United States District Court, D. Colorado
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
(10th 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
(10thCir. 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
(10th 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 ...