbell and Cattano are precluded from relitigating claims the Trustee has already settled; and (5) Campbell and Cattano willfully violated the automatic stay through their prosecution of the Second State Court Action. Campbell and Cattano allege that there are disputed material facts that preclude the entry of summary judgment and that the Trustee has not satisfied his burden.
The Court by its final orders of September 12, 2014 and June 8, 2015 authorized the settlement of all asserted causes of action owned by Debtor and its estate against certain of the State Court Defendants. Therefore, the essential issue before Court is whether those derivative actions, which seek to redress a wrong to the Debtor-LLC, are distinguishable from the causes of action asserted by Campbell and Cattano in the Second State Court Action.
Rule 56 of the Federal Rules of Civil Procedure, as adopted by Fed. R. Bankr. P. 7056, provides that summary judgment is appropriate "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." A genuine dispute of material fact exists "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party."
Neither party addressed the Court's authority to enter final orders and judgments at the hearing on the Motion; however, since the Trustee seeks summary judgment, the Court finds it is appropriate to determine the Court's authority to enter final orders in this proceeding.
The Court entered a scheduling order on March 1, 2016 to expedite the disposition of this proceeding, including setting deadlines for completing discovery, filing motions, and filing joint pre-trial orders. A deadline of March 31, 2016 was provided in the scheduling order which required any party who challenged whether the present adversary proceeding is a core proceeding or otherwise subject to the entry of final orders or judgments by this Court to file a motion requesting the Court determine those issues. The scheduling order also stated that if the parties do not file a motion before that deadline, the party's failure would constitute consent to this Court entering all final orders and judgments in this proceeding. Neither the Trustee, Campbell, Cattano nor any other party filed a motion to challenge the Court's authority to enter final orders and judgments in this proceeding. Therefore, it appears that the parties knowingly and voluntarily consented by implication to the Court's entry of final orders and judgments in this matter.
The Trustee asserts that he is entitled to summary judgment because judicial estoppel bars Campbell and Cattano from denying the bankruptcy estate's ownership of the claims in the Second State Court Action. Specifically, the Trustee asserts that Campbell and Cattano, as officers of Debtor, were responsible for the accuracy of Debtor's schedules and that the Debtor's inclusion of certain contingent and unliquidated claims in its Schedule B which are identical to the claims in the Second State Court Action, judicially estops Campbell and Cattano from now asserting personal ownership over those claims.
The Fourth Circuit has outlined the three essential elements to establish judicial estoppel:
For the purposes of summary judgment, the Court cannot conclude, based upon the submissions, that Campbell and Cattano have taken inconsistent positions so as to trigger judicial estoppel. The claims listed in Schedule B appear to be the claims included in the pre-petition First State Court Action, which were brought by not only Debtor but also Campbell individually, and Cattano individually, as co-plaintiffs. Since the First State Court Action, Campbell and Cattano have taken the consistent position that they have individual claims separate from Debtor's corporate claims for the same causes of action arising from the same facts. Both individual and corporate claims may arise from the same facts.
The Trustee also asserts that he is entitled to summary judgment because there is no dispute of material fact that the claims in the Second State Court Action are derivative and therefore are property of Debtor's bankruptcy estate.
"As a general rule, the right to pursue a derivative action is part of the bankruptcy estate under 11 U.S.C. § 541."
Determining whether each claim is derivative or direct requires a review of the nature of and injuries associated with each claim under state law.
As an initial matter, the Court must determine the choice of law that applies to the claims in the Second State Court Action.
The Second State Court Action includes several claims based in tort law.
The Second State Court Action also includes an indemnification claim, which is based in contract law. In addition, any claim based on a breach by the obligee of a guaranty agreement is based in contract law. Unless otherwise agreed to by the parties, "[a] contract is controlled by the laws of the State in which it is made and is to be performed."
The Court has not found any South Carolina cases determining the choice of law principles for claims based on equitable indemnification, unfair trade practices and unjust enrichment. However, these claims are generally based in either contract or tort law.
Under South Carolina law, the determination of whether a plaintiff's claim is direct or derivative will depend on the nature of the plaintiff's injury as well as any fiduciary relationship owed to the plaintiff. "A shareholder's suit is derivative if the gravamen of his complaint is an injury to the corporation and not to the individual interest of the shareholder."
Initially, it should be noted that neither party has argued that Campbell and Cattano's claims in the Second State Court Action are based on the fiduciary relationship exception under South Carolina law. Nothing in the record indicates that the relationship between Campbell and Cattano and the State Court Defendants rose to the level of a fiduciary relationship.
