United States District Court, S.D. Mississippi, Southern Division
ORDER DENYING MOTION FOR PARTIAL SUMMARY JUDGMENT AND
DENYING MOTION TO STRIKE
GUIROLA, JR. CHIEF U.S. DISTRICT JUDGE
THE COURT is the  Motion for Partial Summary Judgment
filed by Plaintiff RDS Real Estate, LLC, against all
Defendants, and the  Motion to Strike Plaintiff's
Claim for Fraudulent Transfer filed by Defendant Abrams Group
Construction, LLC. Having considered the parties'
submissions and the relevant law, the Court is of the opinion
that both Motions should be denied.
to the  Amended Complaint, in 2009, Plaintiff RDS Real
Estate contracted with another entity, S&S Construction,
LLC, “to construct a building in Ocean Springs, Jackson
County, Mississippi, that would be used for medical office
space . . . .” (Id. at 4 (¶26)). RDS
alleges that soon after it “accepted occupancy of the
building, ” it began experiencing problems, including
roof leaks, as a result of unworkmanlike construction.
(See Id. at 5 (¶¶ 35-36)).
claims that, unbeknownst to it, “[i]n the time frame
around December 2010 through April 2011, S&S
Construction, LLC sold all its assets to Abrams Group
Construction, LLC.” (Id. at 6 (¶42)). It
further contends that it eventually incurred approximately
$214, 000.00 in costs “to correct the construction
defects caused by S&S.” (See Id. at 8-9
(¶¶ 64-70)). RDS then filed a lawsuit in this
district against S&S and Abrams, but later dismissed
Abrams without prejudice and proceeded to arbitration with
S&S. The arbitration resulted in “an award in favor
of RDS in the amount of $240, 898.14[, ]” which the
district court affirmed and on which its entered a final
judgment. (See Id. at 9-10 (¶¶ 82-86)).
RDS alleges that “[t]he judgment has not been paid[,
and that] S&S has made representations that is has no
money to pay the . . . judgment.” (See Id. at
10 (¶¶ 86-87)).
result, in October 2015, RDS instituted this action against
Abrams; George Spellmeyer, Norma Spellmeyer, and Michael
Spellmeyer (collectively, “the Spellmeyer
defendants”), who RDS claims “are, or were,
members of S&S” (see Id. at
13(¶123)); and, by later amendment in 2016, Tusitala,
Inc., which RDS alleges is owned by one or more of the
Spellmeyer defendants. RDS seeks to pierce S&S's
corporate veil and hold the Spellmeyer defendants
individually liable for the judgment it obtained against
S&S. It also argues that S&S made fraudulent
transfers to the Spellmeyer defendants and to S&S
Seafood, which it claims is a d/b/a of Defendant Tusitala.
Additionally, RDS “requests a declaratory judgment that
the judgment RDS obtained against S&S also applies to
Abrams, as they are the same entity.” (See Id.
at 11 (¶100); see also Id. at 13 (¶120)).
Motion for Partial Summary Judgment, RDS contends that the
Defendants “have transferred assets in an effort to
avoid and/or delay their payment obligations to RDS. Through
a series of transfers and transactions, the Defendants have
stripped S&S Construction, LLC of its assets and have
made S&S Construction judgment proof.” (RDS Mot. 1
(¶3), ECF No. 135). It “seeks a partial summary
judgment declaring that the transfers were fraudulent under
the Uniform Fraudulent Transfer Act.” (Id. at
2 (¶4)). It “also seeks partial summary judgment
that the veil of S&S Construction, LLC should be pierced
and that the Spellmeyers should be jointly and severally
have opposed the Motion, and RDS has filed Rebuttals.
Defendant Abrams has also filed a Motion to Strike. Abrams
argues that RDS “did not allege a sufficient basis in
its Amended Complaint for a judgment against this Defendant
based upon a fraudulent transfer.” (Abrams Mem. In
Support of Mot. To Strike 2, ECF No. 151). Abrams also
challenges the legal sufficiency of any fraudulent transfer
claim against it.
summary judgment motion shall be granted “if the movant
shows that there is no genuine dispute as to any material
fact and the movant is entitled to judgment as a matter of
law.” Fed.R.Civ.P. 56(a). If the movant “fails to
meet [its] initial burden, the motion must be denied,
regardless of the nonmovant's response.” Little
v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994).
