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Church Joint Venture v. Blasingame

United States District Court, W.D. Tennessee, Western Division

March 9, 2017

CHURCH JOINT VENTURE, A LIMITED PARTNERSHIP, Plaintiff,
v.
EARL BENARD BLASINGAME; MARGARET GOOCH BLASINGAME; EARL BENARD “BEN” BLASINGAME, JR.; BLASINGAME FAMILY BUSINESS INVESTMENT TRUST; BLASINGAME FAMILY RESIDENCE GENERATION SKIPPING TRUST; and FIBERZONE TECHNOLOGIES, INC.; Defendants.

          ORDER

          SAMUEL H. MAYS, JR. UNITED STATES DISTRICT JUDGE.

         Before the Court are the parties' pretrial memoranda and responses. On December 16, 2016, Plaintiff Church Joint Venture, a Limited Partnership (“Church JV”) filed its Memorandum Addressing Issues Remaining for Trial. (ECF No. 198 (“Church JV Mem.”).) On January 6, 2017, Defendants Earl Benard Blasingame (“EBB”); Margaret Gooch Blasingame (“MGB”); Earl Benard “Ben” Blasingame, Jr. (“EBB Jr.”); Fiberzone Technologies, Inc. (“Fiberzone”); Blasingame Family Residence Generation Skipping Trust (“BFRGST”); and Blasingame Family Business Investment Trust (“BFBIT”) -- collectively, “Defendants”[1] -- filed their Memorandum in Response to Plaintiff's Memorandum Addressing Issues Remaining for Trial. (ECF No. 201 (“Defs.' Resp.”).)

         On December 16, 2016, Defendants filed their Memorandum Concerning Remaining Claims to be Tried. (ECF No. 199 (“Defs.' Mem.”).) On January 6, 2017, Church JV filed its Response to Defendants' Memorandum Concerning Remaining Claims to be Tried. (ECF No. 200 (“Church JV Resp.”).)

         Also before the Court is the November 22, 2016 Motion and Memorandum of BFBIT and EBB Jr. to Strike [Certain Allegations] of Amendment to Paragraph 7 of Complaint. (ECF No. 191 (“Mot. to Strike”).) Church JV did not file a response to the Motion to Strike, and the deadline for doing so has passed. L.R. 7.2(a)(2). The Church JV Memorandum and Church JV Response contain pertinent material that the Court has considered. (See Church JV Mem. ¶¶ 4-8 & n.3; Church JV Resp. 5-10.)

         For the following reasons, the Motion to Strike is DENIED. Two issues remain for trial. The first is whether (and to what extent) MGB's deposits -- between January 1, 2007, and July 31, 2008 -- of annuity and paycheck payments into a BFRGST bank account are fraudulent transfers. The second is whether (and to what extent) Debtors' transfer to BFBIT of the real property listed in a quitclaim deed dated January 14, 2005, is a fraudulent transfer. No claims remain for trial as to EBB Jr. or Fiberzone. Both are dismissed from this action.

         I. BACKGROUND

         Section I of the Court's Order dated November 17, 2016 -- the “November 2016 Order” -- recounts the history of this matter. Church Joint Venture, a Ltd. P'ship v. Blasingame, No. 2:12-CV-02999, 2016 WL 6810873, at *2-5 (W.D. Tenn. Nov. 17, 2016). This Background section addresses only the November 2016 Order and the proceedings that have followed it.

         The November 2016 Order addressed, inter alia, five motions. First, it addressed the Motion to Dismiss [First] Amended Complaint Pursuant to Federal Rule of Civil Procedure Rule 12(b)(6) filed by EBB Jr. and Katherine Blasingame Church (“KBC”) on June 29, 2016. (ECF No. 155 (“KBC/EBB Jr. Mot.”).) The Court granted the motion. (November 2016 Order at *10-11.)

