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Post-Confirmation Committee for Small Loans, Inc. v. Martin

United States District Court, M.D. Georgia, Albany Division

February 20, 2015

POST-CONFIRMATION COMMITTEE FOR SMALL LOANS, INC., Plaintiff,
v.
W. DEREK MARTIN, as Executor of the Estate of Vance R. Martin, et al., Defendants.

ORDER

W. LOUIS SANDS, Sr., District Judge.

Pending before the Court are Defendant James Patrick Johnston's Motion to Dismiss Plaintiff's Amended Complaint (Doc. 124), the Plaintiff's Motion for Default Judgment (Doc. 135), and Motions to Vacate Entries of Default Related to Defendants H&B Enter-prises, Inc., and Bradley D. Bellville. (Docs. 137 & 138.) For the reasons that follow Defendant Johnston's Motion to Dismiss (Doc. 124) is DENIED, the Plaintiff's Motion for Default Judgment (Doc. 135) is DENIED, and the Motions to Vacate Entries of Default (Docs. 137 & 138) are GRANTED.

I. Johnston's Motion to Dismiss

A. Lack of Personal Jurisdiction

On November 7, 2014, the Plaintiff amended its complaint to assert a claim against Defendant James Patrick Johnston as a "mediate or immediate transferee of some or all... amounts recoverable... under 11 U.S.C. § 550." ( See Doc. 113 at 34.) Johnston was served with the amended complaint in Ohio on November 12, 2014. (Doc. 124 at 1.) Johnston argues that the Court lacks personal jurisdiction over him. ( See Doc. 124.)

"When a federal statute provides for nationwide service of process, it becomes the statutory basis for personal jurisdiction." Republic of Panama v. BCCI Holdings (Luxembourg) S.A., 119 F.3d 935, 942 (11th Cir. 1997). "The Bankruptcy Rules are established under a federal statute and authorize nationwide service of process." Redhawk Global, LLC V. World Projects Int'l, 495 B.R. 368, 373 (Bankr. S.D. Ohio 2013); see also 28 U.S.C. § 2075 & Fed.R.Bankr.P. 7004(d). "[T]he applicable forum for minimum contacts purposes is the United States in cases where, as here, the court's personal jurisdiction is invoked based on a federal statute authorizing nationwide... service of process." S.E.C. v. Carrillo, 115 F.3d 1540, 1544 (11th Cir. 1997).

Notwithstanding the recognition of the law cited above, Johnston states that "requiring [him] to defend the vague and unsupported allegation made against him in the Amended Complaint in Georgia would pose a severe inconvenience rising to the level of constitutional concern." (Doc. 134 at 2-3.) Johnston provides no legal citation as to why the inconvenience he will allegedly suffer from litigating in this forum "ris[es] to the level of constitutional concern." ( See generally Doc. 134.) Because the United States as a whole is the applicable forum for minimum contacts purposes and Johnston has admitted that he is a resident of Ohio, the Court finds that it has personal jurisdiction over him. ( See Doc. 124-1 at 1.)

B. Failure to State a Claim

Johnston asserts that the Plaintiff's amended complaint fails to state a claim. ( See Doc. 124 at 8.) Federal Rule of Civil Procedure 12(b)(6) permits a party to assert by motion the defense of failure to state a claim upon which relief can be granted. A motion to dismiss under Rule 12(b)(6) should not be granted unless the plaintiff fails to plead enough facts to state a claim to relief that is plausible, and not merely just conceivable, on its face. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). "Dismissal for failure to state a claim is proper if the factual allegations are not enough to raise a right to relief above the speculative level.'" Edwards v. Prime, Inc., 602 F.3d 1276, 1291 (11th Cir. 2010) (quoting Rivell v. Private Health Care Sys., Inc., 520 F.3d 1308, 1309 (11th Cir. 2008)). "Stated differently, the factual allegations in the complaint must possess enough heft' to set forth a plausible entitlement to relief.'" Id. (quoting Fin. Sec. Assurance, Inc. v. Stephens, Inc., 500 F.3d 1276, 1282 (11th Cir. 2007)). "The threshold of sufficiency that a complaint must meet to survive a motion to dismiss for failure to state a claim is... exceedingly low.'" Acosta v. Watts, 281 F.Appx. 906, 908 (11th Cir. 2008) (quoting Ancata v. Prison Health Servs., Inc., 769 F.2d 700, 703 (11th Cir. 1985)).