If the movant carries its burden of demonstrating the absence
of a genuine issue of material fact, the burden shifts to the
non-movant to show that summary judgment should not be
granted. Celotex Corp. v. Catrett, 477 U.S. 317,
323-25 (1986). “[T]he court must view the facts in the
light most favorable to the non-moving party and draw all
reasonable inferences in its favor.” Deville v.
Marcantel, 567 F.3d 156, 164 (5th Cir. 2009). “In
reviewing the evidence, the court must ‘refrain from
making credibility determinations or weighing the
evidence.'” Id. (citation omitted).
a diversity case and the parties dispute whether Alabama or
Mississippi state law applies. Therefore, in determining
whether RDS is entitled to judgment as a matter of law, the
Court first determines what law applies to the claims at
issue. It then discusses RDS's summary judgment arguments
of fraudulent transfers, including Abrams' Motion to
Strike related to the same. Finally, the Court addresses
RDS's contention that S&S's corporate veil should
be pierced and that the Spellmeyer defendants should be found
individually liable for RDS's judgment against S&S.
Court finds that for purposes of RDS's arguments for
partial summary judgment based on fraudulent transfers, there
is no true conflict between Alabama and Mississippi law. Both
states have adopted the Uniform Fraudulent Transfer Act
(UFTA). See Miss. Code § 15-3-119 (“This
article shall be applied and construed to effectuate its
general purpose to make uniform the law with respect to the
subject of this article among states enacting it.”).
While there are slight differences in the constructive fraud
provisions of each state's UFTA, discussed below, the
Court finds that those differences do not affect the summary
judgment analysis, and, thus, a choice of law analysis at
this stage is unnecessary. See, e.g., Tupelo
Mfg. Co. v. Cope Indus., Inc., No. 1:05CV114-B-D, 2006
WL 1313809, at *1 n.1 (N.D. Miss. May 11, 2006); Accordingly,
the Court will apply Mississippi law to the fraudulent
transfer claims. See, e.g., Fireman's Fund Ins. Co.
v. Ill. Nat'l Ins. Co., No. 3:12-CV-657-CWR-FKB,
2015 WL 1198079, at *4 (S.D.Miss. Mar. 13, 2015) (“[I]f
the laws of the states do not conflict, then no choice-of-law
analysis is necessary, and the law of the forum state will
apply.”) (citations, quotation marks, and brackets
contends that Alabama law applies to its attempt to pierce
S&S's corporate veil, and the Spellmeyer defendants
argue that Mississippi law applies. Mississippi's Limited
Liability Act, Miss. Code §§ 79-29-1001, et
seq. provides in pertinent part that “the laws of
the state . . . under which a foreign limited liability
company is organized govern . . . the liability of its
members . . . .” Miss. Code § 79-29-1001.
Court agrees with other federal courts in Mississippi who
have interpreted this provision to mean that when a party
attempts to pierce the corporate veil of the LLC, the law of
the state under which the LLC exists applies. See
Robinson v. Denbury Onshore, LLC, No. 4:11CV18-DPJ-LRA,
2012 WL 1883594, at *2 n.1 (S.D.Miss. May 22, 2012);
Benson v. City Fin. Co., No. 1:02CV242-D-D, 2003 WL
21517998, at *2 (N.D. Miss. May 16, 2003); Andrews v.
Kerr McGee Corp., No. 1:00CV158-D-A, 2001 WL 1704144, at
*2 (N.D. Miss. Dec. 5, 2001); In re Huffman, No.
12-00177-NPO, 2013 WL 2481529, at *5 (Bankr. S.D.Miss. June
10, 2013). Because S&S is an Alabama LLC, Alabama law
applies to the allegations that the Spellmeyer defendants
should be personally liable for the judgment obtained against
Mississippi's UFTA, “[a] transfer made . . . by a
debtor is fraudulent as to a creditor, whether the
creditor's claim arose before or after the transfer was
made . . ., if the debtor made the transfer . . . with actual
intent to hinder, delay or defraud any creditor of the
debtor.” Miss. Code § 15-3-107(1). Here, there is
no real issue of fact that S&S is a debtor and that RDS
is a creditor under the statute, but the parties dispute in
great length whether there was actual intent to hinder,
delay, or defraud.
generally consider eleven “badges of fraud” in
determining whether a transfer was made with actual intent to
hinder, delay, or defraud. While this list is not exhaustive,
consideration may be given, among other factors, to whether:
(a) The transfer . . . was to an insider;
(b) The debtor retained possession or control of the property