Civil Action No. 03-2889 Section: "R" (5).
January 28, 2005
ORDER AND REASONS
Defendants Clayton Kresge and Standard Collision move the Court to dismiss 3 Eagles' claims against them for lack of timely filing. For the following reasons, the Court DENIES the motion.
Wayne Rousseau personally and unconditionally guaranteed two promissory notes executed by 3 Eagles and Rollins Air S. De R.L. One of the notes is dated September 24, 1997, and the other is dated December 18, 1997 (collectively, "the note"). Rollins Air missed several payments on the note, and 3 Eagles made demand on Mr. Rousseau. Mr. Rousseau never responded to 3 Eagles's demands.
On January 22, 2002, Mr. Rousseau sued 3 Eagles in this Court for a declaration that the guarantee he executed on the note was a nullity. On September 30, 2002, the Court held Mr. Rousseau unconditionally liable for the note. The Court entered judgment against Mr. Rousseau and in favor of 3 Eagles in the amount of $1,341,462.14, plus interest. The Court also entered a judgment for attorney's fees in favor of 3 Eagles against Rousseau in the amount of $49,660.68 on April 2, 2003. To date, 3 Eagles has seized and collected approximately $73,280.00 of the $1.6 million that Mr. Rousseau owes. Mr. Rousseau alleges that he has no other assets to satisfy the judgments.
On February 14, 2002, Mr. Rousseau allegedly withdrew $285,028.87 from his Solomon Smith Barney account and invested it in Standard Collision. (Pl.'s Am. Compl. ¶ 60(a).) 3 Eagles learned of this investment on May 28, 2003, when Rousseau stated in deposition that he invested a significant amount of money in Standard Collision. On June 10, 2003, Mr. Rousseau produced a stock certificate that reflected that he made a $285,087.00 investment in Standard Collision. The same say, 3 Eagles filed a petition for garnishment under Rule 69(a) against Standard Collision to recover Mr. Rousseau's investment. On August 27, 2003, 3 Eagles sought to have Standard Collision turn over Rousseau's shares. Although the Court issued a turnover order, it ultimately vacated it on August 3, 1994.
Before 3 Eagles instituted the garnishment proceeding, 3 Eagles had sued Mr. Kresge, Standard Collision and several others for revocation of several transfers of assets that Mr. Rousseau made when he owed an antecedent debt to 3 Eagles. Specifically, the complaint alleges that Mr. Rousseau "systematically enter[ed] into fraudulent conveyances." (Pl.'s Compl. at ¶ 17.) The Court revoked the transfers on January 5, 2005. (R. Doc. 59.) In the initial complaint, 3 Eagles alleged that Mr. Kresge was actively involved in the transfers. Additionally, 3 Eagles named Standard Collision as a defendant, but 3 Eagles did not pray for relief against Standard Collision. Instead, 3 Eagles noted that Mr. Kresge was "subject to a motion to turn over funds in the amount of $285,000.00. These funds were invested by Mr. Rousseau in Standard Collision, Inc., at a time he was unable to pay his debt to 3 Eagles." (Pl.'s Compl. n. 12.)
After the Court vacated the turnover order, 3 Eagles amended its complaint to allege that Mr. Rousseau effected the stock purchase in Standard Collision when he owed an antecedent debt to 3 Eagles and that transaction increased his insolvency. 3 Eagles sought to annul the transfer. Mr. Kresge and Standard Collision move the Court to dismiss the claim for lack of timely filing.
Under Louisiana Civil Code article 2041, the obligee must bring a revocatory action "within one year from the time he learned or should have learned of the act" that he seeks to annul. The parties dispute whether 3 Eagles timely filed its amended complaint, advancing different legal theories about what triggers the running of the prescriptive period. The parties also dispute whether the amended complaint relates back to the original complaint. If the amended complaint relates back to the original complaint, it is not barred by prescription. The Court will first determine whether the amendment relates back to the original complaint. If it does, the Court need not reach the disputed legal issue about when prescription begins to run on a revocatory action.
A. Legal Standard
Rule 15(c) provides for relation back of amendments when the claim asserted in the amended pleading "arose out of the conduct, transaction, or occurrence set forth or attempted to be set forth in the original pleading." Fed.R.Civ.P. 15(c) (2). There is no mechanical test to determine whether an amendment relates back. F.D.I.C. v. Conner, 20 F.3d 1376, 1386 (5th Cir. 1994). Typically, Rule 15 is liberally construed to permit amendments to pleadings. Williams v. U.S., 405 F.2d 234, 236 (5th Cir. 1968). In addition to the factors enumerated in the rule, notice to the defendant is a critical element in determining relation back. Id.
