REASONS FOR DECISION
This is an action brought by Alan H. Goodman, the trustee of the Gulf Fleet Liquidating Trust (with respect to Mr. Goodman, the “Trustee” and with respect to the Gulf Fleet Liquidating Trust, the “Trust”) against H.I.G. Capital, LLC and other defendants. The Trustee’s claims arise out of H.I.G.’s leveraged buyout and subsequent management of Gulf Fleet Holdings, Inc. and its affiliates (“Gulf Fleet” or “Debtors”). H.I.G. and the other defendants filed a motion to dismiss the Trustee’s complaint under Rules 12(b)(6) and 12(e) of the Federal Rules of Civil Procedure. The court took the motions under advisement and, after considering the parties’ arguments, the Trustee’s complaint, and the relevant authorities, the court GRANTS the defendants’ motions to dismiss IN PART, and DENIES the motions IN PART as set forth herein.
BACKGROUND
Prior to bankruptcy, Gulf Fleet owned and operated a fleet of supply vessels used to support oil and gas exploration and production companies in the Gulf of Mexico and other locations. (Trustee’s Com-plainh-in-Intervention (“Complaint”) at ¶ 17). Gulf Fleet was formed in 1999 by Michael and Darlene Hillman. (Id). H.I.G. Capital, LLC is a private investment firm with its principal place of business in Miami, Florida. (Id at ¶ 9). H.I.G. Capital operates through various subsidiaries and affiliates, including defendants H.I.G. Gulf Fleet Acquisition, LLC, H.I.G. GP-II, H.I.G. Capital Partners IV, L.P., H.I.G. Advisors IV, L.L.C., Gulf Fleet Tiger Holdings, Inc., Gulf Fleet Tiger Acquisition, LLC, and Gulf Fleet Financing, LLC (collectively, the “H.I.G. Defendants”). (Complaint at ¶¶ 10-14, 20-22). In May 2007, the Hillmans and H.I.G. entered into a leveraged buyout transaction (the “LBO”). The Hillmans sold all of their ownership interest in Gulf Fleet to H.I.G. in exchange for $23.5 million in cash and a 35% equity interest in the new Gulf Fleet entity created as a result of the buyout. (Id at ¶ 19). As a result of the LBO, H.I.G. held a 65% controlling interest in Gulf Fleet. (Id). According to the Trustee, H.I.G. Gulf Fleet Acquisition, LLC, (“Gulf Fleet Acquisition”) was a “shell” Delaware LLC and “indirectly wholly-owned subsidiary of H.I.G. Capital” that was formed in connection with the LBO to hold the stock of Gulf Fleet Holdings. (Complaint ¶¶ 10-11). The Trustee alleges that H.I.G. Capital controlled Gulf Fleet through Gulf Fleet Acquisition and H.I.G. GP-II. (Complaint at ¶¶ 10-12). After the LBO, Gulf Fleet Holdings, Inc. had three direct subsidiaries: Gulf Fleet Offshore, LLC (“GFO”), Gulf Ocean Ma-
The LBO was funded by a loan underwritten by a syndicate of banks led by Comeriea Bank. This senior loan was secured by Gulf Fleet’s property and certain accounts receivable. The senior loan included a term loan of $42 million and a revolving credit commitment of $10 million. (Complaint at ¶ 20). The Trustee alleges that Gulf Fleet received the full $42 million term debt and drew approximately $4 million under the revolving credit commitment at the time the LBO was closed on May 1, 2007. The Trustee further alleges that Brightpoint Capital Partners Master Fund, L.P. (“Brightpoint”) extended Gulf Fleet an additional $6 million subordinated loan with a maturity date of May 1, 2012. According to the Trustee, the proceeds of these loans were used to pay Gulf Fleet’s pre-LBO debt and to fund the $23.5 million cash paid to the Hillmans. (Complaint at ¶ 23). The Trustee further alleges that, out of the loan proceeds, Gulf Fleet ultimately retained $500,000 cash.
The Trustee contends that, after the LBO, H.I.G. “dominated and controlled” Gulf Fleet. Specifically, H.I.G. employees — including defendants Jeff Zanarini, Jonathon Fox, and Anthony Tamer — were appointed to the board of directors of the various Gulf Fleet entities. (Complaint at ¶ 24). The Trustee contends that these H.I.G. employees prevented Michael Hill-man from attending board meetings and withheld information from Mr. Hillman. (Complaint at ¶ 24). The Trustee also alleges that H.I.G. and its employees managed Gulf Fleet so as to benefit H.I.G. at the expense of Gulf Fleet, its minority shareholders, and its creditors.
The Trustee alleges that H.I.G. required Gulf Fleet to enter into a Professional Services Agreement (“PSA”) and Consulting Services Agreement (“CSA”). (Complaint at ¶ 33). These agreements provided that H.I.G. would provide professional advice and assist in evaluating potential acquisitions in exchange for an annual management fee of $500,000 as well as other fees set forth in the agreements. (Id.). According to the Trustee, H.I.G. “provided no value to Gulf Fleet for these arrangements.” (Id. at ¶ 34). The Trustee alleges that the agreements “were an artifice used to funnel money from Gulf Fleet to other arms of the H.I.G. enterprise.” (IcL).
The Complaint also addresses the sale of Gulf Fleet’s interests in the construction contract for the M/V Gulf Tiger. Gulf Fleet contracted with Thoma-Sea Shipbuilders, LLC to construct the M/V Gulf Tiger in July 2007. The cost of the contract was approximately $17.975 million, and Gulf Fleet paid $4 million as a deposit for the vessel. (Id. at ¶ 50). Gulf Fleet assigned its rights to the M/V Gulf Tiger construction contract to an H.I.G. subsidiary, GF Tiger Acquisition, in July 2008. According to the Trustee, GF Tiger Acquisition paid Gulf Fleet $8 million for the contract. (Id. at ¶ 51). After the assignment, H.I.G.’s representatives at Gulf Fleet required Gulf Fleet to continue supporting the construction of the M/V Gulf Tiger even though Gulf Fleet no longer had an interest in the contract. (Id. at ¶ 52). According to the Trustee, defendant Jeff Zanarini assured the Chief Financial Officer of Gulf Fleet that H.I.G. would reimburse Gulf Fleet for the expenditures, but no reimbursements were ever made. (Id.). According to the Trustee,
After the LBO, Gulf Fleet entered into a factoring agreement with GF Financing (the “Factoring Agreement”), an H.I.G. subsidiary. (Id. at ¶ 58). According to the Trustee, Michael Hillman objected to this Factoring Agreement. Under the terms of the agreement, GF Financing could purchase up to $4 million in accounts receivable from Gulf Fleet. (Id. at ¶ 59). The Trustee alleges that Gulf Fleet assigned $2,897,400 in accounts receivable to GF Financing in November 2009. The Trustee further alleges that this agreement and assignment of accounts receivable violated the covenants of the senior loan with Corn-erica Bank, and that Comeriea Bank demanded the return of the collateral when it learned of the assignment. (Id. at ¶ 61). As a result, Gulf Fleet and GF Financing restructured the Factoring Agreement to cover only “ineligible accounts” as defined in the documents governing the senior loan by Comeriea. The Trustee contends that the purpose of the Factoring Agreement was to provide liquidity for Gulf Fleet without requiring H.I.G. to risk a capital contribution. (Id. at ¶ 62).
