Deborah Klein v. Douglas Weidner ( 2013 )

PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
______________
No. 10-3218
_______________
DEBORAH D. KLEIN
v.
DOUGLAS M. WEIDNER; KATHLEEN K. WEIDNER;
DMW MARINE, LLC; JEAN M. WEIDNER; JOHN DOE
Douglas M. Weidner, Kathleen K. Weidner,
DMW Marine, LLC,
Appellants
_______________
On Appeal from the United States District Court
for the Eastern District of Pennsylvania
(D.C. Civil No. 2-08-cv-03798)
District Judge: Hon. Juan R. Sanchez
_______________
Argued April 17, 2013
BEFORE: AMBRO, HARDIMAN and COWEN,
Circuit Judges
(Filed: September 3, 2013)
William J. Gallagher, Esq.
Kristin A. Molavoque, Esq.
Jane M. Shields, Esq. (Argued)
MacElree Harvey
17 West Miner Street
P.O. Box 660
West Chester, PA 19381
Counsel for Appellants Douglas M. Weidner,
Kathleen K. Weidner, DMW Marine, LLC
Mary E. Kohart, Esq. (Argued)
Elliott Greenleaf & Siedlkowski
925 Harvest Drive
Suite 300, Union Meeting Corporate Center V
Blue Bell, PA 19422
Counsel for Appellee Deborah D. Klein
_______________
OPINION
_______________
COWEN, Circuit Judge.
Defendants Douglas M. Weidner, Kathleen K.
Weidner, and DMW Marine, LLC (“DMW”), appeal from the
order of the United States District Court for the Eastern
District of Pennsylvania granting Plaintiff Deborah D. Klein’s
2
motion for summary judgment as to her claim that Mr.
Weidner’s transfer of a parcel of real estate to himself and
Ms. Weidner as tenants by the entirety violated the
Pennsylvania Uniform Fraudulent Transfer Act (“PUFTA”).
They also appeal from the subsequent order entering
judgment pursuant to the District Court’s decision on partial
summary judgment, which specifically ordered the Weidners
to execute a deed transferring this parcel of real estate to Mr.
Weidner in fee simple. In addition, Appellants challenge the
District Court’s order directing that judgment of $548,797.07
in punitive damages be entered against Mr. Weidner for his
PUFTA violations. We will affirm.
I.
In 1999, Ms. Klein and Mr. Weidner obtained a
divorce in California. As part of this divorce decree, the
Orange County Superior Court ordered Mr. Weidner to make
spousal and child support payments to Ms. Klein. Appellants
acknowledge that “Weidner made some child support
payments but had paid no spousal support as of the date of
trial in this case.” (Appellants’ Brief at 3 (citing Klein v.
Weidner, Civil Action No. 08-3798, 2010 WL 2671450, at *1
(E.D. Pa. Jul. 2, 2010) (“Klein III”)).) Mr. Weidner and Ms.
Weidner, his current wife, “were aware of Klein’s claim that
Weidner owed her spousal and child support at the time they
married” on January 1, 2006. (Id. at 4 (citing Klein III, 2010
WL 2671450, at *2).) On June 2, 2008, the Orange County
Superior Court determined that Mr. Weidner owed Ms. Klein
$548,797.07 in unpaid spousal and child support. A
3
judgment in this amount was entered in the Chester County
Court of Common Pleas on August 25, 2008.
On March 17, 2005, Mr. Weidner purchased a parcel
of real estate located in Chester Springs, Pennsylvania
(“Property”), from his mother. On January 17, 2006, he
transferred the Property to himself and Ms. Weidner as
tenants by the entirety.
Ms. Klein alleged in the first count of her amended
complaint that Mr. Weidner’s transfer of the Property violated
the PUFTA. On January 6, 2010, the District Court granted
her motion for summary judgment as to this claim because
“Weidner’s transfer of the Property satisfies all three of the
fraudulent transfers described by PUFTA.” Klein v. Weidner,
Civil Action No. 08-3798, 2010 WL 27910, at *1 (E.D. Pa.