While the Court must conduct its analysis "accepting the allegations in the complaint as true and construing them in the light most favorable to the Plaintiff, " Hill v. White, 321 F.3d 1334, 1335 (11th Cir. 2003), in evaluating the sufficiency of a Plaintiff's pleadings, the Court must "make reasonable inferences in Plaintiff's favor, but we are not required to draw Plaintiff's inference.'" Sinaltrainal v. Coca-Cola Co., 578 F.3d 1252, 1260 (11th Cir. 2009) (quoting Aldana v. Del Monte Fresh Produce, N.A., Inc., 416 F.3d 1242, 1248 (11th Cir. 2005)). The Supreme Court instructs that while on a Motion to Dismiss "a court must accept as true all of the allegations contained in a Complaint, " this principle "is inapplicable to legal conclusions, " which "must be supported by factual allegations." Ashcroft v. Iqbal, 556 U.S. 662, 678-79 (2009) (citing Twombly, 550 U.S. at 555, for the proposition that courts "are not bound to accept as true a legal conclusion couched as a factual allegation" in a complaint.) In the post- Twombly era, "[d]etermining 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." Iqbal, 556 U.S. at 679.

To analyze Johnston's motion to dismiss, the Court must rely on the following facts as asserted by the amended complaint. See Chaparro v. Carnival Corp., 693 F.3d 1333, 1335 (11th Cir. 2012) (citing Cinotto v. Delta Air Lines Inc., 674 F.3d 1285, 1291 (11th Cir. 2012)). Grace Elizabeth Martin Johnston, a citizen of Ohio, is the daughter of Vance "Rudy" Martin ("Rudy Martin"), the sister of Derek Martin and Jeff Martin, and the wife of James Patrick Johnston. (Doc. 113 at ¶¶ 31 & 32.) She was, at all times relevant to this suit, an equity owner of Small Loans, Inc., The Money Tree, Inc., The Money Tree of Georgia, Inc., The Money Tree of Florida, Inc., and The Money Tree of Louisiana, Inc. (collectively, "the Debtors"), and The Interstate Motor Club, Inc., as well as the owner and/or beneficiary of various trusts and entities established by members of the Martin family, including the Johnston trust. ( Id. at ¶ 31.)

In 1987, Rudy Martin founded The Money Tree of Georgia in Bainbridge, Georgia. ( Id. at ¶ 44.) Over time, Rudy Martin organized various corporate affiliates of The Money Tree of Georgia in Alabama, Florida, and Louisiana. ( Id. ) The Money Tree was organized as the parent company of Small Loans, The Money Tree of Georgia, The Money Tree of Florida, and The Money Tree of Louisiana. ( Id. at ¶¶ 17 & 44.) The primary business of those corporate entities was providing small loans to individuals with limited access to credit. ( Id. at ¶ 44.)

By 2000, the Debtors were insolvent and continued in business only by raising additional funds by debt offerings to Investors, who were primarily Georgia retirees. ( Id. at ¶¶ 3 & 44.) Best Buy Autos of Bainbridge, Inc. ("Best Buy"), a subsidiary of The Money Tree of Georgia, and therefore an indirect subsidiary of The Money Tree, sold and financed automobiles. ( Id. at ¶¶ 34 & 45.) From 2009 until the Debtors filed for bankruptcy, Best Buy owed The Money Tree of Georgia at least $16.97 million. ( Id. at ¶ 45.) The Money Tree and The Money Tree of Georgia raised capital by selling various debt instruments to people residing in Georgia. ( Id. at ¶ 46.) The latter sold various debt instruments to Georgia investors from 1999 until 2005. ( Id. at ¶ 47.) The Money Tree of Georgia raised approximately $73 million in capital during that time period. ( Id. ) In 2005, The Money Tree registered with the United States Securities and Exchange Commission to sell debt instruments to members of the public. ( Id. at ¶ 48.) From 2005 until 2011, The Money Tree raised approximately $71 million in capital through debt offerings. ( Id. )

The Debtors filed for bankruptcy and their Chapter 11 Plan was confirmed on or about May 6, 2013. ( Id. at ¶ 49.) The Plaintiff was appointed to pursue any claims and causes of action held by the Debtors' estates because those estates do not have sufficient assets to satisfy at least $84 million in claims of the Debtors' creditors. ( Id. ) The Debtors' loss of assets and, derivatively, the creditors' loss of ...


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