The Trustee alleges that H.I.G. underca-pitalized Gulf Fleet by refusing to inject new capital into the company and its affiliates. Instead, H.I.G. attempted to fund Gulf Fleet’s short-term cash needs through the Factoring Agreement and short-term promissory notes issued by H.I.G.’s affiliates. For example, in January 2010, Gulf Fleet issued two promissory notes to GF Financing for $5.5 million and approximately $2.9 million. (Id. at ¶ 63). According to the Trustee, the $2.9 million note was intended to replace Gulf Fleet’s obligations under the amended Factoring Agreement for the accounts receivable that had to be returned to cure the breach of the covenants in the senior loan documents. (Id.). According to the Trustee, Gulf Fleet had no obligation to enter into the promissory note because the assignment of the accounts receivable was without recourse. (Id.). The Trustee further alleges that both promissory notes were essentially a “de facto equity contribution” disguised as a loan. (Id. at ¶ 66). In this regard, the Trustee points to the terms of the promissory notes, which gave GF Financing the right to convert the balance of the notes into stock for $10 per share at any time before maturity. (Id. at ¶ 64). The Trustee characterizes these notes as “the perfect investment vehicle” because if Gulf Fleet succeeded “the notes would become an equity contribution and H.I.G. would own nearly all of Gulf Fleet,” but if Gulf Fleet failed “H.I.G. would claim the notes were debt.” (Id. at ¶ 67). The Trustee also alleges that H.I.G. intended to undercapitalize Gulf Fleet and to take actions that solely benefitted H.I.G.’s interests at the expense of Gulf Fleet and its creditors. Specifically, the Trustee alleges:
• H.I.G. and its representatives on Gulf Fleet’s board of directors effectively excluded Michael Hillman from key board meetings; (Complaint at ¶ 70).
• H.I.G. directed Gulf Fleet to provide false financial reports to Comeriea;;
• H.I.G. delayed Gulf Fleet’s bankruptcy filing to shield the LBO transactions and transfers in connection with the LBO from liability under federal and state avoidance statutes;
• H.I.G. caused Gulf Fleet Acquisition to merge with GOMS to “avoid liabilityfor abusing the corporate forum and incurring inter-company receivables owed by GF Acquisition to one or more debtors”; {Id. at ¶ 56).
• after the LBO, Gulf Fleet was insolvent because its asset values were worth less than what was reflected on Gulf Fleet’s books — “when the reserves needed for capital expenditures and replacement are taken into account, along with accurate vessel condition, Gulf Fleet was insolvent and assets at fair value were exceeded by its liabilities since the LBO on May 1, 2007”; {Id. at ¶ 42).
• because of Gulf Fleet’s insolvency, it had to borrow $4 million from Michael Hillman and H.I.G. in February 2008 and repaid that insider loan in preference to other creditors. {Id. at ¶ 44.).
Gulf Fleet and its affiliated entities filed for relief under Chapter 11 of the Bankruptcy Code on May 14, 2010. The court ultimately confirmed a liquidating plan of reorganization for the substantively consolidated Gulf Fleet entities after an evidentiary hearing on April 26, 2011. The confirmed plan provided for the creation of the Trust and Mr. Goodman was ultimately appointed Trustee. The confirmed plan assigned certain causes of action to the Trust. The present action was initially commenced by Michael Hillman. The Trustee subsequently intervened as plaintiff. The Trustee’s Complaint asserts 14 separate counts: (1) Fraudulent transfer claims under 11 U.S.C. §§ 544, 548, and 550, (2) a claim to recharacterize H.I.G.’s debt as equity, (3) simulation under Louisiana Civil Code Article 2027, (4) a claim for subordination, (5) state law breach of fiduciary duty claims, (6) state law breach of duty of loyalty and tort, (7) aiding and abetting breach of fiduciary duty, (8) delictual action and conversion, (9) unjust enrichment, (10) quantum me-ruit, (11) partnership liability, (12) single business enterprise, (13) a direct action against the defendants’ insurance carrier, and (14) a request for attorney fees. The H.I.G. Defendants subsequently filed the present Motion to Dismiss, and requested dismissal of all of the Trustee’s claims under Rule 12(b)(6) of the Federal Rules of Civil Procedure. Brightpoint also filed a separate Motion to Dismiss and Motion for More Definite Statement under Rule 12(e) of the Federal Rules of Civil Procedure.
DISCUSSION
A. Applicable Standards Under Rules 12(b)(6), 9(b), and 12(e)
Rule 7012(b) of the Federal Rules of Bankruptcy Procedure provides that Rule 12(b)(6) of the Federal Rules of Civil Procedure applies in adversary proceedings. Rule 12(b)(6) allows dismissal if a plaintiff fails “to state a claim upon which relief can be granted.” Fed.R.Civ.P. 12(b)(6). Rule 12(b)(6) must be read in conjunction with Rule 8(a), which requires “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed. R.Civ.P. 8(a)(2). Bell Atlantic Corp. v. Twombly,
Rule 9(b) of the Federal Rules of Civil Procedure imposes additional requirements for pleading claims of fraud. Rule 9(b) requires the plaintiff to plead the circumstances constituting fraud with particularity. See Fed.R.Civ.P. 9(b); Tuchman v. DSC Communications Corp.,
Under Rule 12(e) of the Federal Rules of Civil Procedure, a defendant may move for a more definite statement of a pleading “which is so vague or ambiguous that the party cannot reasonably prepare for a response.” Fed. R. Civ. Pro. 12(e). Courts have traditionally viewed Rule 12(e) motions with disfavor given the liberality of notice pleading and the availability of discovery to obtain the information needed for a party to present its case. See, e.g., Mitchell v. E-Z Way Towers, Inc.,