Jan. 6, 2010) (“Klein I”). According to the District Court, the
transfer constituted an actual fraudulent transfer under 12 Pa.
Cons. Stat. Ann. § 5104(a)(1) and a constructive fraudulent
transfer under 12 Pa. Cons. Stat. Ann. §§ 5104(a)(2) and
5105. On January 13, 2010, the District Court entered an
order for entry of judgment pursuant to the District Court’s
partial summary judgment decision, and the Weidners were
ordered to execute a deed transferring the Property back to
Mr. Weidner in fee simple by 10 a.m., January 15, 2010.
Ms. Klein also attacked Mr. Weidner’s transfer of an
ownership interest in DMW and attempted to pierce DMW’s
corporate veil. The District Court denied Ms. Klein’s motion
for summary judgment as to these counts in Klein I.
Following a bench trial, it entered its findings of fact and
4
conclusions of law on February 18, 2010. According to the
District Court, the transfer of the ownership interest in DMW
to the Weidners as joint owners—just like the transfer of the
Property to the couple as tenants by the entirety—constituted
both an actual and a constructive fraudulent transfer under
Sections 5104(a)(1), 5104(a)(2), and 5105 of the PUFTA.
The District Court also determined that “Weidner has
improperly used the LLC form to perpetrate an injustice and
therefore Klein may reverse-pierce the corporate veil and
treat DMW’s assets as Weidner’s assets for the purpose of
collecting her judgment against Weidner.” Klein v. Weidner,
Civil Action No. 08-3798, 2010 WL 571800, at *10 (E.D. Pa.
Feb. 17, 2010) (“Klein II”). Judgment was entered against
Mr. Weidner, Ms. Weidner, and DMW on the second and
third counts, and the parties were directed to brief the issue of
whether punitive damages should be awarded and, if so, in
what amount.
In a memorandum entered on July 6, 2010, the District
Court concluded that “[p]unitive damages may be awarded
for violations of PUFTA.” Klein III, 2010 WL 2671450, at
*10. Determining that Mr. Weidner—but not Ms. Weidner—
engaged in conduct in connection with his fraudulent
transfers that was so outrageous as to warrant an award of
punitive damages, the District Court ordered that “judgment
5
of $548,797.07 in punitive damages is entered” against Mr.
Weidner.1 Id.II.
The District Court had jurisdiction over this diversity
matter pursuant to 28 U.S.C. § 1332.2It is undisputed that the substantive law of
Pennsylvania applies here. After all, Ms. Klein alleged
violations of the PUFTA, i.e., Pennsylvania’s specific version
of the Uniform Fraudulent Transfer Act (“UFTA”). In the
1
On April 19, 2011, Mr. Weidner notified the Clerk
that, on December 23, 2010, he filed a voluntary petition for
bankruptcy under Chapter 11 in the United States Bankruptcy
Court for the Eastern District of Pennsylvania. On May 3,
2011, the Clerk stayed the current appeal pursuant to 11
U.S.C. § 362 and directed Mr. Weidner to file status reports
every 90 days until either the automatic stay is lifted or the
bankruptcy is discharged. In his October 10, 2012 status
report, Mr. Weidner indicated that the Bankruptcy Court
denied discharge on September 10, 2012 in an adversary
proceeding (which was commenced by Ms. Klein). An
appeal was filed from this Bankruptcy Court ruling to the
District Court. Appellants also requested that the current
Third Circuit appeal be removed from suspense. In an
October 18, 2012 order, the Clerk construed the status report
as a motion to lift the stay and granted the motion.
2
Ms. Klein is a citizen of California, while the
Weidners and DMW are Pennsylvania citizens.
