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Guidry v. Seven Trails West, LLC

United States District Court, E.D. Missouri, Eastern Division

September 5, 2014



NOELLE C. COLLINS, Magistrate Judge.

Before the court is the Motion for Summary Judgment filed by Defendants Seven Trails West, LLC, (Seven Trails) and UBS Realty Investors, LLC, (UBS) (jointly, Defendants). (Doc. 80). Also before the court is the Motion to Strike Affidavit of Michael A. Clithero filed by Plaintiffs John Guidry and Simul-Vision Cable Systems, L.T.D., (jointly, Plaintiffs) (Doc. 106), and the Motion Nunc Pro Tunc for Leave to File Sur-Reply (Doc. 111) filed by Defendants.[1] The matters are briefed and ready for disposition.[2] The parties have consented to the jurisdiction of the undersigned United States Magistrate Judge pursuant to 28 U.S.C. § 636(c). (Doc. 64).


Defendants filed the affidavit of Michael Clithero (original Clithero Affidavit) in support of their Motion for Summary Judgment. Subsequently, Defendants sought leave to file a replacement Clithero Affidavit (Doc. 92), and, in a June 18, 2014 telephone conference, the court stated that it was inclined to allow Defendants to file the replacement Clithero Affidavit, with the proviso, that Plaintiffs be permitted to take Mr. Clithero's deposition. The court further said that it would also consider granting Defendants leave to withdraw their motion to file the replacement Clithero Affidavit. (Doc. 105 (Tr. of 06/18/2014 Conference) at 10-11). Defendants subsequently filed a motion to withdraw the replacement affidavit (Doc. 102), which the court subsequently granted (Doc. 108).

Now pending is Plaintiffs' Motion to Strike the original Clithero Affidavit. (Doc. 106). Plaintiffs cite several reasons why the court should strike the original Clithero Affidavit. In agreement with Defendants, however, the court finds that the original affidavit should not be stricken because Plaintiffs have admitted relevant assertions in the original Clithero Affidavit as reiterated in Defendants' Statement of Material Facts; Defendants have not suggested that statements made in the original Clithero Affidavit are incorrect or untrue, but rather that the statements are incomplete. (Doc. 89, ¶¶ 26, 32-39, 41, 44, 46, 54). Moreover, the court's granting or denying Plaintiffs' Motion to Strike the original Clithero Affidavit is not outcomedeterminative of the Motion for Summary Judgment given the extensive number of disputed material facts, irrespective of the original Clithero Affidavit.


The court may grant a motion for summary judgment Aif 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). See also Celotex Corp. v. Catrett , 477 U.S. 317, 322 (1986). The substantive law determines which facts are critical and which are irrelevant. Only disputes over facts that might affect the outcome will properly preclude summary judgment. Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248 (1986). Summary judgment is not proper if the evidence is such that a reasonable jury could return a verdict for the nonmoving party. Id . See also Fenny v. Dakota, Minn. & E.R.R. Co. , 327 F.3d 707, 711 (8th Cir. 2003) (holding that an issue is genuine Aif the evidence is sufficient to allow a reasonable jury to return a verdict for the nonmoving party").

A moving party always bears the burden of informing the court of the basis of its motion. Celotex , 477 U.S. at 323. Once the moving party discharges this burden, the nonmoving party must set forth specific facts demonstrating that there is a dispute as to a genuine issue of material fact, not the Amere existence of some alleged factual dispute." Anderson , 477 U.S. at 247. The nonmoving party may not rest upon mere allegations or denials of his pleading. Id . at 256. AFactual disputes that are irrelevant or unnecessary" will not preclude summary judgment. Id . at 248.

Where the non-moving party "fails to properly address another party's assertion of fact as required by Rule 56(c), the court may... consider the fact undisputed for purposes of the motion... [or] grant summary judgment if the motion and supporting materials - including the facts considered undisputed - show that the movant is entitled to it...." Fed.R.Civ.P. 56(e).

In ruling on a motion for summary judgment, the court must view the facts in the light most favorable to the nonmoving party, and all justifiable inferences are to be drawn in its favor. Id . at 255; Matsushita Elect. Indus. Co. Ltd. v. Zenith Radio Corp. , 475 U.S. 574, 587 (1986); Raschick v. Prudent Supply, Inc. , 830 F.2d 1497, 1499 (8th Cir. 1987). The court's function is not to weigh the evidence, but to determine whether there is a genuine issue for trial. Anderson , 477 U.S. at 249. However, A[t]he mere existence of a scintilla of evidence in support of the [nonmoving party's] position will be insufficient." Id . at 252. With these principles in mind, the court turns to an analysis of Defendants' Motion.


