The opinion of the court was delivered by: Callie V. S. Granade United States District Judge
On September 25, 2009, Parsons and Whittemore Enterprises Corporation ("P&W") brought a lawsuit against Cello Energy, LLC ("Cello"), Boykin Trust, LLC ("Boykin Trust"), Vesta Venture, L.L.C. ("Vesta"), Forest Technologies, LLC ("Forest Technologies"), Jack W. Boykin ("Jack Boykin"), Lois Anne Cowin Boykin ("Lois Boykin"), Allen Boykin, and Elisa Boykin Rambo ("Elisa Rambo") pursuant to the Alabama Uniform Fraudulent Transfer Act ("AUFTA") to "avoid and/or to prevent fraudulent transfers made and proposed to be made by and among members of the Boykin Family and entities they control." (Doc. 1, p. 1). All of the defendants denied the claimant's allegations. (Docs. 5-10, 13). On August 24, 2010, this court granted the defendants' motions for summary judgment as to P&W's claims against Forest Technologies. (Doc. 156). On September 27, 2010, this court granted a joint motion to dismiss P&W's claims against Vesta and Elisa Rambo. (Docs. 163 & 164). A bench trial was held on P&W's remaining claims; testimony was taken and other evidence was received in this matter on September 27, 2010, September 28, 2010, and September 29, 2010. On October 21, 2010, P&W filed a notice of a bankruptcy filing by Cello, and on October 25, 2010, P&W filed a notice of bankruptcy filings by Boykin Trust and Jack Boykin. On October 27, 2010, this court entered an order finding that P&W was entitled, as to its unjust enrichment claim, to a net claim of $695,000 from Allen Boykin but stayed P&W's cases as to the remainder of the counts. (Doc. 182). On December 7, 2010, the bankruptcy court lifted the stay allowing this court to rule on the remainder of the counts except for the injunctive relief sought by P&W. (Doc. 188, p. 39). Upon consideration of all evidence presented, and for the reasons stated herein, this court finds that P&W is entitled to (1) recover a net claim of $700,000.00 plus pre-judgment interest against Boykin Trust as to Counts I, II, and III; (2) recover a net claim of $399,923.00 plus pre-judgment interest against Jack Boykin as to Counts VII, VIII and IX; (3) recover a net claim of $510,000 against Lois Boykin as to Counts XIII, XIV and XV; (4) recover a net claim of $40,000.00 plus pre-judgment interest against Allen W. Boykin as to Counts XIII, XIV, XV; (5) recover a net claim of $655,000.00 from Allen Boykin as to Count XVI, XVII, XVIII and XIX; and (6) recover a net claim of $10,431,560.50 from Allen Boykin and Lois Boykin, jointly and severally, as to Count XX.
Jack Boykin is the chairman of Cello, a company which he formed in 2004 to allegedly produce synthetic fuels, and since June 2010, has been the sole owner of Boykin Trust. He is the husband of Lois Boykin and the father of Elisa Rambo and Allen Boykin. He earned a bachelor of science degree in chemical engineering at Auburn University and was awarded an honorary doctorate from Huntingdon College, but he is not and has never been a licensed professional engineer. Prior to starting Cello, Jack has been a principal in several entities that had failed. First, Wesley Industries, a company that Jack formed to make pesticides and herbicides, filed for bankruptcy. Second, Jack closed Science International, LLC ("Science International"), a company which he founded in the early 2000s. Third, Environ, LLC ("Environ"), a company which assembled and operated a semi-works plant in Prichard that Jack and Allen claimed made commercial quantities of synthetic fuel, went out of business.
In 2005, Jack Boykin's only reported income was $16,500.00 in social security benefits. Similarly, in 2006, Jack's only reported income was social security benefits totaling $21,198.00. This income was far outweighed by his business losses. For example, as of July 2006, there were six unpaid judgments against Jack totaling more than $1.9 million: (1) Colonial Bank received a judgment of $777,077.98 on March 30, 2004; (2) SunTrust Bank received a judgment of $178,820.00 on September 28, 2004; (3) Altec Capital received a judgment of $305,830.08 on October 13, 2004; (4) Vision Bank received a judgment of $94,590.26 on September 19, 2005; (5) AmSouth Bank received a judgment of $446,820.89 on November 15, 2005; and (6) First American Title Insurance Company received a judgment of $122,977.83 on July 6, 2006. Allen Boykin reported $60,000 of taxable income on his 2004 income tax return, $28,000 of taxable income on his 2005 tax return, and only $30,123 on his 2006 income tax return.