6
absence of a Pennsylvania Supreme Court ruling on the
precise question of law presented, we must predict how it
would resolve the question. See, e.g., Orson, Inc. v. Miramax
Film Corp., 79 F.3d 1358, 1373 n.15 (3d Cir. 1996). In
addressing the statutory predecessor to the PUFTA (i.e.,
Pennsylvania’s version of the Uniform Fraudulent
Conveyance Act (“UCFA”), the Pennsylvania Uniform
Fraudulent Conveyance Act (“PUFCA”)), we explained that,
“[w]here Pennsylvania law is silent, we may look to the law
in other jurisdictions that have adopted the UFCA, and
decisions construing analogous provisions of the Bankruptcy
Code.” Moody v. Security Pac. Bus. Credit, Inc., 971 F.2d
1056, 1063 (3d Cir. 1992) (citations omitted).
We exercise plenary review over a district court’s
grant of summary judgment, applying the same standard that
the district court should have applied. See, e.g., Farrell v.
Planters Lifesavers Co., 206 F.3d 271, 278 (3d Cir. 2000). As
the District Court noted, “[s]ummary judgment may be
granted only ‘if the pleadings, depositions, answers to
interrogatories, and admissions on file, together with the
affidavits, if any, show that there is no genuine issue as to any
material fact and that the moving party is entitled to judgment
as a matter of law.’” Klein I, 2010 WL 27910, at *1 (quoting
Fed. R. Civ. P. 56(c) (2009)).
III.
A. The Property Transfer Claim
7
Appellants argue that the District Court committed
reversible error by granting summary judgment on Ms.
Klein’s claim that the transfer of the Property violated the
PUFTA. We nevertheless agree with the District Court that
this action constituted an actual fraudulent transfer as well as
a constructive fraudulent transfer.
The District Court began with the actual fraudulent
transfer category. Section 5104(a)(1) states that “[a] transfer
made or obligation incurred by a debtor is fraudulent as to a
creditor, whether the creditor’s claim arose before or after the
transfer was made or the obligation was incurred, if the debtor
made the transfer or incurred the obligation . . . with actual
intent to hinder, delay or defraud any creditor of the debtor.”
Section 5104(b) then lists a number of factors—the “badges
of fraud”—that may be considered in determining “whether
the debtor had an actual intent to hinder, delay or defraud one
or more creditors.” 12 Pa. Cons. Stat. Ann. § 5104 cmt. 5.
These Section 5104(b) factors include:
(1) the transfer or obligation was to an insider;
(2) the debtor retained possession or control of
the property transferred after the transfer;
(3) the transfer or obligation was disclosed or
concealed;
(4) before the transfer was made or obligation
was incurred, the debtor had been sued or
threatened with suit;
8
(5) the transfer was of substantially all the
debtor’s assets;
(6) the debtor absconded;
(7) the debtor removed or concealed assets;
(8) the value of the consideration received by
the debtor was reasonably equivalent to the
value of the asset transferred or the amount of
the obligation incurred;
(9) the debtor was insolvent or became
insolvent shortly after the transfer was made or
the obligation was incurred;
(10) the transfer occurred shortly before or
shortly after a substantial debt was incurred;
and
(11) the debtor transferred the essential assets of
the business to a lienor who transferred the
assets to an insider of the debtor.
“Proof of the existence of any one or more of the factors
enumerated in subsection (b) may be relevant evidence as to
the debtor’s actual intent but does not create a presumption
that the debtor has made a fraudulent transfer or incurred a
fraudulent obligation.” 12 Pa. Cons. Stat. Ann. § 5104 cmt.
5. The court should take into account all of the relevant
9
circumstances in applying these statutory factors. See, e.g.,
12 Pa. Cons. Stat. Ann. § 5104 cmt. 6.
Although Appellants argue at some length that there
were genuine issues of material fact as to several Section
5104(b) factors, we conclude that the District Court did not
commit any reversible error given the undisputed evidence in
the record.