Plaintiffs generally allege, in their Second Amended Complaint, that, as of May 18, 2006, they were creditors of Seven Trails as a result of the judgment entered that date against Seven Trails, and that Seven Trails' transfer of its assets, in March 2006, constituted a fraudulent transfer done with the intent to hinder, delay or defraud Plaintiffs in their attempt to collect monies owed to them. (Doc. 15). In the pending Motion for Summary Judgment, Defendants originally sought summary judgment in their favor as to Counts 1, 2 and 4 of Plaintiffs' Second Amended Complaint; this court had previously dismissed Count 3, against Allegis Multifamily Trust, L.P., (AMTLP) "for Seven Trails' Actions Through Piercing of the Corporate Veil" and Count 1, to the extent it alleged Fraudulent Transfer by AMTLP; the court found it did not have personal jurisdiction over AMTLP and that it lacked sufficient indicia that AMTLP was the alter ego of Seven Trails. (Doc. 37). Subsequent to Defendants' filing the pending Motion for Summary Judgment, the parties filed a Stipulation of Dismissal with Prejudice of Count 2 of Plaintiffs' Second Amended Petition; in Count 2, Plaintiffs alleged Fraudulent Transfer by UBS. (Doc. 87). Thus, to the extent Defendants sought summary judgment, in regard to Count 2, their Motion is moot, as the only Counts remaining are Counts 1 as to Seven Trails and Count 4 in its entirety.

In Count 1 of the Second Amended Complaint, Plaintiffs allege fraudulent transfer by Seven Trails in that Seven Trails fraudulently caused assets to be transferred from Seven Trails to AMTLP for the purpose of avoiding Plaintiffs' collection of a monetary debt owed to them by Seven Trails as a result of the State court judgment. In Count 4, Plaintiffs allege UBS is liable for Seven Trails' failure to pay its debt, based on an allegation of piercing the corporate veil.

In August 1999, Seven Trails purchased the property known as Seven Trails Apartments (the Apartments) for approximately $26, 400, 000. AMTLP, a Delaware limited partnership, was the sole member of Seven Trails. AMTLP was formed as a real estate investment trust to invest in real estate throughout the United States, such as multifamily housing projects like the Apartments. At the end of September 2005, the Apartments were the last asset in AMTLP's investment portfolio. AMT Multifamily Trust, Inc. (AMT Inc.) was AMTLP's general partner prior to its merging with AMTLLC, after March 2006. AMTLLC owns approximately 92% of the partnership interests of AMTLP.

UBS (formerly known as Allegis Realty Investors LLC), a Massachusetts limited liability company, is a registered investment advisor and manages real estate for its clients. UBS uses single purpose entities to hold investment properties. UBS is the non-member manager for the single-purpose entity known as Seven Trails pursuant to the Seven Trails Operating Agreement (the Agreement). The Agreement provides that UBS has the right, power, and authority to act on behalf of Seven Trails. UBS was the investment advisor to AMTLP. UBS managed AMTLP and its numerous real estate investments for the exclusive benefit of its partners. Seven Trails maintained its own operating account for purposes of managing the Apartments and maintained its own separate books, records and bank accounts when it had them. The role UBS played in managing the day-to-day operations and finances of Seven Trails is disputed. (Doc. 82 (Defendants' Statement of Undisputed Facts) (DSUF) ¶ 9; Doc. 89 (Plaintiffs' Response to DSUF) (PRDSUF) ¶ 9).

Prior to Seven Trails' purchase of the Apartments in 1999, Plaintiffs provided cable service to the complex. In August 2001, Plaintiffs issued a demand letter claiming that Seven Trails owed money to Plaintiffs "due to the installation of the new cable system by Charter Communications." On August 27, 2001, Seven Trails terminated the relationship with Plaintiffs in a letter from UBS, as Seven Trails' manager. In March 2003, in State court, Plaintiffs sued Seven Trails and UBS, for, among other things, breach of the cable agreement (the underlying State cause of action).

In March 2006, Seven Trails completed a sales transaction whereupon it transferred title and possession of the Apartments, its sole asset, to BPG Properties, Ltd. Plaintiff John Guidry testified that he heard about the sale of the Apartments on the news. The amount for which the Apartments were sold is disputed, with Defendants asserting they were sold for $37, 500, 000 and Plaintiffs asserting they were sold for $36, 750, 000. (DSUF ¶ 1; Plaintiffs' Response to DSUF (PRDSUF) ¶ 1). The proceeds from the sale were wired directly to a bank account held by AMTLP. The account was one of AMTLP's consolidated accounts, and, at the time of the wire transfer, the account had a multi-million dollar balance from the proceeds of other real estate investments made by AMTLP. AMTLP did not maintain separate bank accounts for its numerous real estate investments; rather, all proceeds from these investments were combined into consolidated bank accounts located in Hartford, Connecticut. After the sale of the Apartments, Seven Trails had approximately $120, 000 in its operating account and some accounts receivable.