1. Elements of the Trustee’s Section 548 Claim.
11 U.S.C. § 548(a)(1) allows a trustee to avoid any transfer of the debt- or’s interest in property if the transfer was the result of actual or constructive fraud. Section 548(a)(1)(A) governs “actual” fraud and allows a trustee to avoid a transfer made “with actual intent to hinder, delay, or defraud any entity to which the debtor was or became ... indebted.” Section 548(a)(1)(B) in turn, governs “constructive” fraud and requires proof that (1) the debt- or had an interest in property; (2) a transfer of that interest occurred within two years of the bankruptcy filing; (3) the debtor was insolvent at the time of the transfer or became insolvent as a result of the transfer; and (4) the transfer resulted in no value for the debtor or the value received was not “reasonably equivalent” to the value of the transferred property interest. 11 U.S.C. § 548(a)(1)(B); BFP v. Resolution Trust Corp.,
2. Elements of the Trustee’s Section 544 Claim and Choice of Law.
Under 11 U.S.C. § 544(b), a trustee succeeds to the rights of an unsecured creditor to avoid a transaction under non-bankruptcy law. See In re Moore,
Choice of law is important in the present case because the “reachback” period of the relevant Delaware and Louisiana statutes differ. The Delaware provisions cited by the Trustee allow creditors to avoid transactions occurring up to four years prior to the filing of a bankruptcy case. Del. Stat. Ann. Title 6, § 1309. In contrast, a Louisiana revocatory action allows avoidance of transfers occurring up to three years prior to the bankruptcy filing. La. Civ.Code art.2041. Here, some of the transfers challenged by the Trustee fall outside the three-year reachback period covered by the Louisiana revocatory statute (and, accordingly, under section 544(b)) if Louisiana law applies. In performing a choice of law analysis, the first question that the court must answer is whether federal or state choice-of-law rules govern. In Klaxon Co. v. Stentor Elec. Mfg. Co.,
(a) The place where the injury occurred;
(b) the place where the conduct causing the injury occurred;
(c) the domicile, residence, nationality, place of incorporation and place of business of the parties; and
(d) the place where the relationship, if any, between the parties is centered.
Id. at § 145 (1971). The court agrees with the approach taken by the Cyrus II Partnership court.
While the Trustee cites both Louisiana and Delaware law, he argues that Delaware law applies because some of the debtor entities were formed under Delaware law. Specifically, Gulf Fleet Holdings, Inc. is a Delaware corporation and Gulf Fleet Services, LLC and Gulf Wind LLC are Delaware limited liability companies. The remaining debtor entities are
3. The Professional Services Agreement and Consulting Agreement.
The Trustee first challenges the PSA and the CSA as well as the payments made pursuant to the agreements. The H.I.G. Defendants contend that both of these agreements were executed more than three years prior to bankruptcy and, therefore, are not subject to avoidance under Louisiana Civil Code article 2036. According to the Complaint, these agreements were executed at the time of the May 1, 2007 LBO, which is more than three years prior to the filing of Gulf Fleet’s bankruptcy petition on May 14, 2010. As a result, these agreements cannot be avoided under article 2036. They also cannot be avoided under section 548 because that provision only reaches transfers occurring within the two-year period prior to bankruptcy.
The Trustee alternatively argues that even if these two agreements are not avoidable, the individual payments made pursuant to the agreement occurred within the three-year period prior to bankruptcy and can be avoided under article 2036. Specifically, the Complaint identifies the following management fees paid by Gulf
09/05/2007 $125,000
10/04/2007 125,000
02/28/2008 125,000
08/08/2008 250,000
10/03/2008 125,000
01/05/2009 125,000
04/01/2009 125,000
(Complaint at ¶ 81). The Complaint also alleges that Gulf Fleet paid over $500,000 in expense reimbursements pursuant to the CSA from June 18, 2007 through June 21, 2010.
Nor can these allegations support a claim under section 544 based on Louisiana law. A revocatory action under Civil Code article 2036 requires that the Trustee plead and prove that the payments at issue “caused” or “increased” Gulf Fleet’s insolvency. La. Civ.Code art.2036. While the Complaint alleges that Gulf Fleet was insolvent at the time of these payments, it does not plead facts showing that the payments increased insolvency. Rather, on its face, the Complaint merely shows pay
The Trustee also asserts a claim for “actual” fraud under section 548(a)(1)(A) on the grounds that the transfers were made with the “actual intent to hinder, delay, or defraud” Gulf Fleet’s creditors. Rule 9(b)’s heightened pleading requirements apply to fraudulent transfer claims grounded on allegations of actual fraud. In re American International Petroleum,
A plaintiff may establish the fraudulent intent required under section 548(a)(1)(A) by pleading so-called “badges of fraud” as circumstantial evidence of fraudulent intent. These badges of fraud include:
(1) the lack or inadequacy of consideration;
(2) the family, friendship or close associate relationship between the parties;
(3) the retention of possession, benefit or use of the property in question;
(4) the financial condition of the party sought to be charged both before and after the transaction in question;
(5) the existence or cumulative effect of a pattern or series of transactions or course of conduct after the incurring of debt, onset of financial difficulties, or pendency or threat of suits by creditors; and
(6) the general chronology of the events and transactions under inquiry.
See In re Soza,
Here, the Trustee has pled facts showing that the transfers were made to an insider and that Gulf Fleet was insolvent before and after the transfers, but pleads no facts (as opposed to conclusions) explaining how these transfers, which satisfied an antecedent debt, could have impacted Gulf Fleet’s solvency. With respect to “lack or inadequacy of consideration,” these payments were made to satisfy antecedent debts and, as explained above, resulted in the receipt of reasonably equivalent value by definition. See 11 U.S.C. § 548(d)(2)(A). The Trustee also has not pled facts showing that Gulf Fleet retained “possession, benefit or use” of the funds paid pursuant to the
4. Expenditures in Connection with the M/V Gulf Tiger.
The Trustee further challenges certain expenditures made by Gulf Fleet in connection with the construction of the M/V Gulf Tiger. The Trustee contends that GF Tiger Acquisition and H.I.G. required Gulf Fleet to continue committing equipment, funds, materials, and labor to Tho-ma-Sea for the construction of the vessel even though Gulf Fleet had no contractual obligation to fund the completion of the vessel after the contract was assigned. (Complaint at ¶ 52). According to the Trustee, “Zanarini promised [Gulf Fleet’s CEO] that H.I.G. and/or H.I.G. Subsidiaries would repay Gulf Fleet for the expenditures.” (Id.) The Trustee alleges that Za-narini “made this promise either knowing it was false or with reckless disregard to its falsity, expecting Gulf Fleet to rely on it.” (Id.). The H.I.G. Defendants respond that Gulf Fleet did receive reasonably
The H.I.G. Defendants’ argument that the Trustee’s claim should be dismissed because Thoma-Sea received the transfer and not GF Tiger Acquisition fails based on the language of section 550(a)(1). This provision provides that “the trustee may recover, for the benefit of the estate the property transferred, or, if the court so orders, the value of such property, from— the initial transferee of such transfer or the entity for whose benefít such transfer was made ....” 11 U.S.C. Section 550(a)(1) (emphasis added). Assuming that Gulf Fleet continued to contribute equipment, funds, labor, and other resources to Thoma-Sea, these transfers were for the benefit of GF Tiger Acquisition as the owner of the construction contract. Accordingly, under section 550(a)(1), the Trustee may seek to recover “the value of such property” from GF Tiger Acquisition as the beneficiary of the transfer.