Initially, it is undisputed that “the transfer . . . was to
an insider” under Section 5104(b)(1)—namely, Mr.
Weidner’s own spouse—and that Mr. Weidner “retained
possession or control of the property transferred after the
transfer” pursuant to Section 5104(b)(2). With respect to
Section 5104(b)(4), both Mr. Weidner as well as Ms. Weidner
knew at the time of their marriage that Ms. Klein claimed that
Mr. Weidner owed both spousal and child support.
Appellants also acknowledge that “there had been an ongoing
dispute since 2002 regarding the amount of support
arrearages Weidner owed Klein” (Appellants’ Brief at 19
(citing Klein I, 2010 WL 27910, at *1)) and that “Weidner
made some child support payments but had paid no spousal
support as of the date of trial in this case” (id. at 3 (citing
Klein III, 2010 WL 2671450, at *1)). With respect to
whether “the transfer was of substantially all the debtor’s
assets” under Section 5104(b)(5), Appellants contend that the
Property did not constitute an asset because it was subject to a
mortgage at the time of its transfer and the statutory definition
of “Asset” excludes “property to the extent it is encumbered
by a valid lien,” 12 Pa. Cons. Stat. Ann. § 5101(b). Even
with the mortgage (which Mr. Klein granted to his mother as
10
part of his purchase of the Property from her), it appears
undisputed that there was still $525,000 of equity in the
Property itself. While Appellants contend that, among other
things, Ms. Weidner paid over $300,000 for improvements to
the Property, “‘reasonably equivalent value’ is measured from
Klein’s perspective, not the Weidners’.’” Klein I, 2010 WL
27910, at *2 (citing In re Walter, 261 B.R. 139, 143 (Bankr.
Ct. W.D. Pa. 2001); In re Erie Marine Enters., Inc., 213 B.R.
799, 803 (Bankr. Ct. W.D. Pa. 1997)). The transfer to the
Weidners as tenants by the entirety removed the Property
from Ms. Klein’s reach, and Ms. Weidner’s payments (and
any promises she made to pay for renovations) therefore
could not constitute reasonably equivalent value under
Section 5104(b)(8). See, e.g., United States v. Parcel of Real
Property Known as 1500 Lincoln Ave., 949 F.2d 73, 77-78
(3d Cir. 1991) (noting that tenant by entirety is protected
against levy upon property by co-tenant’s creditor). Mr.
Weidner also indicated in his own deposition testimony that
he held no assets in only his name after he transferred the
Property and the DMW interest to himself and Ms. Weidner.
Mr. Weidner accordingly “was insolvent or became insolvent
shortly after the transfer was made” pursuant to Section
5104(b)(9).
Ultimately, the first, second, fourth, fifth, eighth, and
ninth statutory factors indicated that the transfer at issue here
was actually fraudulent. In addition to the statutory “badges
of fraud,” the District Court also looked to Mr. Weidner’s
own “words and conduct” as evidence of his intent. Klein I,
2010 WL 27910, at *3. For example, Mr. Weidner stated in a
2001 e-mail to Ms. Klein that “he would ‘never ever give her
11
a red cent again’ and Klein would ‘never ever see a penny
from [him] again.’” Id. at *3 (citing 11/27/01 E-mail). Mr.
Weidner’s California attorney likewise notified his
counterpart that “‘I have been informed by Mr. Weidner that
his assets that do exist have been protected in such a way that
while the children will be provided for, it will be impossible
for [Klein] to recover any of the court ordered arrearages.’”
Id. (citing 2/1/05 Letter). Given these undisputed
circumstances, the District Court properly concluded that Mr.
Weidner transferred the Property with an actual intent to
hinder, delay, or defraud.
