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Babin v. Caddo East Estates I, Ltd.

United States District Court, E.D. Louisiana

October 28, 2014

WILBUR J.

ORDER AND REASONS

SUSIE MORGAN, District Judge.

Before the Court is a motion to dismiss Plaintiff's Texas state law claim for aiding and abetting Debtor's officers' and directors' breach of fiduciary duty in Fifth Amended Compliant[1] and to dismiss Schuler as a Defendant pursuant to Fed.R.Civ.P. 12(b)(6) filed by Defendants Caddo East Estates I, Ltd. ("Caddo") and George Schuler ("Schuler").[2] The Court has reviewed the briefs, the record, and the applicable law and now issues this Order and Reasons.

BACKGROUND

Wilbur Babin, Jr. is the Trustee for the bankruptcy estate of Phoenix Land Associates, Inc. ("Debtor"), which has as its principals C. Paul Alonzo, Ronald L. Blackburn, and Carolyn Alonzo ("the Principals"). Debtor filed a voluntary petition for bankruptcy under Chapter 11 on June 10, 2009, which was converted into a Chapter 7 liquidation proceeding on July 31, 2009. The Trustee was appointed on July 31, 2009 and confirmed on August 31, 2009.

On January 19, 2010, the Trustee filed the instant suit, suing Defendants other than Schuler for avoidance of fraudulent transfers on a theory of constructive fraud. On August 13, 2012, after being granted leave, he filed a Second Amended Complaint, which: (1) added Schuler as an additional Defendant, accusing him of aiding and abetting the Principals of the Debtor in breaching their fiduciary duties; (2) added a cause of action against Defendants for recovery of fraudulent transfers based on a theory of actual fraud under 11 U.S.C. ยง 548(a)(1)(A); and (3) added a cause of action against Defendants for a declaratory judgment that the transfer of Debtor's real property is a nullity under Louisiana law.[3]

Schuler moved to dismiss the Second Amended Complaint on various grounds.[4] The Court issued the First Schuler Order denying the motion to dismiss concluding that (1) the Bankruptcy Code does not preempt a claim for aiding and abetting breach of a fiduciary duty, and (2) Louisiana law applies to the Trustee's claim for aiding and abetting breach of fiduciary duty, [5]and Louisiana might permit a civil conspiracy claim. The Court granted Plaintiff leave to amend "to plead a cause of action for conspiracy under Louisiana law."[6]

Plaintiff then filed Third and Fourth Amended Complaints.[7] In the Fourth Amended Complaint, Plaintiff alleged that Defendants Schuler and Caddo knowingly participated and assisted in the Principals' breaches of the fiduciary duties they owed to the Debtor and that the Debtor was proximately damaged by Schuler and Caddo aiding and abetting the breaches.[8] Plaintiff also alleged that Caddo and Schuler conspired with each other and with the officers and directors of Phoenix to commit fraud.[9] Caddo and Schuler filed a second motion to dismiss the new conspiracy claim in the Fourth Amended Complaint and to dismiss Schuler as a defendant altogether.[10]

Plaintiff then filed a motion to reconsider asking that the Court review its rulings in the First Schuler Order "relative only to the following issues: (1) Whether Texas law, and not Louisiana law, governs the Trustee's aiding and abetting claim pursuant to the standards set forth in La. C.C. Art. 3543, or alternatively Art. 3542; and, if not (2) Whether the Trustee's civil conspiracy claims are prescribed or are otherwise not viable."[11] In the First Schuler Order, the Court held that Louisiana's choice-of-law rules applied and that Louisiana Civil Code article 3542 supplied the analysis to be used when deciding which state's law applied to the Plaintiff's claim for aiding and abetting a breach of fiduciary duty.[12] The Court found that, under the factors set out in article 3542, Louisiana law applied. In the motion to reconsider, the Plaintiff argued that instead article 3543 should be used, and under that article, Texas law applies to this claim. The Court reconsidered its ruling in the First Schuler Order and held that Texas law governs the Trustee's claim for aiding and abetting breach of fiduciary duty.[13]

Because the Court reconsidered its prior ruling and held that Texas law applies to Plaintiff's claims for aiding and abetting breach of fiduciary duty, the Court granted Plaintiff leave to file a Fifth Amended Complaint asserting a cause of action for breach of fiduciary duty only under Texas law. Schuler and Caddo's motion to dismiss was denied without prejudice, and they were given leave to file a motion to dismiss in response to Plaintiff's Fifth Amended Complaint. Plaintiff's Fifth Amended Complaint was filed on August 15, 2014 and asserts a Texas state law claim for aiding and abetting debtor's officers' and directors' breach of fiduciary duty.[14] Defendants Caddo and Schuler then filed this motion to dismiss Plaintiff's Texas state law claim for aiding and abetting in Fifth Amended Complaint and to dismiss Schuler as a Defendant pursuant to Fed.R.Civ.P. 12(b)(6).[15]

STANDARD OF LAW

Pursuant to Federal Rule of Civil Procedure 12(b)(6), a district court may dismiss a complaint, or any part of it, for failure to state a claim upon which relief may be granted if the plaintiff has not set forth factual allegations in support of his claim that would entitle him to relief.[16] As the Fifth Circuit explained in Gonzalez v. Kay:

"Factual allegations must be enough to raise a right to relief above the speculative level." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). The Supreme Court recently expounded upon the Twombly standard, explaining that "[t]o survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, ___ U.S. ___, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009) (quoting Twombly, 550 U.S. at 570, 127 S.Ct. 1955, 167 L.Ed.2d 929). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. It follows that "where the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged - but it has not show[n]' - that the pleader is entitled to relief. " Id. at 1950 (quoting Fed.R.Civ.P. 8(a)(2)).[17]

This Court cannot look beyond the factual allegations in the pleadings to determine whether relief should be granted.[18] In assessing the complaint, a court must accept all well-pleaded facts as true and liberally construe all factual allegations in the light most favorable to the plaintiff.[19] "Dismissal is appropriate when the complaint on its face show[s] a bar to relief.'"[20] "A statute-of-limitations defense may be raised in a motion to dismiss under Fed.R.Civ.P. 12(b)(6), but the defense is subject to the traditional rule that the motion cannot be ...


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