Emerson Electric Co. v. Holmes
2:16-cv-01390
E.D.N.YJun 14, 2019Background
- Emerson obtained two unsatisfied judgments against Asset Management Associates of New York, Inc. (AMA) totaling roughly $3.9 million (entered Jan. 9, 2014 and Aug. 13, 2015) after arbitration and a bench trial relating to 2006 transactions.
- AMA, a New York corporation, is 100% owned by Charles S. Holmes; AMA later filed bankruptcy (Feb. 2014) and ceased operations.
- Emerson alleges AMA made insider conveyances (cash and transfer of CSI stock to Holmes) from 2008–2011 to Holmes without fair consideration, depleting assets to frustrate collection.
- Emerson sued Holmes and AMA (March 2016) seeking post-judgment relief under N.Y. Debtor & Creditor Law (DCL) §§ 273-a and 276 and veil piercing; AMA defaulted; Holmes answered asserting affirmative defenses including equitable estoppel and unclean hands.
- Magistrate Judge Locke recommended: deny motion to strike Holmes’s affirmative defenses; grant summary judgment as to Holmes’s liability under DCL § 273‑a (but hold a trial on damages); deny summary judgment on DCL § 276 and veil piercing; deny default judgment against AMA; grant leave to amend to add DCL §§ 273 and 274 claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Motion to strike affirmative defenses (estoppel, unclean hands) | Holmes’s defenses are bare legal conclusions and insufficient under Twombly/Iqbal/GEOMC | Holmes argued affirmative defenses need not meet Twombly plausibility (relied on older cases) | Denied — defenses not stricken: factual/legal questions remain and plaintiff failed to show prejudice |
| DCL § 273‑a (fraudulent conveyance — lack of fair consideration) | AMA made transfers to Holmes without fair consideration; Holmes repaid insider loans/received CSI cheaply | Holmes contends transfers were legitimate (loans, fair payment for CSI) | Granted as to liability: no genuine dispute AMA made insider transfers lacking fair consideration; damages amount disputed — trial needed |
| DCL § 276 (actual fraudulent intent) | Multiple badges of fraud show intent to hinder/delay creditors | Holmes disputes badges and offers expert evidence refuting intent; statute‑of‑limitations/ discovery timing argued | Denied: material disputes of fact on Holmes’s intent preclude summary judgment |
| Piercing the corporate veil | Holmes dominated AMA and diverted assets to render it judgment‑proof | Holmes: AMA was a holding vehicle, transactions were legitimate, experts dispute domination and misuse | Denied: factual disputes on domination and nexus to a wrong prevent veil piercing on summary judgment |
| Default judgment vs. AMA on DCL §§ 273‑a/276 | AMA’s default admits allegations of fraudulent transfers from AMA to Holmes | AMA default does not relieve plaintiff of pleading that transferees/beneficiaries received and benefited; transferor-only defendant insufficient | Denied: AMA is not a proper defendant for fraudulent transfer claims that target transferees/beneficiaries |
Key Cases Cited
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (plausibility standard for pleadings)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (applying plausibility standard)
- GEOMC Co., Ltd. v. Calmare Therapeutics Inc., 918 F.3d 92 (2d Cir. 2019) (Twombly plausibility applies to affirmative defenses)
- Brunswick Corp. v. Waxman, 599 F.2d 34 (2d Cir. 1979) (equitable considerations can bar veil‑piercing when party knowingly dealt with a corporation to avoid personal liability)
- Stochastic Decisions, Inc. v. DiDomenico, 995 F.2d 1158 (2d Cir. 1993) (fraudulent conveyance claims target transferees/beneficiaries, not mere transferor)
- Wm. Passalacqua Builders, Inc. v. Resnick Developers S., Inc., 933 F.2d 131 (2d Cir. 1991) (factors for alter‑ego/veil piercing analysis)