Under Section 5104(a)(2), a transfer (or obligation) is
constructively fraudulent as to present and future creditors if
the debtor made the transfer (or incurred the obligation):
(2) without receiving a reasonably equivalent
value in exchange for the transfer or obligation,
and the debtor:
(i) was engaged or was about to engage in a
business or transaction for which the
remaining assets of the debtor were
unreasonably small in relation to the
business or transaction; or
(ii) intended to incur, or believed or
reasonably should have believed that the
debtor would incur, debts beyond the
debtor’s ability to pay as they became due.
12
Section 5105 states the following:
A transfer made or obligation incurred by a
debtor is fraudulent as to a creditor whose claim
arose before the transfer was made or the
obligation was incurred if the debtor made the
transfer or incurred the obligation without
receiving a reasonably equivalent value in
exchange for the transfer or obligation and the
debtor was insolvent at that time or the debtor
became insolvent as a result of the transfer or
obligation.
In applying these constructive fraudulent transfer
provisions, the District Court relied on the same basic line of
reasoning it applied in concluding that the transfer was
actually fraudulent pursuant to Section 5104(a)(1). Given our
discussion of the actual fraudulent transfer category, we agree
that Mr. Weidner transferred the Property without receiving a
reasonably equivalent value in exchange, his transfer of the
Property and the DMW interest rendered him insolvent, he
either believed or should have believed that he would incur
debts beyond his ability to pay, and Ms. Klein herself was a
present creditor at the time of the transfer.
Appellants take issue with the District Court’s failure
to consider Ms. Weidner as an alleged good faith transferee
under 12 Pa. Cons. Stat. Ann. § 5108(a). This subsection
states that “[a] transfer or obligation is not fraudulent under
section 5104(a)(1) (relating to transfers fraudulent as to
present and future creditors) against a person who took in
13
good faith and for a reasonably equivalent value or against
any subsequent transferee or obligee.” We have already
explained that Ms. Weidner did not provide reasonably
equivalent value, and we accordingly reject Appellants’
invocation of this defense.3
B. Availability of Punitive Damages under the PUFTA
It appears undisputed that neither this Court—nor any
Pennsylvania appellate court—has addressed the specific
question of whether or not punitive damages are available
under the PUFTA or the PUFCA. We predict that the
Pennsylvania Supreme Court would answer this question in
the affirmative.
Following the example set by Appellants themselves,
we turn to the general rules of statutory construction set forth
in Pennsylvania’s Statutory Construction Act of 1972. “The
3
Appellants also claim that Ms. Klein’s appellate brief
violates Federal Rule of Appellate Procedure 28 as well as
Third Circuit Local Appellate Rules 28.1, 28.2, and 28.3 by
failing to include citations to the appendix or the record and
by engaging in unsubstantiated personal attacks. In the end,
we do not believe that her brief violates any procedural rule.
However, we take this opportunity to reiterate the vital
importance of including appropriate and complete citations to
the appendix or record in briefing submitted to this Court as
well as our expectation that attorneys admitted to the Third
Circuit bar will exhibit professionalism and courtesy at all
times.
14
object of all interpretation and construction of statutes is to
ascertain and effectuate the intention of the General
Assembly.” 1 Pa. Cons. Stat. Ann. § 1921(a). Accordingly,
“[e]very statute shall be construed, if possible, to give effect
to all its provisions.” Id. Conversely, “[w]hen the words of a
statute are clear and free from all ambiguity, the letter of it is
not to be disregarded under the pretext of pursuing its spirit.”
1 Pa. Cons. Stat. Ann. § 1921(b). “When the words of the
statute are not explicit, the intention of the General Assembly
may be ascertained by considering,” inter alia, the occasion
and necessity for the statute, the circumstances under which it
was enacted, the mischief to be remedied, the object to be
attained, the former law, and the consequences of a particular
interpretation. 1 Pa. Cons. Stat. Ann. § 1921(c)(1)-(6). In
short, the court should consider the nature and purpose of the
statute. Appellants specifically emphasize 1 Pa. Cons. Stat.