In their responses to the Trustee's interrogatories, Campbell and Cattano defined their individual injuries as to these causes of action as: (1) loss of their personal investment in Debtor, (2) lost opportunity costs and time, (3) losses resulting from their personal guaranties, and (4) damages to their personal credit, reputation and other financial hardships. The Court will consider each of these injuries as they relate to the allegations in the Second State Court Action.
Generally, under South Carolina law, injuries resulting in the diminution of the value of a shareholder's stock are considered a derivative injury as the decline in the corporation's stock was a common injury suffered by all of the shareholders.
In the present matter, Campbell and Cattano allege that their loss of personal investment in Debtor was a separate and distinct injury. However, by investing, Campbell and Cattano, in exchange, received an ownership interest in Debtor. At the time they invested in Debtor, their ownership interest was valued at the amount they had invested. It was Debtor, using the funds invested, that carried out the Purchase Transaction according to the terms of the A.P.A.
Further, Campbell and Cattano allege that Kessler's issuance of $600,000 in checks to the vendors of TSMB and TSCLT for pre-closing liabilities contributed to the loss of their investment in Debtor. The record indicates that Debtor, and not Campbell and Cattano, made the payments to honor the $600,000 in checks issued by Kessler pre-closing.
Kessler's actions appear to breach TSMB and TSCLT's obligations under the A.P.A. which were owed to Debtor as purchaser.
Campbell and Cattano's injuries for their loss of investment are not distinct from the losses suffered by Debtor's other investors, owners and creditors. A recovery in full by the Debtor for the alleged harm would reinstate the value of Debtor, which would in turn make Campbell and Cattano's investment whole again. This injury for a loss of investment, as alleged herein, is derivative in nature.
To support their argument that their loss of investments are separate and distinct injuries. Campbell and Cattano have additionally relied on the Supreme Court of California's opinion in
To the extent that Campbell and Cattano are seeking to recover for their lost investment, this Court, in applying South Carolina law, is not inclined to adopt the reasoning of
In addition, the Supreme Court of South Carolina addressed facts similar to both those in
While
Campbell and Cattano's response to the Trustee's interrogatories also include as alleged injuries the lost opportunity costs and time resulting from the Purchase Transaction. However, when a corporation is harmed, a shareholder cannot bring a claim for lost opportunities or time because the failure of the corporation stems from the harm to the corporation and affects all of the corporation's owners equally.
Campbell and Cattano indicate that their alleged injuries in the State Court Action also result from personal guaranties they entered in connection with the Purchase Transaction and guaranties provided to vendors, suppliers or creditors in connection with the operations of Debtor after the purchase.
In general, it is recognized that claims based on guaranties of corporate debt are derivative in nature. In the well-recognized case of
Despite this general view, however, it has been recognized that the guarantors of a corporate debt may recover directly when their injuries are separate and distinct from the harm suffered by the corporation. As put by the Seventh Circuit in
According to the record, Campbell and Cattano entered nine guaranty agreements related to the Purchase Transaction—eight of which were given to various parties composed of the owners of TSMB and TSCLT, agents, insiders or related entities associated with TSMB and TSCLT's assets, the Seller Financing Guaranties, and one guaranty which was given to Greenfield Commercial Credit, an arms-length third-party lender, chosen by Campbell and Cattano (and unrelated to the sellers) to facilitate the purchase and Debtor's operations. They also assert injury as a result of a number of guaranties of other unspecified debts/loans of the Debtor associated with Debtor's subsequent operations.
Campbell and Cattano allege that they provided the guaranty to Greenfield Commercial Credit ("Greenfield") due to the misrepresentations of asset value by the State Court Defendants and that upon collection of that guaranty, they suffered a direct injury. However, the record demonstrates that the guaranty was required by Greenfield as part of its arms-length third-party loan to Debtor, which was negotiated by Campbell and Cattano as part of Debtor's purchase of the assets of TSMB and TSCLT. The guaranty was apparently a requirement of Greenfield and a fairly common one for major operational loans made to a closely-held company. There is no evidence that the State Court Defendants directed Debtor or Campbell and Cattano to Greenfield or suggested the requirement of a guaranty. Further, it appears that the trigger for Campbell and Cattano's liability under the guaranties was the loss suffered by a default by Debtor under the Greenfield loan. Upon payment, Campbell and Cattano would become contingent creditors. Under the well-recognized approach of
Campbell and Cattano's amended complaint may also be viewed to cover losses incurred due to the Seller Financing Guaranties they entered into directly with the State Court Defendants, as the sellers and suppliers under the Purchase Transaction, and other related entities to those parties. Under the analysis provided by
In this case, Campbell and Cattano claim the State Court Defendants made direct representations that induced them to enter the Seller Financing Guaranties. The common factor under those guaranties is that the alleged wrongful conduct or representations directly benefitted the State Court Defendants by making Campbell and Cattano personally liable under the Seller Financing Guaranties.
