United States District Court, D. Columbia.
For RRR, Inc., Plaintiff: Jonathan Spencer Jacobs, LEAD ATTORNEY, AEGIS LAW GROUP LLP, Washington, DC USA.
For Thomas M. Toggas, Kathryn Toggas, Net Branch Capital, LLC, Defendants: William Franklin Burton, LEAD ATTORNEY, Washington, DC USA.
BERYL A. HOWELL, United States District Judge.
Pending before the Court in this long-running action is Defendants Thomas M. Toggas and Kathryn Toggas' Motion for Relief from Judgment (" Defs.' Mot." ), ECF No. 72, which the Court construes as a motion for relief, pursuant to Federal Rule of Civil Procedure 54(b), from the Court's Memorandum Opinion and Order of January 9, 2014, ECF No. 52, denying the defendants' " Motion to Dismiss (Subject Matter Jurisdiction)" (" Defs.' 2013 Mot. Dismiss" ), ECF No. 48. Since the Court issued its Order denying the defendants' 2013 Motion to Dismiss, a South Carolina court has definitively--and dispositively--resolved a fundamental dispute in this matter. Consequently, for the reasons set forth below, the defendants' motion is granted and this case is dismissed as to all defendants.
The factual background of this action, brought pursuant to the District of Columbia's Uniform Fraudulent Transfer Act (the " DCUFTA" ), D.C. Code § § 28-3101 et seq., has been explained in detail in this Court's prior opinions and orders. See Mem. Op., Sept. 24, 2013 (the " Sept. 2013 Mem. Op." ) at 2-9, ECF No. 39; Mem. Op., Jan. 9, 2014 (the " January 2014 Mem. Op." ) at 1-4, ECF No. 52. The full history
of this litigation will not be repeated here, in favor of a brief discussion of the procedural and legal developments that have occurred since the Court's January 2014 Memorandum Opinion and Order denying the defendants' December 2013 Motion to Dismiss.
The instant suit alleges that the defendants engaged in various fraudulent transfers of assets to stymie the plaintiff's attempt to collect on a judgment rendered by a South Carolina court in 2003. See generally Compl., ECF No. 1. The defendants moved to dismiss this matter twice, Defs.' Mots. Dismiss at 1, ECF Nos. 4, 5; Defs.' 2013 Mot. Dismiss at 1, and both times the Court denied the motions, Order, Jan. 27, 2012, at 1, ECF No. 12; January 2014 Mem. Op. at 1. The most recent motion to dismiss occurred in December 2013, after extensive discovery and motions practice, in which the defendants challenged the Court's subject matter jurisdiction over this action, less than a month before a bench trial was set to begin. Defs.' 2013 Mot. Dismiss at 1. The defendants averred that the South Carolina judgment had been extinguished as a matter of law and, consequently, the plaintiff was no longer a " creditor" within the meaning of the DCUFTA and, thus, there was no case or controversy at issue. See generally id. The defendants' motion was denied in January 2014, January 2014 Mem. Op. at 1, and the parties were ordered to appear for a bench trial on January 13, 2014, as previously scheduled, Minute Order, Nov. 25, 2013.
On January 13, 2014, only Defendants Kathryn Toggas and Net Branch Capital, LLC appeared for trial, however, since Defendant Thomas Toggas was absent due to his filing for bankruptcy in Pennsylvania that very morning. Trial Tr. (" Tr." ) at 2:20-23, ECF No. 61. During a brief recess after opening statements, but before testimony had begun, Defendant Kathryn Toggas filed for bankruptcy in the District of the District of Columbia. Id. 36:1-4. The filing of these petitions resulted in an automatic stay of proceedings pursuant to 11 U.S.C. § 362, against Defendants Thomas Toggas and Kathryn Toggas, but proceedings against the corporate defendant, Net Branch Capital, LLC, proceeded. See id. 37:8-20. Defendant Thomas Toggas eventually appeared as a witness in the bench trial after his counsel informed him that Defendant Thomas Toggas' presence was required by a trial subpoena and, if he did not appear, the Court would issue a bench warrant for his arrest. See Tr. at 7:5-22; id. 36:9-19.
At the conclusion of the bench trial, the plaintiff orally moved for an expedited factual finding that the defendants acted in bad faith by filing their bankruptcy petitions on the first day of trial. Id. at 233:11-234:21. That motion was granted in part and denied in part after the Court received briefing from the parties. Mem. & Order at 3, ECF No. 59. Consideration of the case was then stayed under the automatic stay provision of 11 U.S.C. § 362 until the defendants' bankruptcy proceedings were resolved. Minute Order, Feb. 26, 2014.
In late November, 2014, the plaintiff filed a " Notice of Bankruptcy Court Rulings Allowing This Case To Proceed," as required by the Court's Order outlining post-trial proceedings, and advised the Court that the bankruptcy courts with jurisdiction over Defendant Thomas Toggas and Defendant Kathryn Toggas' petitions had granted relief from the bankruptcy code's discharge injunction to allow this
action to proceed. Pl.'s Notice of Bankruptcy Crt. Rulings at 1-2, ECF No. 64. The stay in this matter was subsequently vacated, and the parties proceeded to complete post-trial briefing. See Minute Order Dec. 1, 2014; Minute Order, Dec. 4, 2014; Minute Order, Jan. 8, 2015.
Six days after submitting their response to the plaintiff's proposed conclusions of law--which submission rendered the bench trial ripe for decision--the defendants filed the instant motion styled a " Motion for Relief Pursuant to FRCP 60(b) From This Court's Interim Order Entered On January 9, 2014 Denying the Defendants' Motion to Dismiss the Above Captioned Case." Defs.' Mot. at 1. The defendants' motion essentially resurrects the arguments in their December 2013 motion to dismiss, but this motion is predicated on a new, salient fact: namely, that a South Carolina court definitively ruled that the underlying judgment on which the plaintiff's fraudulent transfer action was based has been extinguished as a matter of law. Id. Consequently, the defendants allege that the plaintiff lacks standing to pursue this action since the DCUFTA " does not create ...