Ann. § 1504, entitled “Statutory remedy preferred over
common law.” This general rule of statutory construction
states that:
In all cases where a remedy is provided or a
duty is enjoined or anything is directed to be
done by any statute, the directions of the statute
shall be strictly pursued, and no penalty shall be
inflicted, or anything done agreeably to the
common law, in such cases, further than shall
be necessary for carrying such statute in effect.
The Pennsylvania Statutory Construction Act further provides
that “[s]tatutes uniform with those of other states shall be
interpreted and construed to effect their general purpose to
15
make uniform the laws of those states which enact them.” 1
Pa. Cons. Stat. Ann. § 1927.
12 Pa. Cons. Stat. Ann. § 5107 governs the “Remedies
of creditors” under the PUFTA:
(a) Available remedies.—In an action for relief
against a transfer or obligation under this
chapter, a creditor, subject to the limitations in
sections 5108 (relating to defenses, liability and
protection of transferee) and 5109 (relating to
extinguishment of cause of action), may obtain:
(1) Avoidance of the transfer or
obligation to the extent necessary to
satisfy the creditor’s claim.
(2) An attachment or other provisional
remedy against the asset transferred or
other property of the transferee in
accordance with the procedure
prescribed by applicable law.
(3) Subject to applicable principles of
equity and in accordance with applicable
rules of civil procedure:
(i) an injunction against further
disposition by the debtor or a
transferee, or both, of the asset
transferred or of other property;
16
(ii) appointment of a receiver to take
charge of the asset transferred or of
other property of the transferee; or
(iii) any other relief the circumstances
may require.
(b) Execution.—If a creditor has obtained a
judgment on a claim against the debtor, the
creditor, if the court so orders, subject to the
limitations of sections 5108 and 5109, may levy
execution on the asset transferred or its
proceeds.
In turn, 12 Pa. Cons. Stat. Ann. § 5108 (“Defenses, liability
and protection of transferee”) includes the following
subsection:
(b) Judgment for certain voidable transfers.—
Except as otherwise provided in this section, to
the extent a transfer is voidable in an action by a
creditor under section 5107(a)(1) (relating to
remedies of creditors), the creditor may recover
judgment for the value of the asset transferred,
as adjusted under subsection (c), or the amount
necessary to satisfy the creditor’s claim,
whichever is less. The judgment may be
entered against:
17
(1) the first transferee of the asset or the
person for whose benefit the transfer was
made; or
(2) any subsequent transferee other than
a good faith transferee who took for
value or from any subsequent transferee.
“If the judgment under subsection (b) is based upon the value
of the asset transferred, the judgment must be for an amount
equal to the value of the asset at the time of the transfer,
subject to adjustment as the equities may require.” 12 Pa.
Cons. Stat. Ann. § 5108(c). The PUFTA also includes a
“Supplementary provisions” section. Pursuant to 12 Pa.
Cons. Stat. Ann. § 5110, “[u]nless displaced by the provisions
of this chapter, the principles of law and equity, including the
law merchant and the law relating to principal and agent,
estoppel, laches, fraud, misrepresentation, duress, coercion,
mistake, insolvency or other validating or invalidating cause,
supplement its provisions.”
In addition to the Pennsylvania Statutory Construction
Act, Appellants turn for support to the statutory language,
nature, and purposes of the PUFTA as well as case law
addressing the PUFTA, the PUFCA, and other allegedly
similar Pennsylvania statutory schemes. They additionally
“look to the law in other jurisdictions that have adopted the
UFCA [and the UFTA].” Moody, 971 F.2d at 1063 (citation
omitted). With respect to Pennsylvania case law, Appellants
place particular emphasis on the Pennsylvania Supreme
Court’s 1930 decision in Schline v. Kline, 152 A. 845 (Pa.