Moreover, the Trustee has adequately pled that Gulf Fleet did not receive reasonably equivalent value from these expenditures. The Trustee alleges that nothing in the assignment documents obligated Gulf Fleet to contribute additional equipment and labor to a project that would benefit GF Tiger Acquisition even though Gulf Fleet had locked into a substantial profit on the assignment. The assignment and the subsequent contributions to the construction contract must be viewed as separate transactions absent allegations of fact showing that the later contributions were made pursuant to the assignment agreement or facts that would support collapsing the transactions. Finally, the option agreement cited by the moving defendants may ultimately support their claim that Gulf Fleet received reasonably equivalent value if the option agreement and assignment agreement are considered together. However, this is a question that involves matters outside the pleadings and cannot be considered on a Rule 12(b)(6) motion to dismiss. Causey v. Sewell Cadillac-Chevrolet, Inc.,
5. Repayment of $4 Million Loan.
The Trustee further challenges the repayment of Michael Hillman’s $4 million loan as a fraudulent transfer. These allegations suffer from the same problem as the allegations involving the PSA and the CSA: it is apparently a payment that satisfies an antecedent debt and is not avoidable under section 548 or Louisiana law based on the facts pled in the Complaint. The Trustee, however, argues that the payment to H.I.G. and Hillman
Here, the Trustee’s argument on the conversion of unsecured debt into secured debt suffers from at least two flaws. First, the Trustee does not plead sufficient facts to support his conclusion that Gulf Fleet did not receive reasonably equivalent value from the satisfaction of the $4 million loan. The allegations in the complaint with respect to the secured loan used to pay the $4 million loan are “bare bones”, and provide no details about the relationship between the secured loan and the repayment of the $4 million note, the nature of the collateral that secured the loan, or the value of the collateral. See Fowler v. UPMC Shadyside,
Second, the repayment of the loan to Hillman and the secured loan with LBC Credit were two distinct transactions involving two distinct creditors. In compar
The court further concludes that the Trustee has not stated a claim for actual fraud under section 548 for the same reasons outlined with respect to the payments made under the CSA and the PSA. The court, however, will grant the Trustee leave to re-plead his section 544 and section 548 claims in order to plead any additional facts showing that the repayment of the $4 million loan and the secured loan by LBC Credit should be collapsed, and that Gulf Fleet did not receive reasonably equivalent value when the two transactions
6. The $2.9 million GF Financing Promissory Note.
The H.I.G. Defendants next challenge the Trustee’s fraudulent transfer claim based on the $2.9 million GF Financing promissory note. The Trustee alleges that Gulf Fleet entered into this promissory note to replace its obligations under the Factoring Agreement when that agreement had to be modified because of objections by Comerica Bank. According to the Trustee, the original Factoring Agreement was non-recourse and Gulf Fleet had no obligation to enter into the promissory note to replace its obligations under the Factoring Agreement. (Complaint at ¶ 62). Moreover, the Trustee alleges that the promissory note imposed obligations on other affiliated Gulf Fleet entities that were not liable under the original Factoring Agreement. (Id. at 80). The court agrees with the Trustee that these allegations, taken as true, are sufficient to withstand dismissal under Iqbal and Twombly. See In re TOUSA, Inc.,
With respect to the Trustee’s section 548 claim based on actual fraud, the court concludes that the Trustee has not stated a claim for actual fraud based on the $2.9 million GF Financing note for the same reasons outlined with respect to the payments made under the CSA and the PSA. The court, however, will grant the Trustee leave to re-plead his section 548 claim to the extent that it is based on actual fraud.
C. Counts 2 and 3: Recharacterization and Simulation
Count 2 of the Complaint addresses the Trustee’s claim that the $2.9 million and $5.5 million promissory notes and H.I.G.’s contract claims under the CSA and PSA should be recharacterized as equity contributions under 11 U.S.C. § 105 and Louisiana Civil Code articles 2025-2027. A “recharacterization” action challenges a claim characterized as debt and requests that the court treat that debt as an equity investment. In re AutoStyle Plastics, Inc.,
Lothian Oil precludes Count 2 of the Complaint to the extent that it is based on federal recharacterization principles that rely on the court’s equitable powers under section 105. If the Trustee has a viable recharacterization claim, that claim must be based on state law. The Trustee cites Louisiana law on simulations in Counts 2 and 3 of the Complaint.
The H.I.G. Defendants contend that the Trustee cannot rely on Civil Code articles 2025-2027 to support a re-characterization claim or an independent claim for simulation because the Complaint concedes that some consideration was exchanged in the transactions challenged in Counts 2 and 3. According to the H.I.G. Defendants, an exchange of any consideration defeats a simulation claim as a matter of law. (H.I.G. Defendants’ Memoran
With respect to H.I.G.’s contract claims under the CSA and PSA, it is not clear what the Trustee is seeking to recharac-terize under articles 2025-2027. According to the allegations in the Complaint, H.I.G. agreed to provide certain services pursuant to the agreements in exchange for the payment of regular management fees, commissions, and expense reimbursements. If the Trustee is arguing that the services provided pursuant to these agreements were intended to be equity contributions, the fact that Gulf Fleet made a number of payments to H.I.G. under those agreements seems to refute the theory that both parties intended the services to be equity contributions.
