Estate of Jackson v. General Electric Capital Corp. (In re Fundamental Long Term Care, Inc.)
507 B.R. 359
| Bankr. M.D. Fla. | 2014Background
- Three Probate Estates sought to collect over $1 billion judgments against THI and THMI from THI’s former parent and other related entities under theories including alter-ego, veil-piercing, and fraudulent transfers.
- Plaintiffs allege a bust-out scheme orchestrated by the GTCR Group, including Jannotta, to loot THI/THMI and sell assets to the Fundamental Entities for far less than value, while transferring liabilities to a sham Debtor.
- THI was restructured in 2008 under GTCR control, creating THI Holdings, THI-Baltimore, and THMI-Baltimore to facilitate asset transfers and management arrangements.
- Linked transactions in 2006 allegedly transferred THMI’s assets to FLTCH for under-market consideration while THMI’s liabilities were funneled to a shell Debtor, after which THI-Baltimore and related entities continued operations under new names.
- Receivership filings and state court actions followed, with appearances in multiple jurisdictions and attempts to shield the transactions from bankruptcy scrutiny.
- The involuntary bankruptcy case was filed after multimillion and multihundred-million judgments were entered against THI and THMI, prompting procedural consolidation of related claims in this Court.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether alter-ego/veil-piercing claims survive against the GTCR Group and others | Plaintiffs allege domination/control and improper use of the corporate form to shield assets. | GTCR and THIH contend no plausibly pled domination or improper use; claims collapse to a standard parent-subsidiary relationship. | Counts IX–XIII dismissed against all but GTCR on domination; elements not plausibly pled for GTCR/THIH, though some elements remain for aiding/abetting later counts. |
| Breach of fiduciary duty by GTCR/Jannotta | Jannotta breached duties as THI/THMI director; GTCR/THIH aided breach. | Insufficient specificity, business judgment defense, and lack of direct control by GTCR/THIH. | Breach against Jannotta plausibly stated; deny against GTCR/THIH on sole theory of breach but allow aiding/abetting claims to proceed. |
| Aiding and abetting breach of fiduciary duty | Defendants knowingly participated in Jannotta’s breach to advance the bust-out scheme. | Many defendants lacked knowledge or sufficient participation; allegations are vague. | Sufficient plausibility to state aiding/abetting claims against GTCR, THIH, THI-Baltimore, FLTCH, Forman, and Grunstein; others dismissed. |
| Fraudulent transfer claims against THI-Baltimore/FLTCH and related entities | Linked transfers were made to defeat creditors and were for less than fair value with concealment. | Insufficient detail on value, insolvency timing, and consideration for some transfers; some claims time-barred. | Actual/constructive fraudulent transfer pleadings upheld against THI-Baltimore and FLTCH; Forman/Grunstein liable for transfers to FLTCH; GECC/Ventas largely dismissed for lack of value/due timing; Schron limited. |
| Successor liability and conspiracy to commit fraudulent transfer | FLTCH/FAS/THI-Baltimore are successors carrying on THMI’s business; conspiracy exists for recipients of transfers. | No proper continuity; individuals’ liability as successors uncertain; conspiracy claims against non-transferors improper. | Successor liability sustained for THI-Baltimore, FLTCH, FAS; conspiracy claims held against THI-Baltimore, FLTCH, FAS, Forman, Grunstein; GTCR/other entities’ conspiracy claims dismissed. |
Key Cases Cited
- Asarco, LLC v. Americas Mining Corp., 396 B.R. 278 (S.D. Tex. 2008) (used to discuss fiduciary relations and duty scope in corporate parent-subsidiary context)
- Hillsborough Holdings Corp., 166 B.R. 461 (Bankr.M.D. Fla. 1994) (veil-piercing standards in Florida; functional equivalence with Delaware)
- In re Allou Distrib., Inc., 379 B.R. 5 (Bankr.E.D.N.Y. 2007) (debtor's corporate form and piercing doctrines; employment of corporate form)
- Fortner v. Thomas, 983 F.2d 1024 (11th Cir. 1993) (fiduciary duty and balancing complications in piercing theory)
- Official Comm. of Unsecured Creditors v. R.F. Lafferty & Co., 267 F.3d 340 (3d Cir. 2001) (standing and ancillary claims in bankruptcy context)
- Ashcroft v. Iqbal, 556 U.S. 662 (U.S. 2009) (pleading standard: plausibility required)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (U.S. 2007) (pleading standard: plausibility required)
- In re DESA Holdings Corp., 353 B.R. 419 (Bankr. D. Del. 2006) (fraudulent transfer and related concepts in bankruptcy)