United States District Court, Eastern District of Pennsylvania
Judgment creditors typically pursue every available avenue of collection from the judgment debtor, often attempting to gather assets from non-debtor third parties with a close legal relationship to the debtor. Here, we review a judgment creditor's strategy of "reverse veil piercing". Under "reverse veil piercing", the creditor attempts to access assets of non-debtor entities arguing that the non-debtor entity and debtor are so closely related economically that this Court, in an exercise of its equity, may allow the creditor to pierce through the non-debtor entity veil to access its assets to pay an individual debtor's judgment. All agree this exercise of equity must, ab initio, follow the pleading of a plausible claim that the debtor and entities affiliated with him are so closely related economically that it is inequitable to allow the debtor to shelter and avoid the judgment while enjoying the fruits of the entity's efforts.
Here, after years of post-judgment execution efforts, the creditor plaintiff has not plead facts showing an entitlement to this extraordinary exercise of equitable "reverse veil piercing". Further, the creditor waited too long to pursue a fraudulent conveyance claim arising from a stock transfer in March 2008. As such, the Defendants' motion to dismiss is granted with limited leave, mindful of Rule 11, to amend as to facts warranting reverse veil piercing under Counts I, II, IV and V.
I. FACTS PLEAD IN COMPLAINT
In July 2008, Plaintiff Presidential Facility LLC ("Presidential") agreed to unconditionally guarantee $13 million of a bank loan to a non-party. (Complaint, ECF Doc. No. 1, ¶ 12). At some unknown time around the same date of Presidential's bank guaranty, Defendant Gregory S. Campbell ("Mr. Campbell") agreed to guarantee payment of any amount paid by the Presidential to the bank in excess of $3 million. (Id. at ¶ 13).
Facts concerning Mr. Campbell's Judgment
The borrower apparently defaulted at some point and Presidential paid its guarantee. (Id. at ¶ 16). In turn, on June 4, 2009, Presidential demanded that Mr. Campbell satisfy his guarantee to it. (Id. at ¶ 17). On June 17, 2009, Presidential filed an action in the United States District Court for the Eastern District of Michigan against Mr. Campbell. (Id. at ¶ 19). Approximately three years later, on May 16, 2012, the Eastern District of Michigan entered judgment in favor of Presidential and against Mr. Campbell for $9, 500, 000 ("Judgment"). (Id. at ¶ 20). Plaintiff deposed Mr. Campbell on his assets in October 2012. (Id. at ¶ 27). In 2014, Plaintiff transferred the Judgment to this Court at No. 14-0263. (Id. at ¶ 22). Mr. Campbell has not paid any portion of the Judgment. (Id. at ¶ 23).
Facts concerning Defendant Campbell Partners and Diane Campbell
Mr. Campbell and his son formed an entity in 2001 later known as Campbell Partners. (Id. at ¶¶ 58-59, ¶ 65). At some point, the predecessor to Campbell Partners was known as Chester County Aviation. Id. In March 2008, Mr. Campbell transferred all of his ownership interest in Chester County Aviation to his wife, Defendant Diane Campbell, for allegedly no consideration. (Id. at ¶ 63). He testified that his estate planning advisors suggested he move assets into his wife's name. (Id. at ¶ 64). Mr. Campbell is the Chairman of Campbell Partners but he has no ownership interest. (Id. at ¶ 67).
Facts concerning Defendant CDV Capital LLC and LP
From 1996 until sometime in early 2009, Mr. Campbell was a business partner/member in three businesses which included the name "CDV". (Id. at ¶ 24). In February 2009, Mr. Campbell formed CDV Capital LLC ("CDV LLC"). (Id. at ¶ 31). Defendant Diane Campbell is the sole member of CDV LLC. (Id. at ¶ 32). Mr. Campbell placed ownership of this company in his wife's name because he did not want to create "value in an entity that I owned, basically, and I wasn't intending to work any further. There didn't seem to be a lot of reason for me to work given that my money was all going to go to creditors." (Id. at ¶ 34). Mr. Campbell testified that his sole source of income is his wife and that Diane Campbell's only source of income is CDV LLC. (Id. at ¶ 35). Mr. Campbell is the President and remains significantly involved in the business development of CDV LLC. (Id. at ¶¶ 33, 38). Presidential alleges that CDV Capital is trading off of Mr. Campbell's experience and good will. (Id. at ¶ 41). In June 2010, Mr. Campbell was among the persons forming Defendant CDV Capital Partners, LP ("CDV LP"). (Id. at ¶ 54). CDV LLC is the general partner of CDV LP. (Id. at ¶ 55).
Presidential now brings suit in this Court seeking to have entities allegedly affiliated with Mr. Campbell pay the Judgment. Specifically, Presidential seeks to "reverse veil pierce" as to Defendants CDV LP, CDV LLC and Campbell Partners (the former Chester County Aviation) (Counts I and II). Presidential also claims fraudulent conveyance arising from the pre-guaranty transfer of Mr. Campbell's ownership interest in Campbell Partners to his wife without consideration (Count III). Presidential also alleges civil conspiracy and punitive damages (Counts IV and V).
A. Plaintiff fails to plead facts giving rise to a plausible claim for reverse ...