Second, in order to maintain a recharac-terization claim based on Civil Code articles 2025-2027, the Trustee must establish that all of the prerequisites for the effects that parties actually intended have been satisfied. Bennett, 58 S.3d at 671. For example, where a purported sale is intended to be a donation, the transaction must satisfy the requirements for a donation under the Civil Code. See Tate v. Tate,
D. Count 4: Subordination
In Count 4 of the Complaint, the Trustee contends that any claims under the CSA and PSA, the Brightpoint note, the $5.5 million promissory note, the $2.9 million GF Financing promissory note, and H.I.G.’s contract claims should be equitably subordinated under 11 U.S.C. §§ 510(b) and 510(c). According to the Trustee, H.I.G. dominated Gulf Fleet and breached its fiduciary duties to Gulf Fleet by requiring Gulf Fleet to enter into transactions that solely benefitted H.I.G. (Complaint at ¶ 105). The Trustee contends that this inequitable conduct by H.I.G. supports the subordination of its claim. The H.I.G. Defendants contend that these allegations are insufficient because they fail to include specific facts that show inequitable conduct by H.I.G. that resulted in damage to Gulf Fleet’s creditors. (H.I.G.’s Memorandum in Support of Motion to Dismiss at 18). A claim for equitable subordination requires proof that (1) the claimant was engaged in inequitable conduct; (2) the misconduct must have resulted in injury to creditors of the debtor or conferred an unfair advantage on the claimant; and (3) equitable subordination of the claim must not be inconsistent with the provisions of the Bankruptcy Code. See In re SI Restructuring, Inc.,
The Trustee’s allegations, taken as true, address each of the elements of a section 510(c) claim and fall into one or more of the categories identified by the CTS Truss court. The court is satisfied that these allegations are sufficient to avoid dismissal. Accordingly, the court denies the H.I.G. Defendants’ Motion to Dismiss with respect to the Trustee’s equitable subordination claim.
E. Counts 5 and 6: Breach of Fiduciary Duty
The H.I.G. Defendants next challenge the Trustee’s breach of fiduciary duty claims in Counts 5 and 6 of the Complaint. The Trustee alleges that H.I.G. and H.I.G.’s affiliates owed fiduciary duties to all of the Gulf Fleet entities, and that they breached those duties following the LBO in May 2007. The Trustee also alleges that the individual defendants, Mssrs. Tamer, Zanarini, and Fox owed fiduciary duties to the Gulf Fleet entities because they served on Gulf Fleet’s board, and that they breached those duties by taking actions that favored H.I.G. at the expense of Gulf Fleet, Gulf Fleet’s minority shareholder, and Gulf Fleet’s creditors.
1. Choice of Law.
The court must first address choice of law. The Trustee alleges that Louisiana law should govern his fiduciary duty claims because decisions “made about the Gulf Fleet entities were made in Louisiana, about a Louisiana business with operations, assets and personnel in Louisiana.” (Complaint at ¶ 108). Under Louisiana choice-of-law rules, “the law of the place where the corporation was incorporated governs disputes regarding the relationship between the officers, directors, and shareholders and the officers’ and directors’ fiduciary duties.” Torch Liquidating Trust Ex Rel. Bridge Associates, LLC v. Stockstill,
Under Delaware law, the directors of a Delaware corporation owe fiduciary duties of loyalty and care to the corporation. See Mills Acq. Co. v. Macmillan, Inc.,
2. The Trustee’s Allegations.
In Counts 5 and 6, the Trustee alleges that H.I.G., H.I.G.’s subsidiaries, and Mssrs. Tamer, Zanarini and Fox breached their fiduciary duties to Gulf Fleet and its affiliates in the following ways:
• The defendants allegedly acted in bad faith solely in the interest of H.I.G. and not Gulf Fleet;
• the defendants allegedly caused Gulf Fleet to provide over $1 million in equipment, materials and labor to Tho-ma-Sea for the benefit of GF Tiger Acquisition without any compensation or reimbursement;
• the defendants allegedly caused Gulf Fleet to pay over $500 thousand for legal fees and expenses incurred by H.I.G. in connection with certain business transactions including, but not limited, to H.I.G.’s acquisition of Gulf Fleet;
• the defendants caused Gulf Fleet to enter into the CSA and the PSA, and both agreements were signed by Mr. Tamer on behalf of both H.I.G. and Gulf Fleet;
• the defendants allegedly caused Gulf Fleet to enter into a receivable assignment, that breached its covenants with its senior lender;
• the defendants required Gulf Fleet to reimburse the expenses of H.I.G.’s employees for travel unrelated to Gulf Fleet’s business;
• the defendants caused Gulf Fleet and its subsidiaries to execute the Bright-point note on terms that did not reflect industry standards;
• the defendants intentionally chose to delay the bankruptcy fifing to avoid “unwinding” the LBO;
• the defendants’ actions caused Gulf Fleet and its affiliates to lose value and “deepen its solvency during the period after which it was clear that the Debtors should file bankruptcy”;
• the defendants required Gulf Fleet and its affiliates to execute the $2.9 million and $5.5 million notes to GF Financing “on terms that no reasonable company would accept”;
• the defendants allegedly failed to adhere to corporate formalities, including “requirements for holding board meetings and informing non-H.I.G. directors of corporate decisions and board meetings that occurred”; and
• the defendants allegedly made misrepresentations to Gulf Fleet and minority shareholders of Gulf Fleet regarding the financial condition of Gulf Fleet and for the purpose of obtaining “money from RBS, which caused Mr. Hillman and others to expend time and resources pursuing the RBS recapitalization.”
(Complaint at ¶ 111). The Trustee also alleges that at the time of these actions, Gulf Fleet and its affiliates were either insolvent or in the “vicinity or zone of insolvency.” {Id. at ¶ 110).
3. Sufficiency of Allegations with Respect to Individual Defendants.
The Trustee alleges sufficient facts to show that Mssrs. Tamer, Zanari-ni, and Fox owed fiduciary duties to Gulf Fleet Holdings, Inc. by virtue of their membership on Gulf Fleet’s board of directors. The Complaint also includes sufficient facts that, if accepted as true, support the Trustee’s allegations that Gulf Fleet was insolvent after the May 2007 LBO (Complaint at ¶¶ 42-43, 110). Accordingly, any duties owed by the individual defendants to Gulf Fleet Holdings were for the benefit of Gulf Fleet Holdings’ creditors. Trenwick,
Nevertheless, the Trustee’s fiduciary duty allegations fail to state a fiduciary duty claim against Mssrs. Zanarini, Tamer, and Fox for two reasons. First, with three exceptions, the Complaint refers to Mssrs. Zanarini, Tamer, and Fox collectively as the “H.I.G. Employees” in pleading the Trustee’s breach of fiduciary duty claims. The problem with this mode of pleading is that a breach of fiduciary duty “is determined on an individual-rather than a collective-basis.” In re Farmland Industries, Inc.,
Second, the Trustee appears to base his fiduciary duty claims in part on allegations that Mssrs. Zanarini, Tamer, and Fox breached duties to Gulf Fleet Holding’s subsidiaries and affiliates. (See Complaint at ¶ 111). While the Complaint states that “H.I.G. directed the H.I.G. Subsidiaries to appoint Fox, Zanarini, and Tamer to the boards of directors of various Debtor entities,” the Complaint only identifies these defendants as officers or directors of Gulf Fleet Holdings. It is unclear that these facts are sufficient to support the existence of a fiduciary duty with respect to all of the Gulf Fleet entities. In In re USA-Cafes, L.P. Litigation,
