be a exchange for stock and that Fluent's assets were transferred only
after Fluent's products did not reach expectations, then the requisite
intent and unfair consideration may be unfounded. If, however, an asset
transfer is found, then the structure of the acquisition could reasonably
be seen as a transfer made without proper consideration to Fluent's
treasury and with the intent or belief that creditors could not be
satisfied. Thus, I conclude that a genuine issue of material fact has
been raised as to the required elements of section 356.
The final question under PAUFCA concerns section 357 which provides
that a conveyance is fraudulent where the conveyance was made with the
actual intent to hinder, delay or defraud present or future
creditors.*fn12 Such intent must be proven by clear and
convincing evidence. See Moody to Security Pacfic Bus. Credit Inc.,
127 B.R. 958, 990 (W.D.Pa. 1991), aff'd, 971 F.2d 1056
(1992). The existence of actual intent is a question of fact. See Tabor,
803 F.2d at 1304. Direct evidence is not required; actual intent may be
inferred from the totality of the circumstances. See Moody, 971 F.2d at
1075 (citing Tabor; 803 F.2d at 1304).
Thus this Court must ask whether ProtoComm has raised a genuine of
material fact in showing by clear and convincing evidence that defendants
intentionally structured the acquisition to defraud creditors. This
question of fact, though ProtoComm will face a higher burden of proof,
overlaps with the aforementioned provisions because under Pennsylvania
law, intent may be inferred when transfers are made without fair
consideration and where the parties to the transfer have knowledge of the
claims of creditors and know that such creditors cannot be paid. See
Tabor, 803 F.2d at 1304. See also, Lease-A-Fleet, 155 B.R. at 674
(reciting "badges of fraud" which may indicate actual intent). As
explained above, genuine disputes remain concerning these questions.
Thus, I conclude that ProtoComm has met its burden in raising a triable
I therefore conclude that defendants are not entitled to judgment on
the PAUFCA claim as a matter of law.
C. Wrongful Dividend Claim
Plaintiffs bring the wrongful dividend claim under 8 Del. C. §
174, which holds directors, but not shareholders, liable for wilfully or
negligently paying dividends in violation of the general corporate law
chapter of the Delaware Code.*fn13 ProtoComm brings this cause of action
against those Former Fluent Shareholders who served as Directors. There
are times when upon consideration of a summary judgment motion, cases are
reevaluated in light of the facts presented and determinations previously
made by a court are reconsidered as well. This is one of those times.
This Court concluded in its prior opinion that ProtoComm had standing to
pursue this claim.
ProtoComm, 55 F. Supp.2d at 330. This Court now concludes, for the reasons
which follow, that plaintiff lacks such standing.
The Delaware Supreme Court's decision in Johnston v. Wolf 487 A.2d 1132
(Del. 1985), governs standing under section 174. The facts of Johnston
are as follows. Allied Artists Pictures Corporation ("Allied") entered
into a complex reorganization plan and agreement which provided, inter
alia, that Allied would merge with another corporation. See id. at 1134.
As part of the plan, Allied redeemed its preferred stock prior to the
merger. See id. Under the agreement, as well as under Delaware law,
creditors of Allied became creditors of the post-merger corporation. See
id. Plaintiffs alleged that the redemption violated the Delaware Code.
Two plaintiffs filed suit after the merger occurred and, obviously,
therefore had not secured a judgment before the merger occurred. See id.
at 1136. One plaintiff had brought his claim prior to the merger, but had
not obtained a judgment until after the merger. See id. The court denied
standing as to all three plaintiffs under section 174, holding that all
three were creditors of the post-merger corporation only. See id. Thus,
unlike PAUFCA, section 174 provides no protection to future creditors.
Accordingly, I conclude that plaintiff cannot proceed with its claim
against these defendants under section 174 because ProtoComm did not
receive its judgment until after the acquisition of Fluent had occurred.
