552 B.R. 165
S.D. Tex.2016Background
- Brown Medical Center, Inc. (BMC) made payments to attorneys and court appointees in connection with Michael and Rachel Brown’s divorce; plaintiff Elizabeth Guffy is the Plan Agent for BMC’s confirmed Chapter 11 liquidation asserting these were fraudulent transfers.
- Plaintiff alleges transfers occurred while BMC was insolvent, were for Michael Brown’s personal benefit, and provided less than reasonably equivalent value to BMC.
- Plaintiff pleads both constructive fraud (under 11 U.S.C. § 548(a)(1)(B) and Texas Uniform Fraudulent Transfer Act (TUFTA) §§ 24.005(a)(2), 24.006(a)) and actual fraud (under § 548(a)(1)(A) and TUFTA § 24.005(a)(1)).
- Defendants moved to dismiss: two law firms (Hoffman/Moffett), Marshall D. Brown firms (MDBrown), Canales (court-appointed Amicus), and Indelicate (court-appointed Master in Chancery).
- Court found constructive-fraud claims sufficiently pleaded and denied dismissal as to those claims; actual-fraud claims were dismissed for failure to satisfy Rule 9(b)’s particularity requirement.
- The court granted dismissal as to Canales and Indelicate based on statutory immunity for a Chapter 107 Amicus Attorney and derived judicial immunity for a Master in Chancery, respectively.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Are the constructive fraudulent-transfer claims adequately pleaded under § 548(a)(1)(B) and TUFTA §§ 24.005(a)(2)/24.006(a)? | BMC made transfers within the relevant lookback periods, received less than reasonably equivalent value, and was insolvent/was rendered insolvent. | Defendants argue BMC may have received some benefit and contest insolvency, but facts must be presumed true on a motion to dismiss. | Denied dismissal: constructive claims adequately alleged. |
| Are the actual fraudulent-transfer claims under § 548(a)(1)(A) and TUFTA § 24.005(a)(1) pleaded with the particularity required by Rule 9(b)? | Plaintiff asserts actual intent based on chronology and a pattern of transactions (badges of fraud). | Defendants argue badges beyond insolvency and inadequate consideration are not pleaded with particularity. | Granted dismissal: actual-fraud claims fail Rule 9(b). |
| Is Canales immune from suit for receiving court-ordered payments as Amicus Attorney? | Payments were made pursuant to state-court orders but plaintiff alleges they were improper. | Canales invokes Tex. Fam. Code § 107.009 immunity for actions taken as Amicus Attorney; no allegations of bad-faith/gross negligence. | Granted dismissal: statutory immunity applies; no pleaded exception. |
| Is Indelicate immune for awards/receipt of fees as court-appointed Master in Chancery? | Plaintiff alleges Indelicate rubber-stamped invoices without adequate review. | Indelicate asserts derived judicial immunity for functions delegated by the court and compliance with court orders. | Granted dismissal: derived judicial immunity protects acts performed in judicial role. |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (pleading standard: factual matter must state plausible claim)
- Harrington v. State Farm Fire & Cas. Co., 563 F.3d 141 (5th Cir.) (complaint allegations are presumed true on Rule 12(b)(6) review)
- In re Soza, 542 F.3d 1060 (5th Cir.) (lists badges of fraud for actual-intent avoidance under § 548)
- Davis v. West, 317 S.W.3d 301 (Tex. App.) (derived judicial/cloak-of-immunity covers acts performed in judicial capacity)