In February 2007, Jack and Allen, in hopes of having P&W invest in Cello, told P&W's George Landegger and other representatives that they had made commercial quantities of biofuels from cellulosic materials that met ASTM standards at their semi-works plant in Prichard, Alabama. Based on this and other representations, P&W entered into an agreement (the "Option Agreement") on April 19, 2007, to pay Cello $2.5 million for an option to acquire a one-third interest in Cello for an additional $10 million upon production by Cello of commercial quantities of diesel fuel, kerosene and gasoline that met ASTM standards. On April 26, 2007, P&W made a wire transfer of $2.5 million to Cello.
On April 24, 2007, Boykin Trust was formed as a limited liability company under the laws of Alabama. At that time, Lois Boykin had an 80% ownership interest in Boykin Trust, Elisa Rambo had a 10% ownership interest, and Allen Boykin, who was also the president and managing partner, had a 10% ownership interest. Boykin Trust is the sole owner of Cello, and the sole asset of Boykin Trust (other than transitory cash balances distributed primarily to family members) is its ownership interest in Cello. The only business of Boykin Trust was to own Cello. The only address listed for Boykin Trust is a Post Office box, and Boykin Trust did not have a physical address as Lois Boykin performed work for Boykin Trust from her personal residence. None of the members contributed any capital to Boykin Trust at the time it was formed.
Shortly after receiving the wire transfer from P&W, Cello purchased a 2007 Dodge 2500 and a 2007 Chevy Impala for a total of $63,000, vehicles which Allen Boykin and Jack Boykin drive respectively. Furthermore, within days of Cello's receipt of P&W's option payment, Cello began paying Boykin Trust $30,000 per month, purportedly for engineering consulting services provided by Jack. The $30,000 monthly payments continued through March 2009, and in January 2010, Cello made a last $10,000 payment to Boykin Trust. The total amount transferred by Cello to Boykin Trust for the alleged engineering consulting services was $700,000. Jack, however, did not receive this money personally, but rather, Boykin Trust paid Lois Boykin a salary of $20,000 per month for writing checks and paying all of the bills. The payment of salary to Lois began in May 2007 and continued through March 2009 for a total of $460,000. Lois, in turn, paid for the maintenance of the house in which she and Jack lived, his food and clothing, and insurance deductibles for his heath care.
When asked at trial what services Lois had performed in exchange for the $20,000 monthly payments, Jack and Lois testified from a prepared list that she had performed the following services: writing checks and dealing with the accounting firm, coordinating visits of dignitaries to Cello's facilities, assisting with the design of the Cello office building, decorating and furnishing the Cello office building, decorating Cello's lab and production building, break room and guard house, baking cookies and cakes, accompanying her husband Jack on trips, and maintaining the lawn at her home and taking a picture of a tanker leaving Cello's plant. However, in previous depositions, Lois testified that she did not perform any services for that salary and that if she did perform services, she only wrote checks and paid bills. With regards to this discrepancy from her deposition testimony, Lois stated that she was only asked about the services she had performed for Boykin Trust and not for Cello. Lois admitted, however, that she received no payment from Cello for the alleged services.*fn1 She further testified that the reason she ultimately received a check in the amount of $20,000 per month from Boykin Trust was so she could maximize her social security benefits.*fn2
In addition to the payments to Lois, in or around January 2008, Boykin Trust paid Lois $30,000, Elisa Rambo $20,000, and Allen Boykin $20,000. Initially, those payments were characterized on Boykin Trust's income tax return as loans to partners, but at some point thereafter, these payments were reclassified as distributions to the members. A document was provided to this court entitled "Special Meeting of the Members of Boykin Trust, L.L.C" and signed by Lois Boykin, Allen Boykin, and Elisa Rambo. This document states that "[a] special meeting of Boykin Trust, L.L.C. was held on Saturday, December 15, 2007," where they agreed to distribute 42.86% of the profit to Lois, 28.57% to Allen, and 28.57% to Elisa in the same monetary amounts listed above. According to Lois, however, a physical meeting did not take place, but rather, she "more than likely" talked to Elisa and Allen individually. She testified that she decided how much she wanted to "share with [her] children" and established that figure as the amount of the distribution rather than an amount pursuant to their respective ownership interests. Lois further testified that the above document was prepared by Xavier Hartmann, the defendants' accountant, and Mr. Hartmann testified that the document was not created until after April 2008, and that it was a "post hoc justification" for varying the percentages of the distributions made to Lois, Allen, and Elisa. Similar payments occurred in or around December 2008, when Boykin Trust paid Lois $20,000, Elisa $20,000, and Allen $20,000. The defendants did not provide any documentation purporting a special meeting of the members of Boykin Trust authorizing the 2008 distributions.
