Estate of Jackson v. General Electric Capital Corp. (In re Fundamental Long Term Care, Inc.)
512 B.R. 690
Bankr. M.D. Fla.2014Background
- Plaintiffs (Chapter 7 Trustee and six Probate Estates) seek to collect > $1 billion in state-court judgments against Trans Health entities, alleging a 2006 "bust-out" scheme that stripped THI/THMI assets and preserved GTCR principals’ investments.
- Central events: March 28, 2006 linked transactions transferring THMI assets to FLTCH and creating a liability‑free entity; January 5, 2012 settlement assigning potential malpractice/defense rights to certain defendants for $700,000.
- Earlier pleadings: Court previously dismissed many claims without prejudice but sustained some claims (e.g., breach of fiduciary duty against Jannotta; aiding-and-abetting claims against several defendants; fraudulent-transfer claims against certain defendants).
- Plaintiffs’ Second Amended Complaint repleads several dismissed theories (alter ego, aiding-and-abetting, constructive fraud) and adds new claims (abuse of process, conspiracy to abuse process, negligence, post‑petition transfer avoidance).
- Defendants moved to dismiss; court dismisses nearly all new/repleaded claims with prejudice, but allows aiding-and-abetting claims against GECC and Ventas to proceed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Claims vs. Rubin Schron (alter ego, aiding/abetting, constructive fraud, abuse of process, negligence, post‑petition transfer) | Schron benefited or is bound by agents (Forman/Grunstein); received value (options/settlement); participated in January 5 transfer | Schron had no individual acts tied to transfers; agents acted for themselves; no plausible benefit or causal harm; litigation privilege bars process claims | All claims against Schron dismissed with prejudice (only prior aiding/abetting against GECC/Ventas survive) |
| Alter ego liability for Debtor (FLTCH, Forman, Grunstein) | FLTCH/ principals dominated the Debtor and used it as a sham to hide transfers — so alter ego should apply | Even if domination exists, Plaintiffs’ losses were caused by fraudulent transfers, not the corporate form; no causal link to alter ego remedy | Alter ego claim dismissed with prejudice — domination pleaded but no proximate harm from corporate-form misuse |
| Aiding-and-abetting breach of fiduciary duty (GECC and Ventas) | GECC and Ventas knowingly facilitated and had actual knowledge of March 2006 linked transactions that looted THMI to preserve GTCR’s interests | Prior pleading lacked specific knowledge allegations; their participation as secured lenders/forbearance counterparties is insufficient to show knowing participation | Plaintiffs cured pleading defect sufficiently to state plausible aiding-and-abetting claims against GECC and Ventas (survive dismissal) |
| New claims based on January 5 settlement (abuse of process, conspiracy, negligence, post‑petition transfer) | Settlement transferred defense/claims for inadequate consideration and defendants misused litigation process and assumed duties causing harm | January 5 acts are litigation‑related and protected by Florida’s litigation privilege; no plausible sham, improper purpose, or proximate damages; only FAS arguably had defense duty; any transfer was short-lived and avoided | Abuse of process and conspiracy dismissed with prejudice (litigation privilege and absence of improper purpose); negligence dismissed (no duty or plausible damages); post‑petition transfer claim dismissed (no cognizable damages) |
Key Cases Cited
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (plausibility standard for pleadings)
- Ashcroft v. Iqbal, 556 U.S. 662 (application of plausibility standard and pleading requirements)
- Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308 (standard for assessing pleadings and inferences)
- Crumpton v. Stephens (In re Northlake Foods, Inc.), 715 F.3d 1251 (reasonably equivalent value analysis in fraudulent-transfer context)
- Advanced Telecomm'n Network, Inc. v. Allen (In re Advanced Telecomm'n Network, Inc.), 490 F.3d 1325 (fraudulent-transfer/valuation principles and reasonably equivalent value concept)
- Professional Real Estate Investors, Inc. v. Columbia Pictures Indus., 508 U.S. 49 (sham litigation standard referenced re: litigation privilege)
- Levin, Middlebrooks, Mabie, Thomas, Mayes & Mitchell, P.A. v. U.S. Fire Ins. Co., 639 So.2d 606 (Florida litigation privilege applies to acts related to judicial proceedings)