United States District Court, N.D. Alabama, Southern Division
THOMAS E. REYNOLDS, as Trustee, Plaintiff,
BEHRMAN CAPITAL IV L.P, et al., Defendants.
ANNEMARIE CARNEY AXON UNITED STATES DISTRICT JUDGE
Thomas Reynolds, as chapter 7 trustee for the estates of
Atherotech Inc. (“Atherotech”) and Atherotech
Holdings (“Holdings”) has sued thirty related
defendants, seeking to recover purportedly fraudulent
transfers of a dividend recapitalization performed by
Atherotech before Atherotech and Holdings declared
bankruptcy. The thirty defendants have filed four motions to
dismiss for lack of jurisdiction under Federal Rule of Civil
Procedure 12(b)(2) or, in the alternative, for failure to
state a claim under Rule 12(b)(6). (Docs. 28, 33, 37, 39).
the court finds that it lacks personal jurisdiction over each
defendant, the court WILL GRANT the motions
and WILL DISMISS each defendant
WITHOUT PREJUDICE. The court will also
permit Plaintiff Thomas Reynolds leave to file a proper
motion to amend the complaint, attaching to it a proposed
amended complaint that omits any facts, defendants, and
claims that are related only to the previously severed cases.
deciding a Rule 12(b)(2) motion to dismiss for lack of
personal jurisdiction, the court must accept as true the
factual allegations made in the complaint unless the
defendant contradicts those allegations with evidence.
Posner v. Essex Ins. Co., 178 F.3d 1209, 1215 (11th
setting out the facts underlying this case, the court must
discuss how the parties are related to each other. The
plaintiff, Mr. Reynolds, is the chapter 7 trustee for the
estates of Atherotech and Holdings. (Doc. 1-1 at 10).
Atherotech was wholly owned by Holdings, which was in turn
owned by three shareholders: Defendant Behrman Capital IV LP
(“Fund IV”), Defendant Behrman Brothers IV, LLC
(“Behrman Brothers”), and Defendant MidCap
Financial Investment, LP (“MidCap”). (Doc. 1-1 at
15-16 ¶¶ 44-45). Fund IV was Holdings' majority
shareholder, owning 94% of its stock and controlling three of
its five seats. (Id. at 23 ¶ 98). Behrman
Brothers-which was also Fund IV's general partner-and
MidCap owned the remaining shares in Holdings. (Id.
at 17 ¶ 46, 24 ¶ 99).
thirty defendants can be grouped as follows: (1) Fund IV; (2)
Fund IV's fifteen limited partners (the “Limited
Partners”); (3) Behrman Brothers and its twelve members
(the “Behrman Brothers Defendants”); and (4)
MidCap. (See Doc. 1-1 at 16-18 ¶¶ 46-48).
to the complaint, Atherotech operated a laboratory that
conducted testing on blood cholesterol levels. (Doc. 1-1 at
20 ¶ 67). It paid physicians who ordered such testing a
processing and handling fee, also known as a P&H fee.
(Id. ¶¶ 69-70). Although Medicare rules
and regulations prohibit the payment of P&H fees,
Atherotech would nevertheless submit claims that included the
payment of those fees to Medicare and other federal
healthcare programs. (Id. at 20-21 ¶¶
2012, the Department of Justice began to investigate
Atherotech's payments of P&H fees for violation of
the federal False Claims Act, 31 U.S.C. §§
3729-3730, and the federal Anti-Kickback Statute, 42 U.S.C.
§ 1320a-7b. (Doc. 1-1 at 21 ¶¶ 78-79, 28
¶ 122). Violations of the False Claims Act can result in
a per-claim penalty of between $5, 500 and $11, 000, in
addition to treble damages. See 31 U.S.C. §
knowing of the investigation, Atherotech continued to make
P&H fee payments. (See Doc. 1-1 at 22
¶¶ 81-82). From January 2011 through June 2013,
Medicare reimbursed Atherotech about $35, 691, 000 for tests
Atherotech had run that were associated with P&H fee
payments. (Id. at 22 ¶ 82). Accordingly, Mr.
Reynolds contends that by June 2013, Atherotech had $107,
073, 000 in contingent liabilities for violations of the
False Claims Act. (Id. ¶¶ 82-85).
2013, while the Department of Justice investigation was
ongoing, Atherotech entered a credit agreement with certain
lenders under which the lenders loaned Atherotech $40.5
million. (Doc. 1-1 at 22-23 ¶¶ 88-90, 23 ¶
97). Atherotech then executed a dividend recapitalization
under which it paid Holdings' shareholders-Fund IV,
Behrman Brothers, and MidCap-$31, 559, 342.45. (Id.
at 22-23 ¶¶ 86, 97-98).
received $31, 433, 596.05 from the dividend; Behrman Brothers
received $87, 374; and MidCap received $351, 890.70. (Doc.
1-1 at 23-24 ¶¶ 98-99). Fund IV then distributed
its portion of the dividend to its Limited Partners and its
general partner Behrman Brothers, and Behrman Brothers
distributed its portion of the Fund IV dividend to its twelve
members. (Doc. 1-1 at 24-25 ¶¶ 102, 104).
2014, Atherotech could no longer pay P&H fees and its
revenues decreased significantly. (Doc. 1-1 at 29
¶¶ 134-35). From July through October 2015, Fund IV
invested $6.9 million into Atherotech. (Id. at 30
March 2016, Atherotech and Holdings filed for bankruptcy.
(Doc. 1-1 at 16-17 ¶ 40). The bankruptcy court appointed
Mr. Reynolds as the Chapter 7 trustee for both companies
(id. at 16 ¶ 41), and he eventually sold
Atherotech's assets for $19.6 million. (Id. at
30 ¶ 141).
2018, Mr. Reynolds, as trustee for the estates of Holdings
and Atherotech, filed this lawsuit in state court, asserting
the following claims:
Count One: intentionally fraudulent transfer, under 11 U.S.C.
§ 544 and Ala. Code § 8-9A-4(a), against Fund IV
Count Two: constructively fraudulent transfer, under 11
U.S.C. § 544 and Ala. Code § 8-9A-4(c), against
Fund IV and MidCap
Count Three: constructively fraudulent transfer, under 11
U.S.C. § 544 and Ala. Code § 8-9A-5(a), against
Fund IV and MidCap
Count Four: recovery of fraudulent transfer, under 11 U.S.C.
§ 550(a)(1), against Fund IV, Behrman ...