         The Court also granted Church JV leave to “amend the Amended Complaint to state that EBB Jr. is Debtors' son.” (Id. at *12; see id. at *12 n.6.) The Amended Complaint contained “several allegations that suggest transfers to Debtors' son.” (Id. at *10; see Am. Compl. ¶¶ 81(a), 84(a), 91.) The Court concluded that an amendment stating that EBB Jr. is Debtors' son would permit claims based on those allegations to proceed. (Id. at *10.)

         Second, the November 2016 Order addressed the Motion for Summary Judgment as to Counts II, III, IV, and V of the Complaint filed by Fiberzone on June 29, 2016. (ECF No. 156 (“Fiberzone Mot.”).) The Court considered four Fiberzone-related fraudulent-transfer claims, one of which was that MGB performed a fraudulent transfer by incurring obligations to credit-card companies for charges made on her credit card for Fiberzone's benefit (the “Credit-Card Claim”).[2] The Court granted the Fiberzone Motion on all claims but the Credit-Card Claim, concluding that the Credit-Card Claim “is the only Fiberzone-related fraudulent-transfer claim remaining for trial.” (November 2016 Order at *16.)

         Third, the November 2016 Order addressed Debtors' Motion to Dismiss First Amended Complaint Pursuant to Fed.R.Civ.P. 12(b)(6) and, in the Alternative, Motion for Summary Judgment, filed on July 11, 2016. (ECF No. 158 (“Debtors' Mot.”). The Court decided that “[t]he Amended Complaint lacks any allegations specifying transfers to either Debtor (as opposed to transfers from the Debtors).” (November 2016 Order at *17.) The Court granted Debtors' Motion that the Court dismiss any claims based on fraudulent transfers to Debtors. (Id.) The Court concluded that “[n]o claims of fraudulent conveyances to Debtors survive for trial.” (Id. at *18.)

         Debtors' Motion also asked that Debtors be dismissed because they are neither necessary nor permitted parties. (Debtors' Mot. 3.) The Court denied that part of Debtors' Motion, holding that Debtors are required parties under Rule 19(a)(1)(A) or, alternatively, permitted parties under Rule 20(a)(2)(B). (November 2016 Order at *17-18.)

         Fourth, the November 2016 Order addressed BFRGST's July 11, 2016 Motion for Summary Judgment as to Counts II, III, IV, and V of the Complaint and for Partial Dismissal Pursuant to Rule 12(b)(1) as to Paragraph 24(a) of the Complaint. (ECF No. 159 (“BFRGST Mot.”).) The Order analyzed three potential fraudulent-transfer claims against BFRGST. The first arose from a certificate of deposit (CD) purchased by MGB. The Court granted the BFRGST Motion on that claim. (November 2016 Order at *21.) The second claim arose from MGB's deposits of annuity and paycheck payments into a BFRGST bank account. The Court denied the BFRGST Motion on that claim. (Id. at *23.) The third claim was stated in Paragraph 25(a) of the Amended Complaint. Paragraph 25(a) alleged that MGB had collected proceeds from the sale of property left to her by her mother and then transferred those proceeds to BFRGST. (Am. Compl. ¶ 25(a).) The Court granted the BFRGST Motion on the Paragraph 25(a) claim. (November 2016 Order at *25.)

         Fifth, the November 2016 Order addressed BFBIT's July 11, 2016 Motion to Dismiss Pursuant to Fed.R.Civ.P. 12(b)(1) and, in the Alternative, for Summary Judgment as to Counts II, III, IV, and V of the Complaint. (ECF No. 160 (“BFBIT Mot.”).) The Court denied the BFBIT Motion. (November 2016 Order at *27.)

         At the time of the November 2016 Order, this matter was set for trial on November 28, 2016. (Scheduling Order 1, ECF No. 154.) On November 18, 2016, the Court held a pretrial conference. (Minute Entry, ECF No. 187.) Counsel for the parties sought a continuance of the trial to review the November 2016 Order. (Id.) The Court denied that request. (Id.)