In this Court's prior ruling, it turned to Pinellas County v. Great
Am. Indus. Group Inc., No. 90 C 5254, 1991 WL 259020 (N.D.Ill.Dec. 2,
1991). There, the plaintiff had obtained a $25,000,000 judgment against
defendant Madison. See id. at *1. Before the judgment against it, Madison
had engaged in two corporate acts which rendered it insolvent. See id. In
the first act, Madison paid a $5 million dividend to its sole
shareholder, GAIG. See id. Plaintiff claimed that the dividend payment
should be voided. See id.
The court acknowledged that under Johnston, only current creditors had
standing to sue under section 174. See id. at *3 The court then noted
that section 174 would not have application even if standing were not
problematic because the plaintiff was suing a shareholder and not a
director. See id. The court then turned to 8 Del.C. § 325 which
(a) When the officers, directors or stockholders of
any corporation shall be liable by the provisions of
this chapter to pay the debts of the corporation, or
any part thereof, any person to whom they are liable
may have an action, at law or in equity, against any 1
or more of them, and the complaint shall state the
claim against the corporation., and the ground on
which the plaintiff expects to charge the defendants
(b) No suit shall be brought against any officer,
director or stockholder for any debt of a corporation
of which such person is an officer, director or
stockholder, until judgment be obtained therefor
against the corporation and execution thereon returned
(emphasis added). Thus, section 325 allows for a suit to be brought
against officers, directors or stockholders when, under the provisions of
the general corporate law chapter of the Delaware Code, they are liable
to pay the debts of the corporation. And, such suit may not be brought
until judgment is obtained and returned unsatisfied. The court in
Pinellas determined that section 325 could not provide a cause of action
to the plaintiff before it because Delaware statutory corporate law
provided no means for holding shareholders liable for corporate debts. See
1991 WL 259020, at *3 The court then acknowledged that section 325 does
not work to restrict causes of action traditionally available to
creditors independent of corporate law. See id. (citing Lone Star
Indus., Inc. v. Redwine, 757 F.2d 1544, 1554 (5th Cir. 1985)).
The court observed that under Delaware common law, where a corporation
distributes assets to its shareholders while leaving creditors
unsatisfied, those creditors are entitled to recovery directly from the
shareholders, without resort to fraudulent conveyance law and without
having to first obtain a prior judgment against the corporate debtor. See
id. The court ultimately concluded that because the complaint alleged
that the dividend payment occurred at a time when Madison was technically
bankrupt, and thus constituted substantially all of Madison's assets, the
allegations were sufficient to sustain the claim to void the dividend
payment. See id.
Thus, the court in Pinellas did not determine that section 325 could be
used to provide standing for a claim brought under section 174. Rather,
the court essentially provided that the cause of action be brought under
the common law fraudulent conveyance claim. Accordingly, while it may be
that ProtoComm would have a common law claim under Delaware law, which
presumably would require a similar showing to the claim brought under
PAUFCA, ProtoComm does not have a claim against these defendants under
section 174, which is the law invoked by plaintiff.*fn14
III. Joint Motion to Dismiss
ProtoComm and settling defendants move to dismiss with prejudice all
claims brought against such defendants. Federal Rule of Civil Procedure 41
governs dismissals and provides in pertinent part:
(1) By plaintiff; by stipulation. . . . [after an
answer has been filed] an action may be dismissed by
the plaintiff without order of court . . . (ii) by
filing a stipulation of dismissal signed by all
parties who have appeared in the action. . . . (2) By
Order of Court. Except as provided by paragraph (1) of
this subdivision rule, and action shall not be
dismissed at the plaintiffs instance save upon order
of the court and upon such terms and conditions as the
court deems proper.
Fed.R.Civ.P. 41. Because the non-settling defendants, who make up
Fluent's Former Shareholders, oppose the motion, Rule 41(a)(2) is the
controlling provision. It must be observed that the non-settling
defendants have brought no cross claims against the settling defendants.