In the Second State Court Action, Campbell and Cattano have alleged that the State Court Defendants owed them contractual and equitable indemnifications for certain losses associated with their guaranties given to trade vendors. Further, in the affidavits provided in this proceeding, they also allege indemnifications regarding their guaranties provided on the Greenfield loan, guaranties of other Debtor obligations and any other attempts to hold them liable for TSCLT and TSMB's obligations.
To the extent that Campbell and Cattano's claim for indemnification seeks to enforce the contractual indemnification provision contained in the A.P.A., the claim would be derivative as those remedies were provided to Debtor as the purchaser under the A.P.A., and not to Campbell and Cattano individually.
No other written indemnification agreements have been produced; however, Campbell and Cattano also assert that they received oral promises from certain of the State Court Defendants to indemnify them from certain losses.
To the extent that a separate, personal and binding oral indemnification agreement with the State Court Defendants exists, Campbell and Cattano may have distinct contractual obligations owed personally to them, which were not owed to Debtor. Separate promises made to shareholders in their individual capacities may create direct causes of action.
In connection with losses of monies due to their investment in Debtor and guaranties associated with the Purchase Transaction and subsequent operations of Debtor, Campbell and Cattano assert a loss of personal credit, reputation and miscellaneous financial hardships. Whether such damages are allowable under state law and can be proven are best determined by the state court.
However, for the purposes of this Order, such injuries appear ancillary to and derived, if at all, from the associated monetary loss claimed and therefore follow the nature of those claims. Based upon the analysis stated herein, to the extent damages for loss of personal credit, reputation and other financial hardships are proximately related to claims associated with the Seller Financial Guaranties, equitable indemnification and oral indemnification agreements, they may be direct. All other claims for such injuries appear derivative.
The Trustee seeks summary judgment that all of the claims in the Second State Court Action are derivative claims and their prosecution should be barred. However, it appears that the amended complaint in the Second State Court Action, as clarified by the affidavits submitted in this proceeding, may state certain direct claims for harm that are separate and distinct to Campbell and Cattano.
Therefore, the Court finds it proper to grant a permanent injunction, which enjoins Campbell, Cattano and any other party from prosecuting claims in the State Court or otherwise to the extent they pursue derivative injuries as determined in this Order. Such derivative injuries include their loss of investment, lost opportunity costs and time, and (with the exception of their indemnification cause of action and the losses stemming from the Seller Financing Guaranties) the losses resulting from the guaranties of debt incurred by the Debtor in its operations as well as any related claims for loss of personal credit, reputation and other financial hardships associated with those guaranties. Prosecution of the claims in the Second State Court Action seeking recovery for these injuries will be a violation of the automatic stay under 11 U.S.C. § 362, this Court's prior orders and this Order. However, to the extent they can demonstrate that they have direct injuries, they may recover for injuries proximately related to the Seller Financing Guaranties, the alleged oral promises to indemnify as well as any claim for equitable indemnification.
As a consequence of the Second State Court Action, the state court is familiar with the facts and issues presented and has before it all of the required parties needed to make a full factual inquiry into the remaining matters.
While this Court temporarily denied Campbell and Cattano's abstention request, this determination was based in part on the parties' representation that they believed this matter could be fully concluded in an expeditious fashion at the summary judgment stage. However, making a further determination about the nature of the remaining claims would likely require testimony and evidence from all parties as well as the State Court Defendants who are not parties to this proceeding. Upon the issuance of this Order, the most efficient resolution of the remaining issues appears to be with the state court.
Therefore, for these reasons, in the interest of judicial economy and in comity with state court, the Court finds that the state court is now the appropriate and most efficient forum to determine if the injuries proximately related to the Seller Financing Guaranties, the alleged oral promises of indemnification and the alleged equitable indemnification claim are direct and if so, the resulting liability. In determining the nature of those claims and liabilities therein, the state court shall not interfere with this Court's prior orders or permit the prosecution of derivative injuries as indicated in this Order. Campbell, Cattano and any other party are hereby enjoined from proceeding to prosecute or sustain the derivative claims and injuries described herein.
The present adversary proceeding is hereby concluded and shall be closed, and the interim stay of the Second State Court Action that was entered by the oral ruling on February 26, 2016 and supplemented by further order on March 16, 2016 is hereby lifted in strict accordance with the terms and requirements of this Order.
Also the State Court dismissed Campbell and Cattano's claims for Civil Conspiracy, Breach of Fiduciary Duty and Fraudulent Inducement to Form a Limited Liability Company because these claims failed to state a claim for which relief could be granted under South Carolina law pursuant to S.C. R. Civ. P. 12(b)(6). Therefore, this Court will not consider them in this matter.