The Court finds that the revocatory claim in the amended pleading arises out of the same pattern of conduct on which the original pleading is based. In the original pleading, 3 Eagles alleged that Mr. Rousseau engaged in a systematic pattern of transferring assets at a time that he owed an antecedent debt to 3 Eagles. Under Louisiana Civil Code article 2036, "[a]n obligee has a right to annul an act of the obligor, or the result of a failure to act of the obligor, made or effected after the right of the obligee arose, that causes or increases the obligor's insolvency." To prevail on the revocatory claims presented in the original complaint, 3 Eagles had to prove (1) that Mr. Rousseau effected the transfers after 3 Eagles' right arose, and (2) that the transfers caused or increased Mr. Rousseau's insolvency. Trania v. Whitney Nat'l Bank, 109 F.3d 244, 246 (5th Cir. 1997). In the amended complaint, 3 Eagles states another revocatory claim. To recover on its claim, 3 Eagles must prove the same type of conduct and some of the same facts that it had to prove under its original complaint.
The Court notes that this case presents circumstances analogous to F.D.I.C. v. Conner, 20 F.3d 1376 (5th Cir. 1994). In Conner, the F.D.I.C. sued the directors of a failed bank, alleging that they acted negligently in approving twenty-one specified loans to specified borrowers. Id. at 1378. The F.D.I.C. later sought leave to amend its original complaint to add several more loans that were not identified in the original complaint. Id. at 1385. The Fifth Circuit found that the amended complaint related back because it identified "additional sources of damages that were caused by the same pattern of conduct identified in the original complaint." Id. at 1386. See also F.D.I.C. v. Grant, 8 F.Supp.2d 1275, 1288-89 (N.D. Okla. 1998). Thus, in Conner, the F.D.I.C. had to prove the same pattern of conduct, just with regard to different loans. Similarly, 3 Eagles must prove the same pattern of conduct here, only with the addition of another transfer. Proof of when 3 Eagles' right arose and proof that Mr. Rousseau was insolvent will be the same; 3 Eagles will simply prove an additional transfer increasing his insolvency. Compare In re Coastal Plains, 179 F.3d 197, 216 (5th Cir. 1999) (finding that a tortious interference claim did not arise from the same conduct as a failure to return inventory claim); McGregor v. Louisiana State University B'd of Supervisors, 3 F.3d 850, 864 (5th Cir. 1993) (finding that the amendment did not relate back because it alleged "new and distinct conduct"); and Holmes v. Greyhound Lines, Inc., 757 F.2d 1563, 1566 (5th Cir. 1985) (finding that the amended complaint did not relate back because the plaintiff would have had to prove bias, fraud, or prejudice under the initial complaint, and he would have had to prove completely different conduct, specifically arbitrary or capricious decision-making, under the amended complaint).
Moreover, the Court finds that Mr. Kresge and Standard Collision had sufficient notice of the claim. First, both were named and served as defendants in the original complaint which alleged a systematic pattern of fraudulent conveyances by Mr. Rousseau. Second, in the original complaint, 3 Eagles included the facts that put the defendants on notice that the stock purchase would be challenged. 3 Eagles alleged that Mr. Kresge was "subject to a motion to turn over funds in the amount of $285,000.00. These funds were invested by Mr. Rousseau in Standard Collision, Inc., at a time he was unable to pay his debt to 3 Eagles." (Pl.'s Compl. n. 12.) Moreover, Standard Collision and Mr. Kresge were aware from the garnishment proceeding, which they chose to ignore until 3 Eagles sought contempt proceedings, that 3 Eagles sought to recover the proceeds of the stock transfer. These facts compel the Court to conclude that Mr. Kresge and Standard Collision had sufficient notice of 3 Eagles' revocatory claim.
Accordingly, the Court finds that the amended complaint relates back to the original complaint and the prescriptive period does not bar it. The Court therefore does not reach the disputed legal issue of what triggers the prescriptive period in a revocatory action.
For the foregoing reasons, the Court DENIES the defendants' motion to dismiss 3 Eagles' claims in the amended complaint.