Bertram v. WFI STADIUM, INC.
2012 D.C. App. LEXIS 153
D.C.2012Background
- Bertram was CEO and majority owner of Distributive Networks, Inc., which owed a Maryland judgment to the Stadium for Redskins season tickets and related services.
- The Stadium obtained a Maryland judgment against Distributive and later learned Distributive had conveyed its property to ArX Mobile, Inc. (ArX).
- In July 2010, Distributive and Bertram-controlled entities entered an Asset Transfer and Collateral Acceptance Agreement, transferring substantial assets to ArX in satisfaction of the debt and to release Bertram from personal liability as guarantor.
- The Stadium alleged Bertram personally benefited from the transfer and that the agreement was designed to hinder, delay, or defraud the Stadium.
- Bertram defaulted on the pleadings; a damages hearing occurred, culminating in a $1,883,230.70 judgment against Bertram.
- The Court of Appeals affirmed liability under the UFTA but remanded for a value determination of the surrendered collateral, potentially reducing the damages.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Amended Complaint states a UFTA claim | Stadium contends Distributive incurred an obligation with intent to hinder Stadium. | Bertram argues the pleadings fail to allege a valid fraudulent transfer/obligation under the UFTA. | Amended Complaint plausibly stated a UFTA claim. |
| Whether Bertram can be held liable under UFTA as the beneficiary of the transfer | Bertram benefited from the release of his guaranty liability and controlled the transfer. | Bertram argues lack of direct debtor status bars liability. | Yes; individuals who participate or benefit may be liable under UFTA; Bertram could be liable. |
| Whether the damages award rests on appropriate value of collateral | Damages equal the amount of stadium's claim up to value of transferred collateral. | Value of collateral not proven; damages possibly overstated. | Remand to determine collateral value; if value is lower than judgment, reduce damages accordingly. |
| Whether the complaint alleged an 'obligation' incurred with actual intent to hinder, delay, or defraud | Allegations show Distributive incurred an obligation via the Agreement with intent to hinder Stadium. | No need to plead 'obligation' beyond existing contract; intent absent or insufficient. | Allegations sufficiently alleged an incurrence of an obligation with fraudulent intent. |
Key Cases Cited
- Elmore v. Stevens, 824 A.2d 44 (D.C.2003) (default judgments require a facially valid claim)
- Hudson v. Ashley, 411 A.2d 963 (D.C.1980) (default judgment based on complaint must have basis for liability)
- City of New York v. Mickalis Pawn Shop, LLC, 645 F.3d 114 (2d Cir.2011) (facial plausibility standard for claims)
- In re Montgomery, 983 F.2d 1389 (6th Cir.1993) (fraudulent transfers and depletion of debtor's estate considerations)
- In re Crystal Med. Prods., Inc., 240 B.R. 290 (Bankr.N.D.Ill.1999) (focus on transfers and consequences under UFTA/BK framework)
- Voest-Alpine Trading USA Corp. v. Vantage Steel Corp., 919 F.2d 206 (3d Cir.1990) ( UFCA/UFTA context; personal control and provisions for frauds against creditors)
- Janvey v. Alguire, 647 F.3d 585 (5th Cir.2011) (illustrates considerations of fraudulent transfer and bad faith)