4. Sufficiency of Allegations with Respect to H.I.G. Capital and its Affiliates.
The Trustee’s allegations with respect to defendant H.I.G. Capital satisfies the pleading standards adopted in Iqbal and Twombly with respect to whether H.I.G. Capital owed a fiduciary duty to Gulf Fleet Holdings. The H.I.G. Defendants argue that it is improper to impose fiduciary duties on H.I.G. Capital because H.I.G. Capital was not the direct parent of Gulf Fleet Holdings. {See H.I.G. Defendants’ Reply Memorandum at 7) (“The Trustee has cited no authority for the dangerous proposition that the alleged shareholder {e.g., H.I.G.) of a corporation {e.g., GFA) that holds the shares of another corporation {e.g., GFH) that holds the shares of other corporations {e.g., Gulf Fleet) owes fiduciary duties throughout the entire corporate structure.”) Delaware courts, however, have extended the reach of fiduciary duties to include shareholders who control a Delaware corporation through an intermediate affiliate. See In re Primedia, Inc. Derivative Litigation,
The Trustee’s fiduciary duty claims, however, suffer from at least two pleading defects with respect to H.I.G. Capital and its affiliates that require the Trustee to replead his claims. First, like the allegations pertaining to Mssrs. Za-narini, Tamer, and Fox, the Complaint improperly groups H.I.G. Capital and its related subsidiaries and affiliates for purposes of pleading the Trustee’s fiduciary duty claims. As with the individual defendants, the question of whether a fiduciary duty exists and, if so, whether the duty has been breached must be decided on an individual basis. While the Trustee’s allegations may be sufficient to support the existence of a fiduciary duty on the part of H.I.G. Capital, these allegations do not necessarily support an extension of that duty to all of H.I.G. Capital’s affiliates, such as Brightpoint. With respect to Brightpoint, the Complaint merely pleads that Brightpoint made a loan to Gulf Fleet. Without more, the mere fact that Brightpoint is a subsidiary of H.I.G. Capital and made a loan to Gulf Fleet does not establish that it owed a fiduciary duty to Gulf Fleet Holdings. The same holds for the other H.I.G. affiliates who are merely referenced in the Complaint collectively as “H.I.G. Subsidiaries.” While the Trastee argues that these affiliates can be referenced as a group because they acted collectively, there is nothing in the Complaint establishing that every H.I.G. affiliate incorporated in the definition “H.I.G. Subsidiaries” owed a fiduciary relationship to Gulf Fleet Holdings and its subsidiaries, or acted collectively in breaching any such duties. The Trustee suggests that H.I.G. and its affiliates can be grouped together because they operated collectively as a “single business enterprise.” These allegations are also the basis for the Trustee’s claim in Count 12 of the Complaint. As explained below, the Trustee has not pled grounds to pierce the corporate veil of H.I.G. Capital and each of its subsidiaries. Accordingly, the Trustee cannot rely on the single business enterprise doctrine to escape the requirement that he plead a factual basis for his fiduciary duty claims against each H.I.G. affiliated defendant.
Second, the Complaint alleges that the duties owed by the defendants shifted to creditors when Gulf Fleet entered the “vicinity or zone of insolvency.” (Complaint at ¶ 110). As recognized by the Fifth Circuit, Delaware courts have held that actual insolvency, not the “vicinity or zone of insolvency” is the determining factor as to whether fiduciary duties owed to the corporation must be exercised for the benefit of creditors. See, e.g., Torch Liquidating Trust ex rel. Bridge Assoc. L.L.C. v. Stockstill,
F.Count 7: Aiding and Abetting Breach of Fiduciary Duty
In Count 7, the Trustee alleges that H.I.G. and its subsidiaries aided and abetted Mssrs. Tamer, Zanarini, and Fox in breaching their fiduciary duties to Gulf Fleet. To state a claim for aiding and abetting a breach of fiduciary duty under Delaware law, the Trustee must plead “(1) the existence of a fiduciary relationship, (2) a breach of the fiduciary’s duty, (3) knowing participation in that breach by the defendants, and (4) damages proximately caused by the breach.” Malpiede v. Townson,
The Trustee’s aiding and abetting claims suffer from at least two flaws. First, as discussed with respects to Counts 5 and 6, the Trustee has not adequately pled his breach of fiduciary duty claims, which is a prerequisite for asserting an aiding and abetting claim. See Malpiede,
G. Count 8: Delictual Action for Conversion
In Count 8 of the Complaint, the Trustee asserts a delictual action for conversion based on his allegations that Gulf Fleet (1) contributed approximately $1 million toward the M/V Gulf Tiger without reimbursement, (2) paid $500,000 of H.I.G.’s legal fees, (3) executed the $2.9 million promissory note to G.F. Financing when it had no obligation to do so under the Factoring Agreement, and (4) paid over $1 million to H.I.G. pursuant to the CSA and PSA and received nothing in return. (Complaint at ¶¶ 126-127). The H.I.G. Defendants counter that the Trustee’s conversion claim fails as a matter of law because the payment of money cannot be grounds for a conversion claim. (H.I.G. Defendants’ Memorandum in Support of Motion to Dismiss at 13). Because the parties cite Delaware, Louisiana, and Florida law, the court must decide what law applies to the Trustee’s conversion claims. The general choice-of-law principles outlined in connection with the Trustee’s section 544 claims apply here with a significant exception: the Trustee’s state law conversion claims do not implicate important federal policy as in the case of the Trustee’s section 544 claims. Accordingly, the court will look to Louisiana choice-of-law rules. See In re Endeavour Highrise, L.P.,
(1) the pertinent contacts of each state to the parties and the events giving rise to the dispute, including the place of conduct and injury, the domicile, habitual residence, or place of business of the parties, and the state in which the relationship, if any, between the parties was centered; and (2) the policies referred to in Article 3515, as well as the policies of deterring wrongful conduct of repairing the consequences of injurious acts.
