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Churchill Medical Systems, Inc. v. Rubacha

United States District Court, D. Colorado

November 12, 2019



          William J. Martínez United States District Judge

         In this action, Plaintiff Churchill Medical Systems, Inc. (“Churchill”), sues Ashley Capital, LLC (“Ashley Capital”), Paul Rubacha, Ross Kurz, Robert Auskalnis, and former employees of WalkMed Infusion LLC (“Old WalkMed”) (together, “Defendants”) for fraudulent transfer under the Colorado Uniform Fraudulent Transfer Act (“CUFTA”), Colo. Rev. Stat. §§ 38-8-101 et seq., and for civil conspiracy. (ECF No. 1.) Currently before the Court is Defendants' Partial Motion to Dismiss (the “Motion”). (ECF No. 21.) For the reasons stated below, Defendants' Motion is granted in part and denied in part.

         I. BACKGROUND

         The Court accepts the following allegations, drawn from the complaint, as true for purpose of resolving the pending Motion.

         In 2011, Churchill and Old WalkMed entered into a supply agreement under which Churchill would provide medical devices to Old WalkMed. (ECF No. 1 ¶ 23; ECF No. 1-1.) At the time, Old WalkMed was led by Rubacha as the Chief Executive Officer, Kurz as the President, and Auskalnis as the Chief Financial Officer. (ECF No. 1 ¶¶ 6-8.) The relationship between Churchill and Old WalkMed subsequently deteriorated. On October 2, 2015, Churchill sent a letter to Old W alkMed terminating the supply agreement. (Id. ¶ 27.) Churchill also sent Old WalkMed invoices for outstanding amounts due in March 2016. (Id. ¶¶ 28-29.)

         During this period, on July 1, 2016, Old WalkMed entered an asset purchase agreement with Panacea Infusion, LLC (“Panacea”), a company formed by Rubacha and Kurz, “to sell the so-called Project Panacea Assets to Panacea.” (Id. ¶¶ 35-36.) Churchill alleges on information and belief that Old WalkMed transfered to Panacea the Project Panacea Assets “without receiving a reasonably equivalent value in exchange for such assets, and the transfer was made in order to hinder, dely, or defraud.” (Id.) Churchill also alleges that Old WalkMed was insolvent at the time of the transaction. (Id.)

         The relationship of the parties did not improve with time. On August 15, 2016, Churchill sent Old WalkMed a demand letter for amounts due under the contract. (Id. ¶ 31.) On October 14, 2016, Churchill filed a demand to begin arbitration proceedings to recover damages. (Id. ¶ 32.) On November 9, 2017, Churchill obtained an arbitration award in the amount of $954, 330.54 plus pre-judgment interest. (Id. ¶ 33; ECF No. 1-6.) On July 10, 2018, the U.S. District Court for the Eastern District of Pennsylvania confirmed the award and entered judgment in favor of Churchill in the amount of $954, 330.54. (ECF No. 1-7.)

         On January 27, 2017, Old WalkMed entered into a product purchase agreement with WalkMed, LLC (“New WalkMed”) to sell Old WalkMed's remaining assets to New WalkMed. (ECF No. 1 ¶ 37.) Some of the proceeds of this transaction were paid as bonuses and severance payments-totaling $405, 305-to insiders and employees of Old WalkMed. (Id. ¶ 38.) Churchill alleges that, in 2017, Phil Prescott received at least $118, 405 (id. ¶ 10); Sally Leonard received at least $59, 202 (id. ¶ 11); Sal Lantieri received at least $47, 465 (id. ¶ 12); Mario Blanco received at least $16, 000 (id. ¶ 13); Thomas Assante received at least $47, 465 (id. ¶ 14); Stella Sularski received at least $9, 000 (id. ¶ 15); Geary Ryder received at least $6, 000 (id. ¶ 16); Tina Blanco received at least $9, 000 (id. ¶ 17); and Leslie Hall received at least $2, 000 (id. ¶ 18). Churchill alleges that each of these individuals (together, the “Relief Defendants”) received funds without providing adequate value for services and while having reasonable cause to believe that Old WalkMed was insolvent. (Id. ¶¶ 10-18.) Churchill alternatively suggests that Old WalkMed became insolvent as a result of these bonuses and severance payments. (Id. ¶ 38.)

         Plaintiff also alleges that, in 2017, Old WalkMed transferred $47, 350 to Ashley Capital for “administrative fees” and “shared services.” (Id. ¶ 39.) Rubacha is the co- founder and principal of Ashley Capital, and Auskalnis is the Vice President. (Id. ¶¶ 6, 8.) Churchill alleges on information and believe that Old WalkMed did not receive reasonably equivalent value for these payments, and that the transfers occurred while Old WalkMed was insolvent. (Id.)


         Under Federal Rule of Civil Procedure 12(b)(6), a party may move to dismiss a claim in a complaint for “failure to state a claim upon which relief can be granted.” The Rule 12(b)(6) standard requires the Court to “assume the truth of the plaintiff's well-pleaded factual allegations and view them in the light most favorable to the plaintiff.” Ridge at Red Hawk, LLC v. Schneider, 493 F.3d 1174, 1177 (10th Cir. 2007). In ruling on such a motion, the dispositive inquiry is “whether the complaint contains ‘enough facts to state a claim to relief that is plausible on its face.'” Id. (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). Granting a motion to dismiss “is a harsh remedy which must be cautiously studied, not only to effectuate the spirit of the liberal rules of pleading but also to protect the interests of justice.” Dias v. City & Cnty. of Denver, 567 F.3d 1169, 1178 (10th Cir. 2009) (internal quotation marks omitted). “Thus, ‘a well-pleaded complaint may proceed even if it strikes a savvy judge that actual proof of those facts is improbable, and that a recovery is very remote and unlikely.'” Id. (quoting Twombly, 550 U.S. at 556).

         III. ANALYSIS

         Under the CUFTA, a transfer of funds by a debtor can be intentionally or constructively fraudulent. “The transfer is intentionally fraudulent as to a creditor if it was made with the intent to hinder, delay or defraud the creditor.” Wellons, Inc. v. Eagle Valley Clean Energy, LLC, 2015 WL 7450420, at *2 (D. Colo. Nov. 24, 2015) (citing Colo. Rev. Stat. § 38-8-105(1)(a)). A transfer may be constructively fraudulent in one of three ways under the CUFTA. First, a transfer is constructively fraudulent if the debtor made the transfer without receiving a “reasonably equivalent value” and the remaining assets of the debtor were “unreasonably small in relation to the transaction” or the debtor reasonably should have believed that he would incur debts beyond his ability to pay as they became due. Colo. Rev. Stat. § 38-10-105(b).

         “Creditors whose claims arose before the transfer have two additional varieties of constructive fraud” ...

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