947 F.3d 925
6th Cir.2020Background
- CJV purchased two judgments against Earl B. Blasingame and Margaret G. Blasingame arising from guarantees and pursued collection beginning after the Blasingames’ 2009 Chapter 7 bankruptcy.
- The Blasingames used a network of interrelated trusts and closely held corporations (including BT, the Residence Trust, the BIT, Flozone Services, Fiberzone, BFI, and ADSI) to hold real estate, investments, and intellectual property; Mrs. Blasingame funded several trusts and transferred large tracts of land into trust for the children.
- CJV alleged the trusts and corporations were alter egos or the recipient of fraudulent transfers by the Blasingames and sought to reach those assets to satisfy the judgments.
- In district court, CJV’s reverse alter-ego/reverse-veil-piercing claims were dismissed, the court declined to certify the legal question to the Tennessee Supreme Court, one fraudulent-transfer claim (Flozone) was dismissed on summary judgment for lack of evidence, and CJV’s motion to amend to add a self-settled-trust theory was denied.
- On appeal, CJV challenged (1) dismissal of reverse-piercing claims, (2) denial of certification to the Tennessee Supreme Court, (3) summary judgment dismissing the Flozone fraudulent-transfer claim, and (4) denial of leave to amend to plead the trusts were self-settled. The Sixth Circuit affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Tennessee recognizes reverse alter-ego / reverse veil-piercing outside parent–subsidiary context | CJV: Tennessee should permit reverse piercing/alter-ego to reach trust and corporate assets the Blasingames used to conceal assets | Blasingame: Tennessee precedent limits reverse piercing to parent–subsidiary situations; trust/beneficiary context not covered | Court: Tennessee law does not recognize reverse piercing/alter-ego outside parent–subsidiary context; those claims dismissed |
| Whether the court should certify the reverse-piercing question to the Tennessee Supreme Court | CJV: Question is unsettled and determinative; certification appropriate | Blasingame: Existing Tennessee authority is reasonably clear; certification unnecessary | Court: Denied certification as district court did not abuse its discretion; weight of Tennessee authority makes doctrine not novel |
| Whether CJV proved a fraudulent transfer from the Blasingames to Flozone Services (the $225,000 loan allegation) | CJV: Alleged undisclosed $225,000 loan and other transfers showing fraudulent conveyance to Flozone | Blasingame: No admissible evidence of such transfers from debtors to Flozone despite full discovery | Court: Summary judgment for defendants—CJV failed to adduce evidence supporting the claim |
| Whether CJV should be allowed to amend complaint (after discovery and dispositive motion practice) to add a self-settled-trust theory | CJV: Delay excusable; factual allegations of self-settled trusts already pleaded and theory was purchased from the bankruptcy estate | Blasingame: Nearly five-year delay, discovery closed, trial imminent; amendment would cause prejudice | Court: Denied leave to amend—delay unexplained and prejudicial; denial not an abuse of discretion |
Key Cases Cited
- Majestic Bldg. Maint., Inc. v. Huntington Bancshares Inc., 864 F.3d 455 (6th Cir. 2017) (de novo review standard for dismissal under Rule 12(b)(6))
- Brumley v. United Parcel Serv., Inc., 909 F.3d 834 (6th Cir. 2018) (summary-judgment review principles and standards)
- West v. AT&T, 311 U.S. 223 (1940) (intermediate appellate state-court decisions are persuasive when ascertaining state law)
- Cont'l Bankers Life Ins. Co. v. Bank of Alamo, 578 S.W.2d 625 (Tenn. 1979) (recognition of reverse piercing in parent–subsidiary context)
- Rogers v. Louisville Land Co., 367 S.W.3d 196 (Tenn. 2012) (plaintiff bears burden to prove grounds for piercing the corporate veil)
- Cedric Kushner Promotions, Ltd. v. King, 533 U.S. 158 (2001) (corporation is a distinct legal entity)
- Americold Realty Tr. v. Conagra Foods, Inc., 136 S. Ct. 1012 (2016) (a trust is not a legal entity in the same sense as a corporation)
- United States v. Bestfoods, 524 U.S. 51 (1998) (corporate veil piercing appropriate where a corporation is used for wrongful purposes)