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United States v. Rocky Mountain Holdings

March 3, 2009

UNITED STATES OF AMERICA PLAINTIFF,
v.
ROCKY MOUNTAIN HOLDINGS, INC., DIMELING, SCHREIBER & PARK, L.P., DIMELING, SCHREIBER & PARK REORGANIZATION FUND, L.P., AND DUPONT CONOCO PRIVATE MARKET GROUP TRUST, DEFENDANTS.



The opinion of the court was delivered by: Buckwalter S. J.

MEMORANDUM

Currently pending before the Court is the Motion to Dismiss the Amended Complaint by Defendants Dimeling, Schreiber & Park, L.P., Dimeling, Schreiber & Park Reorganization Fund, L.P., and DuPont Conoco Private Market Group (collectively "Moving Defendants"), and the Response of Plaintiff United States of America ("United States"). For the following reasons, the Motion is denied.

I. FACTUAL AND PROCEDURAL HISTORY

According to the facts set forth in the Amended Complaint, Rocky Mountain Holdings, LLC ("Rocky Mountain") entered into a transaction on October 17, 2002, whereby it was paid $28 million for the sale of its only asset, Rocky Mountain Helicopter, Inc. (Am. Compl. ¶ 19.) The sale closed on October 17, 2002, in Philadelphia, Pennsylvania, and Rocky Mountain received an immediate $15,210,895 in proceeds from the sale (the "Sale Proceeds"). (Id. ¶¶ 20-21.) Of that amount, $14,860,895 was immediately transferred to the account of Rocky Mountain's only shareholder, the Dimeling, Schreiber & Park Reorganization Fund, L.P. ("the Fund"). (Id. ¶ 22.) That same day, the Fund wired 88.9% of the $14,860,895 (or $13,224,710.50) to the State Street Bank and Trust Company as Trustee of DuPont Conoco Private Market Group Trust ("DuPont Conoco"), (id. ¶ 23), and 11.01% (or $1,636,184.50) to account no. 2654-6524, titled to Dimeling, Schreiber & Park, L.P. ("DSP). (Id. ¶ 24.) Later that same day, DSP transferred the $1,636,184.50 to DuPont Conoco. (Id. ¶ 25.).

Rocky Mountain received additional proceeds in the amount of $296,509.45 (the "Additional Sales Proceeds") on November 21, 2002. (Id. ¶ 26.) That same day, the Additional Sales Proceeds were transferred to the Fund. (Id. ¶ 27.) The Fund then transferred 88.99% of that amount (or $263,862.87) to the State Street Bank and Trust Company as Trustee of DuPont Conoco, (id. ¶ 28), and 11.01% (or $32,645.58) to DSP, account no. 2654-6524. (Id. ¶ 29.) DSP then wired its share to DuPont Conoco. (Id. ¶ 30.)

In total, Rocky Mountain transferred approximately $15,157,403 from the proceeds of the October 17, 2002 sale, all of which ended up in DuPont Conoco's account. (Id. ¶ 31.) According to the Amended Complaint, such transfers rendered Rocky Mountain insolvent. (Id. ¶ 32.) Further, at the time of the above-described transfers, Rocky Mountain, based on its own tax return, was indebted to the United States of America for unpaid federal income tax liability for the year 2002. (Id. ¶ 33.) The Amended Complaint alleges that the transfers were made without fair consideration and were made to or for the benefit of insiders of Rocky Mountain. (Id. ¶¶ 35-36.)

On November 10, 2003, a delegate of the Secretary of the Treasury of the United States issued corporate income tax, interest, and penalty assessments against Rocky Mountain for the year 2002, based on Rocky Mountain's own Form 1120 return, in the amount of $1,813,601. (Id. ¶ 11.) As a result of Rocky Mountain's failure to pay these assessments after due notice and demand, federal tax liens arose as of the date of each assessment in favor of the United States and against all property and rights belonging to Rocky Mountain and the Fund. (Id. ¶ 12.) In addition, statutory penalties and interest were assessed against Rocky Mountain. (Id. ¶ 13.) To date, Plaintiff has recovered only $15,972.27 from Defendants, leaving an unpaid balance of the assessed tax liability of over three million dollars. (Id. ¶ 38.)

