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Impala Platinum Holdings Ltd. v. A-1 Specialized Services And Supplies, Inc.

United States District Court, E.D. Pennsylvania

June 30, 2017



          Baylson, Judge

         This vigorously litigated dispute, which culminated in a seven (7) day jury trial in March, 2017, reaches its final coda in this decision on post-verdict motions. Plaintiffs Impala Platinum Holdings Limited and Impala Refining Services Limited (collectively, “Impala”) alleged fraud and other claims against the individual defendants and their related business entities, arising out of the operation of a specialty metals business. Four claims proceeded to trial, each premised on allegedly fraudulent transactions by and between the defendants, shareholder-directors of a closely held Pennsylvania corporation. All but one of the individual defendants (Ashok Kumar Khosla, referred to throughout this case as simply “Kumar”), reached a settlement during the trial. The jury found for Impala on one claim: constructive fraudulent transfer under the Pennsylvania Uniform Fraudulent Transfer Act (“PUFTA”).

         Following the verdict, both Kumar and Impala moved to alter the judgment-Kumar, to achieve a set-off in the amount of the settlement that had been reached by the other defendants in the midst of trial, and Impala, to add pre- and post-judgment interest to the verdict. (ECF 346, 371.) We dispose of both motions here, and, in so doing, reach a final resolution in this matter.

         I. Facts and Procedural History

         The factual background of this case has been exhaustively narrated by the Court in the opinion disposing of defendants' motions to dismiss (ECF 73), the summary judgment opinion (ECF 289), and the summary judgment opinion rendered in a prior case involving the same underlying facts (Alliance Industries Limited v. A-1 Specialized Services & Supplies, Inc., No. 13-2510, 2015 WL 4943471 (E.D. Pa. Aug. 19, 2015)). Consequently, we decline to go into great detail here. It is sufficient for purposes of this memorandum to state the basic contours of the claims at issue.

         At the crux of this case is the business relationship that existed for many years between Impala and Defendant A-1 Specialized Services, Inc. (“A-1”), involving the refining of used catalytic converters such that the precious metals therein could be sold on the open metals market and to car companies. The financial crisis of 2008 led to the dissolution of that profitable relationship by greatly reducing the value of the extracted metals, which in turn left A-1 unable to repay Impala for unsecured advances totaling more than $200 million, which Impala had made to A-1. Impala sued A-1 in the London Court of International Arbitration (“LCIA”) in December 2015 to collect on A-1's debt and obtained a $200 million judgment. That award was entered as a judgment in this Court on April 26, 2016. Impala Platinum Holdings Ltd. v. A-1 Specialized Servs. & Supplies, Inc., No. 13-2930, ECF 79.

         The trial of this case centered on allegedly fraudulent transfers made by and between A-1's shareholder-directors for the purpose of diverting A-1's assets to themselves, so as to leave very little, if any, assets for A-1 to use in the payment of the LCIA verdict and the judgment entered in favor of Impala. On that theory, Impala initiated proceedings against Defendants Kumar, Suresh K. Khosla (“Suresh”), Om K. Khosla (“Om”), and Leena Khosla (“Leena”), all of whom are shareholders in A-1 and were directors at the relevant time periods. Impala also named as defendants two entities alleged to have participated in the fraudulent scheme: Slogam Limited Partnership (“Slogam”) and Alliance Industries Limited (“Alliance”). Four claims survived dismissal and summary judgment, and proceeded to trial:

(1) Actual fraudulent transfer under PUFTA;
(2) Constructive fraudulent transfer under PUFTA;
(3) Breach of fiduciary duty; and
(4) Deepening insolvency.

         Impala's proof at trial centered on settlements of three prior litigations that it alleged were improper because they furthered the fraudulent scheme of the individual defendants.

         Bucks County Settlement

         First, the settlement of litigation filed in the Bucks County Court of Common Pleas by Om against Kumar, Suresh, and A-1. Om stated claims for breach of fiduciary duty, breach of contract, conversion, and unjust enrichment arising out of A-1's failure to pay him distributions in proportion to his ownership interest in A-1 from 2000 to 2012. On May 29, 2015, the parties executed a settlement agreement (“Bucks County Settlement”) resolving Om's claims and requiring A-1 to pay Om $10 million and Leena, who stood in a similar situation to Om, $1.5 million.

         Alliance/New Jersey Settlement

         The second settlement resolved two separate cases. One case was filed in this Court by Alliance against A-1 (Civil Action No. 13-2510) in which Alliance asserted claims for breach of contract and unjust enrichment in regard to certain precious metal leases entered into between it and A-1. The second case was filed by A-1 against Kumar in the Superior Court of New Jersey, Burlington County in which A-1 sought repayment of a $15 million transfer made from A-1 to Kumar in 2012. On September 15, 2015 the parties entered into a settlement agreement resolving both cases (“Alliance Settlement”), providing that A-1 would pay Alliance $35.6 million and Kumar would pay A-1 $5.5 million.

