In re Atna Resources, Inc.

          ORDER

          ROBERT E. BLACKBURN, UNITED STATES DISTRICT JUDGE

         This matter is an adversary proceeding filed initially in the United States Bankruptcy Court for the District of Colorado as Adv. Proceeding No. 17-01160-JGR. This adversary proceeding was initiated when the plaintiff, Atna Liquidating Trust, Kenneth J. Buechler, Liquidating Trustee (the Trustee), filed in the bankruptcy court a complaint [#1 - Adv. Proceeding No. 17-01160-JGR] against the defendant, Elwood Staffing Services, Inc. The Trustee later filed an amended complaint [#20 - Adv. Proceeding No. 17-01160-JGR] (the Complaint). In the Complaint, the Trustee seeks to recover from Elwood alleged preferential transfers and fraudulent transfers. I entered an order [#6]^[2] withdrawing the reference of this adversary proceeding to the bankruptcy court and again referred this matter to the bankruptcy court for resolution of pretrial issues, including dispositive motions.

         On December 14, 2018, the bankruptcy court entered its Order Granting Defendant's Motion To Dismiss Third and Fourth Claims of Amended Complaint [#46 - Adv. Pro. No. 17-01160-JGR]^[3]. The bankruptcy court ordered that the third and fourth claims alleged in the Complaint be dismissed with prejudice. The bankruptcy court entered judgment [#47 - Adv. Pro. No. 17-01160-JGR] dismissing the third and fourth claims with prejudice. The Trustee then filed with this court a motion for clarification [#8] asking this court to determine if the court would treat the order and judgment of the bankruptcy court as a binding order and judgment or as proposed findings of fact and conclusions of law subject to objections and de novo review by the district court. Addressing the motion to clarify, I concluded that I must treat the final order and judgment [#46, #47 - Adv. Proceeding No. 17-01160-JGR] of the bankruptcy court as proposed findings of fact and conclusions of law. Order [#10].

         The proposed findings of fact and conclusions of law of the bankruptcy court are subject to de novo review under 28 U.S.C. § 157(c)(1). Under § 157(c)(1), the district court must enter a final order or judgment after considering the proposed findings and conclusions of the bankruptcy court and after reviewing de novo those matters to which any party has timely and specifically objected.

         Now before me are the following: (1) the Defendant's Motion for Partial Dismissal of Complaint [#21 - Adv. Pro. No. 17-01160-JGR]; and (2) the Order Granting Defendant's Motion To Dismiss third and Fourth Claims of Amended Complaint [#46 - Adv. Proceeding No. 17-01160-JGR], which I treat as proposed findings of fact and conclusions of law. The Trustee filed objections [#13');">13');">13');">13');">13');">13');">13');">13] to the order of the bankruptcy court, and Elwood filed a response [#15] to the objections. Having reviewed the filings noted above and the relevant portions of the record, I now conduct a de novo review of the order of the bankruptcy court under 28 U.S.C. § 157(c)(1).

         I. STANDARD OF REVIEW

         The motion to dismiss seeks dismissal of the third and fourth claims under Fed.R.Civ.P. 12(b)(6). In its order, the bankruptcy court recited the relevant standard applicable to a motion to dismiss under Rule 12(b)(6). To summarize, under Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 562 (2007), I must review the complaint to determine if it “‘contains enough facts to state a claim to relief that is plausible on its face.'” Ridge at Red Hawk, L.L.C. v. Schneider, 493 F.3d 1174, 1177 (10^th Cir. 2007) (quoting Twombly, 550 U.S. at 569). I must accept all well-pleaded factual allegations of the complaint as true. McDonald v. Kinder-Morgan, Inc., 287 F.3d 992, 997 (10^thCir. 2002). However, mere “labels and conclusions or a formulaic recitation of the elements of a cause of action” will not be sufficient to defeat a motion to dismiss. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citations and internal quotation marks omitted). See also Robbins v. Oklahoma, 519 F.3d 1242, 1247-48 (10^th Cir. 2008) (“Without some factual allegation in the complaint, it is hard to see how a claimant could satisfy the requirement of providing not only ‘fair notice' of the nature of the claim, but also ‘grounds' on which the claim rests.”) (quoting Twombly, 550 U.S. at 555 n. 3) (internal citations and footnote omitted). To meet the plausibility standard, the complaint must suggest “more than a sheer possibility that a defendant has acted unlawfully.” Iqbal, 556 U.S. at 678.