Besides paying Boykin Trust $30,000 per month, Cello also began paying Allen Boykin a salary of $15,000 per month as purported compensation for overseeing the construction of the Bay Minette facility within a week of receiving P&W's option payment.*fn3 Allen testified that he "was asked if I would construct the facility and explained this would be my salary and I said yes and I said thank you and I took it."*fn4 Cello also paid Allen a $27,000 bonus in November 2007 and an $18,000 bonus in December 2008. Allen continues to be paid a salary of $15,000 a month from Cello.*fn5
In October 2007, Cello wrote two checks for a total of $370,000 to the law firm of Brackin, McGriff, and Johnson, P.C. ("BM&J") who then placed the money into a trust account titled "Boykin, Jack." On its financial statement, Cello noted that it paid a legal retainer of $370,000 which was "being held to negotiate and purchase integral equipment for the plant." however the identity of the law firm was not identified. In January 2008, BM&J wrote a check for $250,000 to Regions Bank, which merged with AmSouth Bank in 2005, to satisfy a judgment in favor of AmSouth Bank against Environ and Jack Boykin. Jack testified that in return for the $250,000 payment, Cello acquired equipment from Regions that had been repossessed when the note underlying the judgment went into default. Jack, however, did not provide any documentation, such as a bill of sale, in support of this testimony. He also testified that the plant and some of the equipment located there were damaged by flood waters in 2004 by Hurricane Ivan. Moreover, BM&J also transferred $10,000 on March 24, 2008, from the Jack Boykin Trust Account to settle a case brought against Jack by First American Title.
Furthermore, in 2009, BM&J transferred $25,000 out of its Jack Boykin trust account as "fees for Allen Boykin Divorce." Jack testified that it was possible that Allen's divorce was funded from money that Lois had paid to BM&J, and Lois clarified that all monies paid by her to BM&J were "for other things we might need for the company." However, the BM&J trust account does not show a payment from Lois prior to the payment for Allen's divorce, and although she testified that she would bring a cancelled check to court that showed that she made a $50,000 payment to the BM&J trust account, she did not produce the document.*fn6
The Option Agreement allegedly prohibited Cello from providing an equity interest or licensing the technology to any investor without first obtaining P&W's permission. However, in September 2007, Allen Boykin, on behalf of Forest Energy Systems, LLC ("FES") and BioFuels Operating Company, executed a document entitled "Manufacturing and Financing Contract" ("MFC"). In the MFC, Biofuels agreed to pay FES a $25 million project fee for the construction of three plants, with a first installment of $12.5 million on the effective date of the contract. Biofuels also received (1) the exclusive right to operate and manage those plants and any other plants constructed to make use of the technology, (2) 49% of an interim gross profit from each plant for up to 80 years, and (3) the exclusive right to provide financing for any plant. On September 14, 2007, BioFuels paid Cello $12.5 million via wire transfer. Following receipt of the project development fee from BioFuels, Jack Boykin placed what remained of the P&W option payment into a separate bank account
On October 16, 2007, P&W brought a lawsuit against Cello, Boykin Trust, Jack Boykin, Allen Boykin, and BioFuels and its related companies for injunctive and declaratory relief. (hereinafter referred to as the "Previous Litigation"). (Case No. 07-0743-CG-B, Doc. 1).*fn7 Construction on the new Cello plant began shortly thereafter in early 2008. On July 16, 2008, the Boykin Defendants in the Previous Litigation filed a motion for a judgment on the pleadings asking this court to declare the Option Agreement invalid. (Id., Doc. 146). By July 24, 2008, Cello had used all of BioFuels' project development fee, thus it began to again use the P&W option proceeds to pay its debts as they became due. In February 2009, this court ruled in the Previous Litigation that the Option Agreement was void ab initio. (Case No. 07-0743-CG-B, Doc. 375). By that time, Cello had spent all of P&W's option payment, all of the project development fee of $12.5 million, $500,000 more advanced by BioFuels, and was then using a $950,000 line of credit from Vision Bank.