         The alleged impropriety of the transfers made and obligations incurred by A-1 via these two settlements formed the crux of Impala's case against the defendants at trial. But, Impala also presented evidence intended to establish further bases for its claims of fraudulent transfer, breach of fiduciary duty, and deepening insolvency. Specifically, Impala argued that:

(1) A-1 had fraudulently paid Slogam, which owns the property on which A-1 operates its business and which is owned by Om, Suresh, and Kumar, in excess of rent due under its lease;
(2) A-1 had fraudulently made distributions to Om, Leena, Suresh, and Kumar between May 29, 2012 and August 17, 2012; and
(3) The salaries paid to Kumar, Om, Leena, and Suresh between 2012 and 2016 were fraudulent transfers.

         Partial Settlement During Trial

         In the midst of trial, Om, Leena, Suresh, and Slogam (“Settling Defendants”) reached a settlement with Impala resolving all claims pending against them, for a total consideration of $10, 715, 000 (“Partial Settlement”). (ECF 434.) The agreement included a provision stating that any judgment for money damages entered against other alleged tortfeasors in this matter shall be reduced by the pro rata share of liability the jury apportioned to the Settling Defendants. (Id. at 15.) The jury was not apprised of the Partial Settlement, and trial continued on against Kumar and Alliance. On March 22, 2017, the jury deliberated and reached a verdict in which it found Kumar, Leena, Om, Suresh, and Slogam liable on Impala's claim for constructive fraudulent transfer under PUFTA. (ECF 342, Verdict Form at 2.) On each of the other three claims- actual fraudulent transfer under PUFTA, breach of fiduciary duty, and deepening insolvency- the jury did not impose liability for any defendant. (Id. at 1, 5, 7.) The jury also did not find that any defendant's conduct had been “willful and malicious” and therefore no further proceedings took place regarding punitive damages. (Id. at 11.)

         Jury Verdict

         The jury imposed a total of $16 million in damages, $11.5 million of which it attributed to transfers arising out of the Bucks County Settlement and none of which it attributed to transfers arising out of the Alliance Settlement. (Id. at 10.) In response to Interrogatory No. 6, which asked the jury to apportion “each defendant's share of liability in terms of a percentage of the total” if it found any defendant liable on Impala's claims for actual fraudulent transfer, constructive fraudulent transfer, or deepening insolvency, the jury responded with the following allocations:

Alliance Industries Limited: 0%
Kumar Khosla: 59%
Leena Khosla: 4%
Om Khosla: 16%
Suresh Khosla: 20%
Slogam Limited Partnership: 1%

(Id. at 6.) Judgment was entered on March 23, 2017, in favor of Impala and against Kumar, Leena, Om, Suresh, and Slogam in the amount of $16 million. (ECF 345.)

         Post-Trial Motions

         On March 24, 2017, Kumar moved to alter the judgment pursuant to Federal Rule of Civil Procedure (“Rule”) 59(e)[1] and to stay execution pursuant to Rule 62(b)(3). (ECF 346.) The Court granted the motion to stay pending resolution of the Rule 59(e) motion. (ECF 367.) On April 20, 2017, Impala moved to require Kumar to post as security the assets of A-1 in which Alliance has a secured interest. (ECF 370.) Kumar opposed that motion, arguing that security was not required under the relevant law and that if the Court disagreed, the stay should be lifted. (ECF 377.) On May 16, 2017, the Court ordered that Kumar must post security valued at $13 million in order to maintain the stay of execution. (ECF 386.) Kumar's attorney represented at oral argument on May 24, 2017 that Kumar refused to post such security, leading the Court to lift the stay on that date. (ECF 398.) On May 24, 2017, the Court also ordered further briefing on two issues: the evidence introduced at trial that would support the jury's verdict, to be briefed by Impala, and the equitable relief to which Kumar believed he was entitled under PUFTA. (ECF 397.) Impala and Kumar both filed such briefs on June 1, 2017 (ECF 399, [2] 400) and, on June 6, 2017, both filed oppositions (ECF 405, 406.[3])

         II. Kumar's Motions for Directed Verdict and to Alter the Judgment

         A. Motion for Directed Verdict

         At the close of Impala's case, Kumar and Alliance filed a motion under Rule 50 for entry of judgment. (ECF 329.) Of the seven separate claims that were made, six of them are moot after the jury's verdict. The seventh claim, that Impala did not hold a certificate of authority to permit filing suit, was determined adversely to Kumar and Alliance in a prior Order.

         B. Motion to ...

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