Gatx Corp. v. Addington
2012 WL 1621363
E.D. Ky.2012Background
- GATX sued Stephen and Robert Addington in their individual capacities for allegedly participating in fraudulent conveyances tied to Larry Addington’s transfer of assets to the Larry Addington Irrevocable Trust for Maxwell Addington.
- The 2009 GATX case resulted in an Agreed Judgment against Larry for $2.9 million; GATX alleged Larry moved assets to the Irrevocable Trust to hinder creditors like GATX.
- Stephen and Robert served as Co-Trustees of the Irrevocable Trust; the trust received Larry’s real estate conveyed via quit-claim deeds and other transfers.
- GATX alleged a note file reflecting Larry’s motives, but the court found Stephen did not draft the note; the note cited health and family planning rather than creditor concerns.
- Larry transferred $1,000,000 to the Irrevocable Trust in January 2009; later transfers occurred, with vehicles acquired by the Irrevocable Trust, allegedly from trust funds or Larry’s assets.
- Larry filed for Chapter 11 bankruptcy (converted later to Chapter 7); the court stayed claims against Larry, and subsequently stayed against Stephen and Robert in their co-trustee capacities.
- The court granted Stephen and Robert’s Rule 12(b)(6) motion to dismiss their individual-capacity claims and denied GATX’s motion to amend; leave to amend was denied as futile.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Direct liability of non-transferees under KRS 378.010/378.020 | GATX contends Stephen and Robert aided/abetted or were directly liable for fraudulent transfers. | Stephen and Robert, as non-transferees, are not liable under the statutes for direct liability. | Non-transferees cannot be directly liable. |
| Aiding/abetting a fraudulent conveyance by non-transferees | GATX asserts aiding-and-abetting liability against Stephen and Robert. | Kentucky and other jurisdictions do not recognize aiding/abetting claims against non-transferees for fraudulent conveyances. | Aiding/abetting a fraudulent conveyance by non-transferees is not viable. |
| GATX’s proposed amendments asserting fraud against Stephen and Robert | GATX seeks to amend to include fraud, conspiracy, and negligence-per-se theories. | Amendments would be futile and fail to state viable claims under Kentucky law. | Proposed amendments would be futile; amendment denied. |
| Conspiracy to effect a fraudulent conveyance | GATX contends Stephen and Robert conspired with Larry to effect a fraudulent conveyance. | Non-transferees cannot be liable for conspiracy to commit fraud under fraudulent-conveyance laws. | Conspiracy to effect a fraudulent conveyance against non-transferees is not viable. |
| Negligence per se based on fraudulent conveyance statutes | GATX seeks negligence-per-se liability against Stephen and Robert for violating KRS 378.010/378.020. | Non-transferees cannot violate those statutes; no private right of action for negligence per se exists here. | Negligence per se claim cannot be based on these statutes; denied. |
Key Cases Cited
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (U.S. 2007) (pleading must show plausible entitlement to relief)
- Ashcroft v. Iqbal, 556 U.S. 662 (U.S. 2009) (concrete plausibility standard for pleadings)
- Paradigm BioDevices, Inc. v. Viscogliosi Bros., 842 F.Supp.2d 661 (S.D.N.Y. 2012) (fraudulent conveyance remedies and limits on claims)
- Mack v. Newton, 737 F.2d 1343 (5th Cir. 1984) (fraudulent conveyance liability limited to transferees/recipients)
- Porco, 75 N.Y.2d 840 (N.Y. 1990) (no private action for aiding/abetting non-transferees under NY law)
- Freeman v. First Union Nat’l Bank, 865 So.2d 1272 (Fla. 2004) (no aiding/abetting liability against non-transferees for UFTA)
- Efessiou v. Efessiou, 1996 WL 1065637 (Va. Cir. Ct. 1996) (principles on conspiracy to effect fraudulent conveyance and standing)
- S. Prawer & Co. v. FDIC, 829 F.Supp. 453 (D. Me. 1993) (fraudulent conveyance as underlying contract/indemnity context)
- In re Minh Vu Hoang, 2012 WL 195316 (Bankr. D. Md. 2012) (nontransferee liability for conspiracy to commit fraudulent conveyance generally not recognized)
- Corrosioneering, Inc. v. Thyssen Environmental Systems, Inc., 807 F.2d 1279 (6th Cir. 1986) (Rule 54(b) analysis guiding final-judgment certification; relatedness of claims)