Whether to grant or deny such a motion falls within the sound
discretion of this Court. See Sinclair v. Soniform Inc., 935 F.2d 599,
603 (3d Cir. 1991) (citing Ferguson v. Eakle, 492 F.2d 26, 28 (3d Cir.
1974)). The purpose of the rule is primarily to prevent dismissals which
would result in some clear legal prejudice to the defendant. See Spring
City Corp. v. American Bldgs. Co., Nos. Civ. A. 97-8127, 98-105, 1999 WL
1212201, at *1 (E.D.Pa. Dee. 17, 1999); Environ Prod., Inc. v. Total
Containment, Inc., No. Civ. A. 94-7118, 1995
WL 459003, at *4 (E.D.Pa. July 31, 1995). Where a plaintiff moves for a
voluntary dismissal with prejudice "`it has been held that the district
court must grant that request.'" Spring City, 1999 WL 1212201, at *1
(quoting Charles A. Wright & Arthur R. Miller, Federal Practice and
Procedure § 2367, at 318 (2d ed. 1995)). See also Gilbreth Int'l
Corp. v. Lionel Leisure, Inc., 587 F. Supp. 605, 614 (E.D.Pa. 1983)
("where the plaintiff has consented to dismissal with prejudice and the
defendants will not face a second lawsuit on plaintiffs claim, the Court
should grant the motion for dismissal so long as it is not unfair to the
defendant to do so.") (citations omitted).
Rule 41 allows for the dismissal of fewer than all defendants. See
Langer v. Presbyterian-Univ. of Pa. Med. Ctr., Civ. A. No. 87-4000,
1988 WL 33880 at * 2 (E.D.Pa. April 5, 1988); Plasterer v. Hahn, 103
F.R.D. 184, 185-86 (M.D.Pa. 1984). In plasterer'; the plaintiff filed
suit under the Eighth Amendment against multiple defendants.
Subsequently, the plaintiff and one of the defendants filed a joint
motion to dismiss under Rule 41. The remaining defendants opposed the
motion, arguing that they would be prejudiced. The court rejected their
argument, noting that (1) no cross claims had been filed asserting that
the moving defendant was wholly or partially responsible; (2) the
remaining defendants could still avoid liability at trial by arguing that
the moving defendant had been responsible; and (3) their rights to
indemnification and contribution were unaffected. See Plasterer, 103
F.R.D. at 186. See also Langer, 1988 WL 33880, at *23 (adopting reasoning
in Plasterer). The Court in Plasterer also noted that even had a cross
claim been filed, the moving defendants still would have a right to have
the plaintiffs claim against them dismissed and would have remained in
the case as third-party defendants. See id. (quoting Broadway &
Ninety-Sixth St. Realty Corp. v. Loew's, Inc., 23 F.R.D. 9, 11-12
(S.D.N.Y. 1958)). See also Country-Wide Produce, Inc. v. H. Sacks &
Sons, Inc., No. 88 Civ. 0408, 1992 WL 369928, at *1 (S.D.N.Y. Nov. 25,
1992) (acknowledging that while Rule 41 limits dismissals where
counterclaims are pending, it purposefully allows for no such protection
where cross-claims are pending). Accordingly, I conclude that the
non-settling defendants presently before this Court will not be
prejudiced by the dismissal of the settling defendants.
Non-settling defendants invoke Pennsylvania's Uniform Contribution
Among Joint Tort-feasors Act, 42 Pa.C.S.A. § 8321, et. seq., which
A release by the injured person of one joint
tort-feasor, whether before or after judgment, does
not discharge the other tort-feasors unless the
release so provides, but reduces the claim against the
other tort-feasors in the amount of the consideration
paid for the release or in any amount or proportion by
which the release provides that the total claim shall
be reduced if greater than the consideration paid.
42 Pa.C.S.A. § 8326.
As the face of the statute makes clear, for the Act to apply, "``it is
necessary to establish that those allegedly culpable are joint
tortfeasors.'" Carr v. American Red Cross, 17 F.3d 671, 683 (3d Cir.
