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Carn v. Heesung Pmtech Corp.

United States District Court, M.D. Alabama, Southern Division

April 9, 2018

WILLIAM C. CARN, III, as Chapter 7 Trustee of SpecAlloy Corp., et al. Plaintiffs,
v.
HEESUNG PMTECH CORP., Defendant.

          MEMORANDUM OPINION AND ORDER

          DAVID A. BAKER UNITED STATES MAGISTRATE JUDGE

         William C. Cam, III, as the Chapter 7 Trustee ("the Trustee") of SpecAlloy Corporation doing business as Panhandle Converter Recycling ("SpecAlloy" or "the Debtor"), LKQ Corporation ("LKQ"), Converter Brokers, LLC, ("Converter Brokers"), and Enterprise Recycling, Ltd., doing business as Wrench-A-Part and Commodity Recyclers ("Enterprise") filed the Amended Complaint against Defendant Heesung PMTech Corporation ("Heesung" or "Defendant"). (Doc. 24). The Trustee asserts claims of avoidable setoff pursuant to 11 U.S.C. §§ 553 and 550; avoidable preferences pursuant to 11 U.S.C. §§ 547 and 550; fraudulent transfers pursuant to 11 U.S.C. §§ 548 & 550; fraudulent transfers pursuant to the Uniform Fraudulent Transfer Act, Ala. Code §8-9-1, etseq., and 11 U.S.C. §§ 544 and 550; re-characterization of the advances; and equitable subordination. LKQ, Converter Brokers, and Enterprise (collectively "the Suppliers") assert state law claims of conversion; breach of contract; quantum meruit; unjust enrichment; principal liability; and partner/joint venture liability. (Doc. 24).[1]

         On October 13, 2017, Heesung filed its Answer to the Amended Complaint and Counterclaim (Doc. 49), and an Amended Answer and Counterclaim on October 17, 2017, (Doc. 52). In Count I, Heesung requested a declaratory judgment "confirming who has an interest in the Supplier Converters, " "confirming who was entitled to receive payment on account of Debtor's sale of Supplier Converters to Heesung, " "declaring] that LKQ, Brokers, and Enterprise did not retain or otherwise preserve a bailment relationship with Debtor, " and "establishing the relationship between and among Heesung, Debtor, LKQ, Brokers, and Enterprise." (Doc. 52 at ¶¶ 192-98). In Count II, Heesung stated a claim for Breach of Contract, accounts owing, against SpecAlloy Corporation. (Doc. 52 at ¶ 231) In Count III, Heesung requested a declaratory judgment it made "Advance Payments" to SpecAlloy Corporation that should be characterized as debts. (Doc. 52 at ¶ 265). In Count IV, Heesung stated a claim for Breach of Implied Covenant of Good Faith and Fair Dealing against SpecAlloy Corporation. (Doc. 52 at ¶ 274).

         On November 3, 2017, the Suppliers filed a Motion to Dismiss Heesung's Counterclaims, or, in the alternative, to redesignate the Counterclaims as affirmative defenses (Doc. 59), and the Trustee filed a motion to strike or dismiss the Counterclaims (Doc. 60). Further, on February 29, 2018, the parties filed a Joint Motion for Extension of Time to Amend Pleadings and Add Parties (Doc. 84), and Heesung filed a Motion to Amend its Answer and to assert additional affirmative defense (Doc. 85).

         I. JURISDICTION

         This court has federal question jurisdiction pursuant to 28 U.S.C. §1331, diversity jurisdiction pursuant to 28 U.S.C. §1332, bankruptcy jurisdiction pursuant to 28 U.S.C. §1334(b), and supplemental jurisdiction pursuant to 28 U.S.C. §1367. The parties do not contest personal jurisdiction or venue, and there are adequate allegations to support both. See 28 U.S.C. § 1391. The parties do not dispute venue or personal jurisdiction, and there are adequate allegations in Plaintiff's Amended Complaint and Heesung's First Amended Answer and Counterclaim to support both. On January 18, 2017, the parties consented to Magistrate Judge Jurisdiction for all matters pursuant to Rule 73, Fed. R. Civ. P., and 28 U.S.C. § 636(c). On December 20, 2017, this matter was reassigned to the undersigned as the presiding judge in this matter.

         III. STANDARD OF REVIEW

         A Rule 12(b)(6) motion to dismiss tests the sufficiency of the Complaint against the legal standard set forth in Rule 8: "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed.R.Civ.P. 8(a)(2).

         When evaluating a motion to dismiss pursuant to Rule 12(b)(6), the court must take "the factual allegations in the complaint as true and construe them in the light most favorable to the plaintiff." Pielage v. McConnell, 516 F.3d 1282, 1284 (11th Cir. 2008). However, "the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions." Ashcroft v. Iqbal, 556 U.S. 662, 663 (2009). "[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." Twombly, 550 U.S. at 555.

         "To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'"/gZx2/, 556 U.S. at 678 (quoting Bell Atl Corp. v. Twombly, 550 U.S. 544, 570 (2007)). "Determining whether a complaint states a plausible claim for relief [is]... a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Id. at 663 (alteration in original) (citation omitted). "[F]acial plausibility" exists "when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. (citing Twombly, 550 U.S. at 556). The standard also "calls for enough facts to raise a reasonable expectation that discovery will reveal evidence" of the claim. Twombly, 550 U.S. at 556. While the complaint need not set out "detailed factual allegations, " it must provide sufficient factual amplification "to raise a right to relief above the speculative level." Id. at 555.

         "So, when the allegations in a complaint, however true, could not raise a claim of entitlement to relief, 'this basic deficiency should ... be exposed at the point of minimum expenditure of time and money by the parties and the court.'" Twombly, 550 U.S. 558 (quoting 5 Wight & Miller § 1216, at 233-34 (quoting in turn Daves v. Hawaiian Dredging Co., 114 F.Supp. 643, 645 (D. Haw. 1953)) (alteration original). "[O]nly a complaint that states a plausible claim for relief survives a motion to dismiss." Iqbal, 556 U.S. at 679 (citing Twombly, 550 U.S. at 556).

"In keeping with these principles a court considering a motion to dismiss can choose to begin by identifying pleadings that, because they are no more than conclusions, are not entitled to the assumption of truth. While legal conclusions can provide the framework of a complaint, they must be supported by factual allegations. When there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief."

Iqbal, 556 U.S. at 679.

         IV. ...


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