On July 18, 2008, Plaintiff initiated the current litigation against the various Defendants seeking to (1) reduce its tax assessment against Defendant Rocky Mountain to Judgment (Count I), and (2) set aside the alleged fraudulent conveyances by and among the Fund, DSP, and DuPont Conoco (Count II). On December 12, 2008, Moving Defendants brought the present Motion to Dismiss the fraudulent conveyance claim. Plaintiff responded on January 16, 2009, and Moving Defendants filed a Reply Brief on January 30, 2009. The Court now considers the merits of that motion.

II. STANDARD OF REVIEW

The purpose of a Fed. R. Civ. P. 12(b)(6) motion is to test the legal sufficiency of a complaint. Kost v. Kozakiewicz, 1 F.3d 176, 183 (3d Cir. 1993). Under Rule 12(b)(6), a defendant bears the burden of demonstrating that the plaintiff has not stated a claim upon which relief can be granted. FED. R. CIV. P. 12(b)(6); see also Hedges v. U.S., 404 F.3d 744, 750 (3d Cir. 2005). In the recent decision of Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955 (2007), the Supreme Court recognized that "a plaintiff's obligation to provide the 'grounds' of his 'entitle[ment] to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Id. 127 S.Ct. at 1965. Following Twombly, the Third Circuit has cautioned that the factual allegations in the complaint may not be "so undeveloped that it does not provide a defendant the type of notice which is contemplated by Rule 8." Phillips v. County of Allegheny, 515 F.3d 224, 233 (3d Cir. 2008). Additionally, "it is no longer sufficient to allege mere elements of a cause of action; instead 'a complaint must allege facts suggestive of [the proscribed] conduct.'" Id. (alteration in original) (quoting Twombly, 127 S.Ct. at 1969 n. 8). Finally, the complaint's "'factual allegations must be enough to raise a right to relief above the speculative level.'" Id. at 234 (quoting Twombly, 127 S.Ct. at 1965). "This 'does not impose a probability requirement at the pleading stage,' but instead 'simply calls for enough facts to raise a reasonable expectation that discovery will reveal evidence of' the necessary element." Id. (quotingTwombly, 127 S.Ct. at 1965).

Notwithstanding these new dictates from the United Supreme Court and the Third Circuit, the basic tenets of the Rule 12(b)(6) standard of review have remained static. Spence v. Brownsville Area Sch. Dist., Civ. A. No. 08-626, 2008 WL 2779079, at *2 (W.D. Pa. Jul. 15, 2008). The general rules of pleading still require only a short and plain statement of the claim showing that the pleader is entitled to relief, not detailed factual allegations. Phillips, 515 F.3d at 231. Further, the court must "accept all factual allegations in the complaint as true and view them in the light most favorable to the plaintiff." Buck v. Hampton Twp. Sch. Dist., 452 F.3d 256, 260 (3d Cir. 2006). Finally, the court must "determine whether, under any reasonable reading of the complaint, the plaintiff may be entitled to relief." Pinkerton v. Roche Holdings Ltd., 292 F.3d 361, 374 n.7 (3d Cir. 2002).

III. DISCUSSION

The sole claim against Moving Defendants challenges alleged fraudulent transfers pursuant to the Pennsylvania Uniform Fraudulent Transfer Act ("PUFTA"), 12 Pa.C.S. § 5101, et seq.*fn1 PUFTA is designed "to protect creditors from debtors who might try to shelter assets by sham transactions, thereby depriving the creditor of his ability to collect from the debtor." Bell v. Wyatt, Civ. A. No. 03-3225, 2005 WL 1522015, at *1 (Pa. Com. Pl. 2005), aff'd, 903 A.2d 39 (Pa. Super. 2006). The language of the statute states:

(a) General Rule. --A transfer made or obligation incurred by a debtor is fraudulent as to a creditor, whether the creditor's claim arose before or after the transfer was made or the obligation was incurred, if the debtor made the transfer or incurred the obligation:

(1) with actual intent to hinder, delay or defraud any creditor of the debtor; or

(2) without receiving a reasonably equivalent value in exchange for the transfer or obligation, and the debtor:

(i) was engaged or was about to engage in a business or a transaction for which the remaining assets of the debtor were unreasonably small in relation to the business or transaction; or

(ii) intended to incur, or believed or reasonably should have believed that the debtor would incur, debts beyond the debtor's ...


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