Article 3515 provides that a court should consider “(1) the relationship of each state to the parties and the dispute; and (2) the policies and needs of the interstate and international systems.... ” La. Civ.Code art. 3515. Here, those factors weigh in favor of Louisiana law. Specifically, the Gulf Fleet entities are based in Louisiana, the focus of the two agreements at issue was to be services provided to a Louisiana-based business, the payments involving the M/V Gulf Tiger were made to Louisiana-based Thoma-Sea, and the obligations created by the $2.9 promissory note involve the property of and payment of funds by a Louisiana-based business. In contrast, the only contact with Delaware is the fact that some of the Gulf Fleet entities were formed under Delaware law. With respect to Florida, the sole contact is H.I.G.’s principal place of business. Based on the court’s consideration and evaluation of these contacts, the court concludes that Louisiana’s policies would be most seriously impaired if its law is not applied to the Trustee’s conversion claim.
The Louisiana Civil Code does not specifically identify a cause of action for “conversion.” Conversion is a common law doctrine. However, Louisiana courts have identified a type of delictual action often termed “conversion” where “(1) possession is acquired in an unauthorized manner; (2) the chattel is removed from one place to another with the intent to exercise control over it; (3) possession of the chattel is transferred without authority; (4) possession is withheld from the owner or possess; (5) the chattel is altered or destroyed; (6) the chattel is used improperly; or (7) ownership is asserted over the chattel.” Dual Drilling Co. v. Mills Equip. Invest., Inc.,
H. Counts 9 and 10: Unjust Enrichment and Quantum Meruit
In Counts 9 and 10 of the Complaint, the Trustee challenges the $1
With respect to the Trustee’s quantum meruit claim in Count 10 of the Complaint, Louisiana law governs this claim because the transactions challenged in Count 10 originated or centered in Louisiana. Louisiana courts have recognized that “quantum meruit is an equitable remedy, based on former LSA-C.C. article 1965, which provided that ‘no one ought to enrich himself at the expense of another,’ and on LSA-C.C. articles 2292-2294, relating to quasi-contracts.” Sam Staub Enterprises, Inc. v. Chapital,
I. Count 12: Single Business Enterprise
In Count 12 of the Complaint, the Trustee asserts that Gulf Fleet Holdings, all of the Gulf Fleet-affiliated entities, H.I.G., all of the H.I.G.-affiliated defendants, and Mssrs. Tamer, Zanarini, and Fox operated as a “single business enterprise” and that, under Louisiana’s single business enterprise doctrine, the defendants are liable for all the debts of Gulf Fleet. Specifically, the Trustee alleges that the single business enterprise arose when Gulf Fleet and its affiliates “acted in conjunction with H.I.G. and the H.I.G. Employees to further the enterprise goal of H.I.G.” (Complaint at ¶ 145). With respect to H.I.G. and its subsidiaries, the Trustee contends that these entities “show a deliberate fracturing of a single business between thinly capitalized companies with identical control, offices, and ownership.” (Complaint at ¶ 148). As a result “H.I.G. treated all of the H.I.G. Subsidiaries (including the Gulf
• All of the companies had identical ownership and leadership; the business functions of H.I.G. and its subsidiaries were “supplementary” in the sense that H.I.G.’s subsidiaries “existed exclusively as subsidiaries of H.I.G. to fund one-off deals in an attempt to insulate H.I.G. from liability”;
• H.I.G.’s officers and directors acted in their own interest as opposed to the interest of Gulf Fleet;
• H.I.G. directly financed its subsidiaries;
• H.I.G.’s Subsidiaries “were never capitalized, or were thinly capitalized”;
• H.I.G. formed subsidiaries for each “one-off deal” before closing a transaction;
• H.I.G. funded the closing costs and professional fees of the subsidiaries it formed for its “one-off deals”;
• Gulf Fleet and H.I.G.’s subsidiaries shared common offices;
• Gulf Fleet and H.I.G.’s subsidiaries used the same accountants and attorneys;
• H.I.G.’s employees “regularly ‘negotiated’ deals on behalf of H.I.G. Subsidiaries, which were not real negotiations, but rather as directed by H.I.G. as part of its business plan”;
• H.I.G.’s formation of new subsidiaries for each “one-off deal” was a means of “fragmenting the enterprise and avoiding creditors.”
(Id. at ¶ 147).
1. Choice of Law: Louisiana versus Delaware Law.
The Trustee’s allegations in Count 12 are grounded on the single business enterprise doctrine set forth in Green v. Champion Ins. Co.,
As in most jurisdictions, however, Louisiana courts recognize that under certain circumstances the corporate veil may be pierced to impose personal liability on a corporation’s owners. Id. Traditional veil-piercing doctrines are generally limited to cases where the separate existence of the corporation has been abused and where the court finds that piercing the corporate veil is necessary to remedy fraud, illegality, or other inequitable conduct by the corporation’s shareholders. Id. In this regard, Louisiana courts have recognized traditional veil-piercing theories such as the alter ego doctrine. See Id. at 1168. The alter ego doctrine allows courts to disregard corporate formalities “to the extent that the corporation ceases to be distinguishable from its shareholders.” Id. (citing Gordon v. Baton Rouge Stores Co.,
In Green v. Champion Ins. Co., the court created a new distinct doctrine for disregarding the legal distinctions between separate corporate entities and imposing personal liability for the debts of one corporation on a separate, but affiliated company. The Green case involved the well-publicized failure of a large insurance company with multiple affiliated “sister” companies. In traditional veil-piercing cases, courts pierce the veil between corporation and shareholder. Here, however, there was no shareholder relationship between the failed insurer and its sister companies. Nevertheless, the court allowed the liquidator of the failed insurance company to
1. corporation with identity or substantial identity of ownership, that is, ownership of sufficient stock to give actual working control;
2. common director or officers;
3. unified administrative control of corporation whose business functions are similar or supplementary;
4. directors and officers of one corporation act independently in the interest of that corporation.
5. corporation financing another corporation;
6. inadequate capitalization;
7. corporation causing the incorporation of another affiliated corporation;
8. corporation paying the salaries and other expenses or losses of another corporation;
9. receiving no business other than that given to it by its affiliated corporation;
10. corporation using the property of another corporation as its own;
11. noncompliance with corporate formalities;
12. common employees;
13. services rendered by the employees of one corporation on behalf of another corporation;
14. common offices;
15. centralized accounting;
16. undocumented transfer of funds between corporations;
17. unclear allocation of profits and losses between corporations; and
18. excessive fragmentation of a single enterprise into separate corporations.