18
1930), which discussed the PUFCA, and its more recent
ruling in Hoy v. Angelone, 720 A.2d 745 (Pa. 1998), which
held that punitive damages are not available under the
Pennsylvania Human Relations Act (“PHRA”). According to
Appellants, the Pennsylvania Supreme Court, in cases like
Hoy, has decided that punitive damages are unavailable in
statutory actions unless the statute expressly provides for such
damages. With respect to the PUFTA itself, Appellants
emphasize the remedial nature and purposes of this fraudulent
transfer statute. They believe that “the remedies are all
focused upon preservation of assets and making the creditor
whole—and no more.” (Appellants’ Brief at 8.) The PUFTA
accordingly does not expressly state that punitive damages
may be awarded. Appellants, in turn, claim that Section
5107(a)(1) provides that transfers and obligations may be
avoided only to the extent necessary to satisfy the creditor’s
claim and that Section 5108(b) limits the monetary damages
that a creditor may recover. According to Appellants,
“punitive damages were not required to afford Klein the
remedies of PUFTA,” “[t]he common law principles of
punitive damages conflict with and far exceed the remedies
available under PUFTA because such remedies are designed
to compensate plaintiffs to the extent of the value of the
transferred property, while at the same time, protecting (not
punishing) transferees,” and “an award of punitive damages
under PUFTA is inappropriate because it exceeds that which
is necessary to obtain the protections of the statute.” (Id. at
15-16 (citations omitted).)
Having considered the various contentions raised by
the parties as well as the District Court’s own reasoning, we
19
predict that the Pennsylvania Supreme Court would conclude
that punitive damages are available under the PUFTA. We
make this prediction based on the actual language of the
statute itself—especially the “catch-all” provision in Section
5107(a)(3)(iii). We also rely on the nature and purposes of
this uniform statutory scheme as well as prior case law from
Pennsylvania and other jurisdictions.
As an initial matter, we do not believe that Schline has
much, if any, bearing on the present inquiry. Appellants turn
to a single sentence from this opinion: “As this act does not
specify a particular course of procedure, that previously
existing and any necessary modification thereof may be
adopted, in order to enable the one attacking the ‘conveyance’
to obtain the rights accorded by the statute.” Schline, 152 A.
at 846. The state supreme court actually disposed of the
appeal in that case on different grounds, before briefly calling
attention to the PUFCA because “the case goes back for a
trial.” Id. More importantly, it did not actually identify the
“rights accorded by the statute” and therefore did not consider
whether such “rights” could include punitive damages. If
anything, the Schline court seemed to be more concerned
with the proper procedure to use (i.e., “that previously
existing and any necessary modification thereof”) than the
actual forms of relief available under the PUFCA itself.
In Hoy, the state supreme court did consider the
availability of punitive damages under Pennsylvania’s anti-
discrimination statute. In a rather lengthy opinion, the Hoy
court specifically addressed the following statutory provision:
20
“If the court finds that the respondent has
engaged in or is engaging in an unlawful
discriminatory practice charged in the
complaint, the court shall enjoin the respondent
from engaging in such unlawful discriminatory
practice and order affirmative action which may
include, but is not limited to, reinstatement or
hiring of employes, granting of back pay, or any
other legal or equitable relief as the court deems
appropriate. Back pay liability shall not accrue
from a date more than three years prior to the
filing of a complaint charging violations of this
act.”
Hoy, 720 A.2d at 748 (quoting 43 Pa. Stat. Ann. § 962(c)(3)).
The Pennsylvania Supreme Court held that, “[i]n the absence
of express statutory language or any further legislative
guidance,” punitive damages are not available under the
PHRA. Id. at 751.
The court began by noting that the Pennsylvania
General Assembly was free to provide for punitive damages
under the PHRA and that a cursory survey of other statutory
enactments revealed that it knew how to do so in clear and
unambiguous terms. Id. at 748 & n.3. “Thus, as a starting
point, it is reasonable to infer that the General Assembly’s use
of specific language to permit the award of punitive damages
in numerous statutes reflects an intention to allow such a
remedy only when expressly provided for.” Id. at 748.