         On November 21, 2016, Church JV filed its Partial Amendment to Original Complaint. (ECF No. 189 (“Church JV Partial Amend.”).) The amended Paragraph 7 of the Amended Complaint reads, in relevant part, as follows:

Defendant EARL BENARD “BEN” BLASINGAME, JR. (“Ben” or “Ben Jr.”) is an adult resident and citizen of the State of Tennessee . . . . Ben Jr. is the son of EBB and MGB. . . . As further alleged below, EBB and MGB established a “clearing account” in the name of Ben Jr. and using his Social Security Number, into which they deposited hundreds of thousands of dollars between the time it was opened and the time EBB and MGB filed bankruptcy on August 15, 2008. Ben Jr. did not use this account. The ostensible purpose of the account was so that Joyce Long could write checks for various trusts controlled by EBB and MGB, yet she wrote and signed checks for those trusts on many occasions. Ms. Long, [Debtors'] long time bookkeeper, used the “clearing account, ” which was part of the BIT (defined herein) to pay bills of and loan money to EBB and MGB. The “clearing account” was concealed from EBB and MGB's creditors. Its use enabled EBB and MGB, who had no personal or real property in their name after December 1993, to maintain their lifestyle while at the same time concealing, hindering, delaying and defrauding their creditors from gaining access to the funds in the account.

(Id. at 1-2 (emphasis removed).)[3]

         On November 22, 2016, EBB Jr. filed his Answer to Church JV's Partial Amendment. (ECF No. 190.) EBB Jr. admitted being Debtors' son, but denied the remaining substantive allegations in Paragraph 7. (Id. at 1-2.) The same day, EBB Jr. and BFBIT filed the Motion to Strike.

         On November 23, 2016, the Court held a status conference. (Minutes, ECF No. 192.) After discussion with counsel, the Court continued the trial “to allow for clarification of claims.” (Id.) The Court set a status conference on November 28, 2016, to reschedule the trial.

         At the November 28 status conference, the Court set a new trial Dated: March 20, 2017. (Minutes, ECF No. 194.) The Court also ordered the parties to file memoranda addressing the remaining issues for trial by December 16, 2016, and to file responses by January 6, 2017. (Id.)

         On December 16, 2016, Church JV filed the Church JV Memorandum and Defendants filed Defendants' Memorandum. On January 16, 2017, Church JV filed the Church JV Response and Defendants filed Defendants' Response.

         II. ANALYSIS

         A. Motion to Strike

         The Motion to Strike asks the Court to “strike those portions of [Church JV's] amendment to paragraph 7 which go beyond Plaintiff's allegation that [EBB Jr.] is the son of [Debtors], ” and to “prohibit [Church JV] from attempting to introduce evidence in support of such claims at trial.” (Mot. to Strike 3-4.) Defendants cite no rule to support their Motion to Strike. (Church JV Mem. 7 n.3; see generally Mot. to Strike.) Rule 12(f) provides that a court “may strike from a pleading . . . any redundant, immaterial, impertinent, or scandalous matter.”[4] The Court construes the Motion to Strike to be based on Rule 12(f).