For the year that ended on December 31, 2007, Cello had total assets of $14,634,975 and total liabilities of $15,045,215. The liabilities included a line item "Deferred revenue" of $12.5 million. The "Deferred revenue" line item represents the $12.5 million received from BioFuels for the construction of the first plant. Cello noted in its records that it "will recognize the $12.5 million as revenue upon substantial completion of the plant as agreed upon by both parties which is expected to occur by December 31, 2008." The liabilities also included a "Purchase Option" line item for P&W's $2.5 million payment to Cello. Cello noted on the financial statement that "[t]he option could be exercised anytime after the initial payment and before the expiration of 90 days after the refinery being engineered and built in Bay Minette, Alabama, is physically competed and has passed standard ASTM test for the production of fuel oils, diesel fuel oils, and gasoline."
On a balance sheet dated September 30, 2008, Cello had total assets of $13,344,127 and total liabilities of $15,015,579. The liabilities continued to list the $12.5 million "Deferred revenue" line item and the $2.5 "Purchase Option" line item. The "Deferred revenue" line item was thereafter removed from the financial statement for December 31, 2008, lowering Cello's liabilities to $3,815,013. On the June 30, 2009, balance sheet, Cello reported it had total assets of $13,928,467 and total liabilities of $5,142,627. On December 31, 2009, Cello reported that it had $13,176,111 in total assets and $7,453,369 in total liabilities.
Although the December 31, 2008, balance sheet indicated that the new Cello plant was substantially completed by the end of 2008, Allen testified that the construction of the plaint was not completed until some time in February or March 2009. In fact, Cello did not turn the plant over to BioFuels for operation until April 2009. The plant, however, was returned to Cello on May 26, 2009, as BioFuels determined that the plant was still in pre-commercialization mode. Samir Kaul of BioFuels testified that he did not believe that the new Cello plan was capable between April 1, and May 29, 2009, of producing cellulosic fuel in commercial quantities that would meet ASTM standards. Allen Boykin admitted that the new Cello plant has failed to generate enough income to cover expenses. Over the approximately 18 months since its alleged completion, Cello's plant had generated approximately $17,000 in revenues.
On June 29, 2009, the jury in the Previous Litigation returned a verdict in favor of P&W and against Cello, Boykin Trust, Jack Boykin, and Allen Boyken, for a total of $10.4 million. First, the jury found from a preponderance of the evidence that P&W proved its breach of the nondisclosure agreement against Cello and Boykin Trust and awarded P&W $2,827,123.00.
Second, the jury found from a preponderance of the evidence that there was a business relationship between P&W and the Boykin Defendants and that Biofuels and its related parties knew of that business relationship at the time of the alleged interference. Third, the jury found from a preponderance of the evidence that P&W proved its fraud claim against Cello, Boykin Trust, Jack Boykin, and Allen Boykin and awarded P&W $104,437.50, and found by clear and convincing evidence that all four defendants consciously or deliberately engaged in oppression, fraud, wantonness, or malice with regard ...