1994) (quoting Rocco v. Johns-Manville Corp., 754 F.2d 110, 114 (3d Cir.
1985)). As a result, under Pennsylvania law, "a defendant has the right
to require a codefendant settling on a pro-rata release to remain in the
case through trial and verdict to establish joint tortfeasor status."
Id. (quoting Rocco v. Johus-Manville Corp., 754 F.2d 110, 114 (3d Cir.
1985)) (citing Davis v. Miller, 385 Pa. 348, 351-52, 123 A.2d 422, 424
If, however, the settling parties concede joint tortfeasor liability in
the release, a so-called "Griffin release," the need to keep a settling
co-defendant in the suit drops out. See id. (citing Griffin v. U.S.,
500 F.2d 1059 (3d Cir. 1974)).
The parties to the joint motion have not shown the releases to this
Court or to opposing parties. Non-settling defendants essentially argue
that the joint motion cannot be evaluated without reference to the
releases. They take the position that if the release states that the
defendants are joint tortfeasors or that the issue of joint and several
liability is waived, then the settling defendants do not have to
participate in the trial. If, on the other hand, no such concessions were
made, the settling defendants must remain in the case to determine the
status of joint tortfeasor liability.
The glaring problem with the objections raised by the non-settling
defendants is that they have failed until now to raise the issue of joint
tortfeasor status. As stated, the non-settling defendants never filed a
cross-claim, nor asserted any affirmative defense in their answer raising
such a defense, and do not even attempt to do so now. I note in passing
that the time to do so seems to have clearly passed. The complaint also
does not allege that defendants are joint and severally liable.
Succinctly put, the issue of joint tort-feasor liability is not properly
before this Court. If non-settling defendants had wished to raise such a
claim, they could have, but did not, so the issue has been waived in this
case. I therefore conclude that the motion will be granted.
To summarize, this Court concludes that plaintiff has raised triable
issues on the claims brought under PAUFCA and that plaintiff lacks
standing to bring a wrongful dividend claim under the Delaware Code.
Thus, I will grant in part and deny in part the motion of Former Fluent
Shareholders for summary judgment. The joint motion of plaintiff and
settling defendants will be granted, as the non-settling defendants have
failed to show any reason the remaining defendants must stay in the
An appropriate Order follows.
AND NOW this 25th day of September, 2001, upon consideration of the
motions of defendants Technology for Information and Publishing, L.P.,
David L. Nelson, Cornelius A. Ferris, and Premkumar Uppaluru
(collectively referred to as "Former Fluent Shareholders") for summary
judgment (Document No. 67), pursuant to Federal Rule of Civil Procedure 56,
and the joint motion of plaintiff ProtoComm Corporation ("ProtoComm") and
remaining defendants Aenas Venture Corporation, ASCII Corporation, Cirrus
Logic, Inc., FIP Associates Ltd. and FIP II, Ltd., and Intel Corporation
(collectively referred to as "settling defendants") to dismiss with
prejudice all claims of plaintiff against such defendants (Document No.
76), pursuant to Federal Rule of Civil Procedure 41(a)(2), and the
responses and replies thereto, and for the reasons set forth in the
foregoing memorandum, it is hereby
1. The motion for summary judgment is GRANTED in part
and DENIED in part. It is GRANTED only as far as it
moves this Court to dismiss the claims brought under
the Delaware Code for a wrongful dividend. See 8 Del.
C. § 174. It is DENIED as far as it moves this
court to dismiss claims brought under the Pennsylvania
Uniform Fraudulent Conveyances Act. See 39 P.S. §
351 et seq.
2. The joint motion to dismiss is GRANTED and all
claims of plaintiff against Aenas Venture
Corporation, ASCII Corporation, Cirrus Logic, Inc.,
FIP Associates Ltd. and FIP II, Ltd., and Intel
Corporation are DISMISSED with prejudice.