         II. BACKGROUND

         The debtors in these jointly administered bankruptcy cases are affiliated mineral exploration and mining entities that operated under the umbrella of a publicly-traded Canadian company, debtor Atna Resources, Ltd. (Atna Ltd.). Atna Ltd. operated its United States-based companies through a wholly-owned Delaware corporation, Canyon Resources Corporation (Canyon). In turn, Canyon was the sole owner of three Colorado corporations: CR Briggs Corporation (CR Briggs), CR Montana Corporation, and CR Kendall Corporation. Canyon also was the sole owner of Atna Resources, Inc. (Atna, Inc.), a Nevada corporation, and Horizon Wyoming Uranium, Inc., a Wyoming corporation. Attached to the order of the bankruptcy court is a helpful organizational chart which shows the organization of these entities. Order [#46 - Adv. Pro. No. 17-01160-JGR], p. 18. All of these entities are debtors in this jointly administered case.

         Canyon maintained a centralized cash account (CCA) for the affiliated companies. Prior to the bankruptcy filings, substantially all the revenues funding the Canyon CCA were provided by Atna, Inc. through the operation of the Pinson mine and by CR Briggs through the operation of the CR Briggs mine. The other companies did not generate significant revenues. Canyon would make transfers from the commingled funds in the Canyon CCA to the separate bank accounts of Atna, Inc. and CR Briggs so those operating companies could pay the expenses of operations. Attached to the order of the bankruptcy court is a helpful flow chart which shows the operation of the CCA as relevant to the transactions at issue in third and fourth claims alleged in the complaint. Order [#46 - Adv. Pro. No. 17-01160-JGR], p. 20.

         Prior to the bankruptcy filings, Elwood provided temporary staffing services to Atna, Inc. Elwood had no business dealings with any of the other debtors. In claims one and two of the complaint, the trustee seeks to recover from Elwood certain alleged avoidable preferential transfers to Elwood in the 90 days before the bankruptcy petitions were filed. Claims one and two are not challenged in the motion to dismiss.

         In claims three and four, the Trustee asserts claims against Elwood for recovery of alleged avoidable fraudulent transfers, totaling $49, 881, made within two years of the bankruptcy filings of the debtors. In claim three, the Trustee alleges these transfers are voidable under the laws of Nevada, California, and Colorado, as applicable to specific transfers, citing the versions of the Uniform Fraudulent Transfers Act adopted in those states. The Trustee brings these claims based on the avoidance powers granted to the Trustee under the Bankruptcy Code, 11 U.S.C. § 544(b). In claim four, the Trustee alleges that the transfers are voidable as constructive fraudulent transfers under 11 U.S.C. § 548(a)(1)(B).

         Claims three and four of the Trustee are based on the following series of alleged transfers: (1) transfers from the bank account of CR Briggs to the Canyon CCA account; (2) transfers from the bank account of Atna, Inc. to the Canyon CCA account; (3) subsequent transfers from the co-mingled funds in the Canyon CCA account to the bank account of Atna, Inc.; and (4) ultimately, payments to Elwood from the bank account of Atna, Inc. The net effect of these transfers, the Trustee alleges, is that property and assets of CR Briggs and Canyon were transferred to Elwood to pay debts owed to Elwood by Atna, Inc. Complaint [#20 - Adv. Pro. No. 17-01160-JGR], ¶ 87. The Trustee alleges that debtors CR Briggs and Canyon received less than reasonably equivalent value for the transfers. In addition, the Trustee alleges that the debtors were, at the time of the transfers, insolvent or they otherwise met the criteria specified in 11 U.S.C. § 548(a)(1)(B)(ii) and the relevant state law provisions.

         III. ANALYSIS

         A. Application of In re Slack-Horner Foundries Co.

         In the motion to dismiss, Elwood argues that the Trustee may not seek to avoid transfers from Atna Inc. to Elwood without also avoiding the prior transfers, the transfers from CR Briggs to the Canyon CCA, the transfers from Atna, Inc. to the Canyon CCA, and the subsequent transfers from the Canyon CCA to Atna. Inc. Elwood relies on the holding of the United States Court of Appeals for the Tenth Circuit in In re Slack-Horner Foundries Co., 971 F.2d 577, 578 (10th Cir. 1992). The bankruptcy court agreed. This is one of the primary bases for the conclusion of the bankruptcy court that the allegations in claims three and four fail to state a claim against Elwood.

         In Slack-Horner, the debtor owned a parcel of real estate. In 1983, the county treasurer conducted a tax sale of the property for nonpayment of real property taxes. Simons was the successful bidder at the tax sale and received a tax sale certificate of purchase. Simons also paid the delinquent real property taxes for the years 1982 through 1987. In December of 1987, Simons obtained a ...