The trial in Plaintiffs' underlying State cause of action commenced on May 15, 2006. On May 18, 2006, approximately two months subsequent to Seven Trails' sale of the Apartments, judgment was entered against Seven Trails in the amount of $706, 000.00, in favor of Plaintiffs. On June 21, 2006, Seven Trails appealed the judgment in Plaintiffs' underlying State cause of action. It did not post a bond.

The date Plaintiffs learned that the Apartments were sold, the date Plaintiffs learned that Seven Trails did not have any assets, and the date that Plaintiffs learned that the proceeds from the sale of the Apartments were transferred to AMTLP are disputed. In this regard, Defendants allege that Plaintiffs learned during testimony at the State court trial, on May 17, 2006, that the Apartments were sold. Defendants also contend that Plaintiffs' representative was informed, in January 2007, that the Apartments had been sold (DSUF ¶ 35), and Plaintiffs contend that, in June 2007, counsel communicated to Plaintiff's that the Apartments had been sold prior to trial. (Doc. 90 (Plaintiff's Statement of Undisputed Facts) (PSUF) ¶ 75). On January 5 and 12, 2007, Plaintiffs served deposition notices in aid of execution. It is undisputed that "[t]hose depositions were marked off and Plaintiffs never again sought to take depositions in aid of execution." (DSUF ¶ 36; PRDSUF ¶ 36). Plaintiffs stated in a discovery response that, on April 19, 2012, they first learned that proceeds from the sale of the Apartments were instructed to be wired to a bank held by AMTLP; they asserted they learned this "from the Purchase and Sale Agreement of the Apartments, which was provided by counsel for Seven Trails West." (DSUF ¶ 50; PRDSUF ¶ 50; Doc. 90, Ex. WW). In its December 6, 2013 Objections and Responses to Defendants' First Set of Interrogatories, Plaintiffs stated that, on January 17, 2012, Seven Trails communicated to counsel for Plaintiffs that "Seven Trails states that it has not owned any assets from September 8, 2009 (two years before entry of the jury verdict on September 8, 2011) to the present." (Doc. 90, Ex. WW). Robert Wilkens, Director Asset Management for UBS, testified that he did not know if anyone "told Mr. Guidry that the net proceeds from the sale of Seven Trails West apartment complex were wired to Allegis Mutifamily Trust Limited Partnership." (Doc. 90-4 at 25).

On May 14, 2007, approximately one year after the notice of appeal in Plaintiffs' underlying lawsuit was filed, Seven Trails filed a third party irrevocable stand-by letter of credit, in the amount of $749, 100.00, to secure the State court's judgment pending appeal. AMTLP provided these funds to Seven Trails to secure the letter of credit. In response to AMTLP's contending it expected the funds to be returned, with interest, (DSUF ¶ 37), Plaintiffs contend that there was no written agreement between Seven Trails and AMTLP regarding the transfer of the funds (PRDSUF ¶ 37).

In 2008, the Missouri appellate court found that the damages verdict was excessive and speculative, reversed the judgment on damages, and remanded the matter for a new trial on damages only. Seven Trails was released from the appeal bond and repaid AMTLP the full amount of $749, 100, plus interest, for a total payment of $794, 572.

On remand, the trial court entered summary judgment, awarding Plaintiffs $24, 363.56. Plaintiffs appealed this damage award, and, in 2010, the Missouri appellate court reversed the second judgment and remanded the matter to the trial court, with instructions to conduct a new trial on the issue of damages. In September 2011, a new trial on damages was held, and a jury found Seven Trails liable for $1, 675, 000 in damages and that it should pay Plaintiffs that amount. Seven Trails appealed but did not post an appeal bond or offer security against the September 2011 judgment. On September 4, 2012, the Missouri appellate court affirmed the $1, 675, 000 judgment.

Plaintiffs brought the instant cause of action, on August 3, 2012, in State court, and Defendants removed it to federal court. (Docs. 1, 2). Also, on August 27, 2013, this court denied Plaintiffs' request to file a Third Amended Complaint naming AMTLLC as a defendant. Upon doing so, the court found that the factual allegations and alter ego/pierce the corporate veil claim which Plaintiffs sought to file against AMTLLC were identical to those raised in the Second Amended Complaint against AMTLP, upon which the court had already determined that it lacked personal jurisdiction. (Doc. 61).

In the pending Motion for Summary Judgment, Defendants argue that summary judgment should be granted as to Count 1 (against Seven Trails for fraudulent transfer) because: (1) AMTLP, which is not a party, must be a party in order for Plaintiffs to sustain their fraudulent transfer claim, and (2) Plaintiffs claim is time barred under Mo. Rev. Stat. § 428.049(1). Defendants also argue that summary judgment should be granted as to Count 4 (against UBS ...

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