         Rule 12(f)'s language is permissive, not mandatory. A motion to strike serves the purpose of “‘avoid[ing] the expenditure of time and money that must arise from litigating spurious issues by dispensing with' them early in the case.” Operating Eng'rs Local 324 Health Care Plan v. G&W Const. Co., 783 F.3d 1045, 1050 (6th Cir. 2015) (quoting Kennedy v. City of Cleveland, 797 F.2d 297, 305 (6th Cir. 1986)). Such a motion, however, is “a drastic remedy to be resorted to only when required for the purposes of justice” and when “the pleading to be stricken has no possible relation to the controversy.” Brown & Williamson Tobacco Corp. v. United States, 201 F.2d 819, 822 (6th Cir. 1953); see also Parlak v. U.S. Immigration & Customs Enf't, No. 05-2003, 2006 WL 3634385, at *1 (6th Cir. Apr. 27, 2006) (quoting Brown). The Sixth Circuit has recently stated that Rule 12(f) motions “are viewed with disfavor and are not frequently granted.” Operating Eng'rs, 783 F.3d at 1050 (citing cases). Generally, “‘courts should not tamper with the pleadings unless there is a strong reason for so doing.'” Williams v. E.I. du Pont de Nemours & Co., Inc., No. 2:15-CV-02111-STA-DKV, 2016 WL 7192173, at *2 (W.D. Tenn. Dec. 12, 2016) (quoting City of New York v. Fedex Ground Package Sys., Inc., 314 F.R.D. 348, 354 (S.D.N.Y. 2016)).

         The gravamen of Defendants' argument is that Church JV's amendment goes beyond what the Court contemplated in its November 2016 Order. (Mot. to Strike ¶¶ 1-2.) In addition to the allegation that EBB Jr. is Debtors' son, the new Paragraph 7 includes allegations about a clearing account that appear neither in the original Amended Complaint nor in Church JV's discovery responses. (Id. ¶¶ 2-6.) Defendants contend the amendment is “prejudicial to the Defendants” and “expands the claims asserted by [Church JV] . . . .” (Id. ¶ 7.)

         Church JV has not filed a response to the Motion to Strike. The Church JV Memorandum, however, states that, “[t]o the extent necessary . . ., [5] Church JV adopts [the Church JV Memorandum] as its response to the Motion to Strike.” (Church JV Mem. ¶ 8 n.3.) Church JV argues that its Paragraph 7 amendment “satisfies the Court directive in [the November 2016 Order], tracks the allegations in the Amended Complaint, and complies with the Court's comments at the [November 18] Pretrial Conference . . . .” (Id. ¶ 6.)

         Striking material from Paragraph 7 is unnecessary. The purposes of justice do not require granting the Motion to Strike. The content added to Paragraph 7 arguably goes beyond what the November 2016 Order permitted, but the material relates to the controversy between the parties. More importantly, the new material does not prejudice Defendants. As discussed below, even assuming that the new material is properly part of the Amended Complaint, no claims based on the clearing account will proceed to trial. The Motion to Strike is DENIED.

         B. Remaining Issues for Trial

         In the Memoranda and Responses, the parties raise numerous issues that remain for trial. Church JV asserts that ten issues remain:[6]

1. “Whether and to what extent [EBB] fraudulently transferred property to Fiberzone?” (Church JV Resp. 3; see also Church JV Mem. 8.)
2. “Whether and to what extent [MGB] used a credit card in the name of [Fiberzone] for her personal benefit, which charges were paid for through the ‘clearing account' and were not disclosed or known to her creditors and were, therefore, fraudulent transfers?” (Church JV Resp. 3; see also Church JV Mem. 8.)
3. “Whether and to what extent [MGB's] transfer of annuity and employment checks into a bank account of the [BFRGST] (approximately $38, 000) constituted a fraudulent transfer from [MGB] to the [BFRGST]?” (Church JV Resp. 4; see also Church JV Mem. 8.)
4. “Whether and to what extent Debtors fraudulently transferred property to the [BFRGST] directly or indirectly through the vehicle and use of the ‘clearing account'?” (Church JV Resp. 4; cf. Church JV Mem. 8 (“Whether and to what extent Debtors fraudulently transferred property to the . . . [BFRGST]?”).)
5. “Whether and to what extent Debtors fraudulently transferred property to the [BFBIT]?” (Church JV Resp. 10; see also Church JV Mem. 8.)
6. “Whether and to what extent the transfer of certain real property by Debtors by Quitclaim Deed dated January 14, 2005, to the [BFBIT] constituted a fraudulent transfer from Debtors to the [BFBIT]?” ...

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