2. The Trustee’s Single Business Enterprise Claim is A Veil-Piercing Claim For Purposes of Choice of Law.
Considering the Trustee’s allegations in the context of the single business
Applying the same choice-of-law rule for traditional veil-piercing doctrines to the Trustee’s claims in Count 12 is also consistent with the underlying rationale for applying the law of the state of formation to veil-piercing claims. Courts that apply the law of the state of incorporation to veil-piercing claims do so because these claims implicate matters of internal corporate operations and organization that are typically governed by the law of the state of incorporation, including the rights and duties of shareholders, the corporate formalities that must be observed by the corporation, and the rules governing the limited liability of shareholders. See, e.g., Fusion Capital Fund II, LLC v. Ham,
Finally, the effect of a single business enterprise determination in this case is the same as a determination of liability under a traditional veil-piercing theory such as the alter ego doctrine. Specifically, under an alter ego doctrine, the Trustee would seek to impose liability on H.I.G. and its
3. Applying Delaware Law on Piercing the Corporate Veil.
Applying Louisiana’s choice-of-law rule for veil-piercing claims, the court will look to the law of the state of incorporation. Here, the Trustee is seeking to pierce the corporate veil of Gulf Fleet and impose personal liability on Gulf Fleet’s immediate parent, as well as the other members of H.I.G.’s corporate group. Accordingly, the court will look to the state of incorporation of Gulf Fleet, which is Delaware. See, e.g., ASARCO, LLC,
Applying the requirements for a Delaware alter ego claim to Count 12, the Trustee’s single business enterprise allega
Second, the Trustee’s allegations do not support the second prong of an alter ego claim under Delaware law: the presence of fraudulent intent, inequitable conduct, or injustice. While Delaware courts do not require proof of actual fraud, Delaware courts have held that a plaintiff must plead facts establishing “something like fraud” and that the distinction between actual fraud and the requirement to plead injustice or unfairness as part of an alter ego claim is “largely superficial.” In re Moll Industries, Inc.,
Third, the Trustee has failed to plead facts supporting his request to pierce the corporate veil of each of the H.I.G.-affiliated defendants. Under Delaware law, if a plaintiff seeks to establish liability for all members of a corporate group, it must “establish alter ego liability with respect to each one of the entities.” See In re The Heritage Org. LLC,
J. Count 11: Partnership Liability
In Count 11 of the Complaint, the Trustee alleges that the H.I.G. defendants and Gulf Fleet formed a partnership
K. The Brightpoint Motion
Brightpoint filed a separate Motion to Dismiss and Motion for More Definite Statement on the grounds that the Complaint fails to assert specific allegations against Brightpoint, but instead merely groups Brightpoint into the Trustee’s definition of “H.I.G. Subsidiaries.” The court agrees with Brightpoint in this regard. With respect to all of the Trustee’s claims, the Trustee must allege specific facts to establish conduct by Bright-point that serves as a basis for liability against Brightpoint. As explained previously, the Trustee cannot rely on Louisiana partnership law, Louisiana’s single business enterprise doctrine, or Delaware veil-piercing principles to impute liability up and down the H.I.G. corporate chain. Here, Brightpoint is referenced three times in the Complaint and with respect to the allegations that form the basis of the Trustee’s claims, Brightpoint is merely consolidated into the definition of “H.I.G. Subsidiaries.” Accordingly, the court grants Brightpoint’s motion and requires the Trustee to re-plead his complaint to include specific allegations showing conduct by Brightpoint that gives rise to each of the claims asserted against Brightpoint.
L. Stern v. Marshall and Authority to Enter an Order on the Motion to Dismiss
As a final matter, the court concludes that it has authority to enter an order on the Motion to Dismiss under Stern v. Marshall, — U.S.-,
CONCLUSION
For the reasons set forth herein, the court GRANTS the H.I.G. Defendants’ Motion to Dismiss IN PART and DENIES
Within 10 days, counsel for each Defendant shall submit orders in conformity with the foregoing Reasons for Decision as to their respective motions, to be approved as to form by counsel for Trustee.
Notes
. The court notes that in Stern v. Marshall, - U.S., -,
. Defendant H.I.G. Capital and certain of its affiliates are based in Miami, Florida. (Complaint at ¶¶ 9-10). No party has addressed whether Florida law applies to the Trustee’s claims, nor does the Complaint assert a section 544(b) claim based on Florida law. As a result, the court will not perform a separate choice-of-law analysis with respect to Florida law. The court, however, notes that the relationship between H.I.G. and Gulf Fleet, as pled in the Complaint, was centered on Gulf Fleet's operations and principal place of business in Louisiana. Accordingly, even if the Complaint relied on Florida law, the court would still conclude that Louisiana law defines the Trustee’s rights under section 544(b).
. The Complaint identifies a $419,000 payment on May 2, 2007, but this payment falls outside the three-year avoidance period. For purposes of section 548, the reachback period would cover the payments made during the two years prior to the filing.
. There is an argument that the individual payments made pursuant to the CSA and PSA are not '‘severable” from the underlying agreements for statute of limitations purposes and, therefore, that the individual payments are also barred by limitations. See In re Le Café Creme, Ltd.,
. Some courts relax the heightened pleading requirements of Rule 9(b) for allegations of fraud pled by bankruptcy trustees. See In re Marketxt Holdings Corp.,
. TOUSA and its subsidiaries designed, built and marketed residential real estate developments.
. The same factors that support the application of Louisiana law to the Trustee’s section 544(b) claims also supports the Trustee's reliance on Louisiana law in Counts 2 and 3 of the Complaint. Specifically, the transactions that are challenged in Counts 2 and 3 were centered in Louisiana, and Louisiana has the most substantial relationship to these claims.
. The Pounds case, like the Johnson case, did not expressly identify the contract at issue as an absolute simulation, but the fact that both courts framed the question as whether the contract could be set aside as an absolute nullity is consistent with a claim that the contract was an absolute simulation — in other words, that the contract is given no effect because the parties intended that the contract would have no effect. See, e.g., Pounds,
. The court also notes that this theory is inconsistent with the Trustee's allegation that H.I.G. provided no services to Gulf Fleet under the terms of the CSA and the PSA.
. In the Moll Industries case, the court rejected an argument that the plaintiff had to establish alter ego liability for each layer of a corporate group because, unlike the Heritage Org. case, the plaintiff was not seeking to impose liability on multiple members of the corporate group. In contrast, here the Trustee seeks to impose liability on multiple members of the H.I.G. corporate group. Accordingly, the Trustee must satisfy the requirement for pleading alter ego liability at each level of the H.I.G. corporate group as required in the Heritage Org. case.