Asking the court to read this remedy into the statute, the
plaintiff focused on the “any other legal or equitable relief”
21
language as well as the statute’s liberal construction
requirement. Id. Pursuant to the canon of ejusdem generis
(“‘[g]eneral words shall be construed to take their meanings
and be restricted by preceding particular words,’” id. (quoting
1 Pa. Cons. Stat. § 1903(b)), the state supreme court turned to
the introductory phrase “affirmative action” as well as the
specific examples provided thereafter. Id. at 748-49.
“Indeed, to focus solely on the phrase ‘any other legal and
equitable relief’ and contend that any and all remedies are
available under the Act would be to relegate the introductory
phrase ‘affirmative action’ to mere surplusage, an approach
which we are not at liberty to take.” Id. at 749 n.4 (citing 1
Pa. Cons. Stat. Ann. § 1922(2)). “Thus, the seemingly
limitless phrase ‘any other legal or equitable relief’ must be
construed in this light.” Id. at 749. The Hoy court concluded
that “the phrase ‘any other legal or equitable relief’ is clearly
a subset of the ‘affirmative action’ which a court may order,”
and it therefore considered “whether punitive damages are
properly awarded as affirmative action for purposes of the
Act.” Id. According to the state supreme court, the PHRA
constitutes a remedial statute whose purpose is to protect the
rights of individuals to obtain and hold a job without
discrimination and to foster the employment of all individuals
in accordance with their abilities, regardless of their sex or
similar characteristics. Id. The statutory provision thereby
offers various examples of “make-whole measures” (e.g.,
reinstatement, hiring, and back pay). Id. Accordingly,
“affirmative action contemplates make whole measures and
remedial action.” Id. On the other hand, punitive damages,
which are based on the defendant’s culpability and are purely
penal in nature, “are not consistent with this goal of achieving
22
the remedial purposes of the statute and are not a make-whole
remedy.” Id. “While punitive damages also serve to deter,
simply put, we do not consider punitive damages to be
consistent with the remedial nature of the Act.” Id. Instead,
the Pennsylvania Supreme Court believed that, “when
interpreted in the context of contemplated affirmative action,
the phrase ‘any other legal or equitable relief’ does not
include punitive damages.” Id.
The Hoy court reached the following conclusion: “In
sum, we are of the view that the Legislature’s silence on the
issue of punitive damages, together with the statutory
language, interpreted consistent with the laws of statutory
construction and in the context of the nature and purpose of
the Act, requires the conclusion that the Legislature did not
intend to permit the award of exemplary damages.” Id.
Although not necessary to its disposition, it also addressed the
other arguments advanced by the parties, including the
plaintiff’s theory that “public policy requires the remedy of
exemplary damages.” Id. at 751. The court did not dispute
the premise that punitive damages would deter
discrimination. Id. Nevertheless, it believed that such a
premise is insufficient to support an inference that the
General Assembly intended an award of punitive damages
given the extraordinary nature of such relief. Id. According
to the Pennsylvania Supreme Court, “punitive damages are
not absolutely necessary to achieve the Act’s goals of
eliminating discrimination and redressing injury” because the
courts already possess broad authority under the statutory
scheme to fashion remedies that discourage discrimination
and restore the injured party (i.e., the PHRA expressly
23
permits injunctive relief, reinstatement, hiring, and an award
of back pay). Id. “While it can be persuasively argued that
punitive damages are entirely appropriate, and even
necessary, we do not sit as a super legislature.” Id.
Especially in light of our task of predicting how the
Pennsylvania Supreme Court would resolve this question of
state law, its prior decision in Hoy does at least provide a
useful framework for considering the language, nature, and
purpose of the PUFTA. We nevertheless believe that this
uniform fraudulent transfer statute differs in a number of
important—and ultimately dispositive—ways from the anti-
discrimination statute addressed by the state supreme court in
Hoy.
As the District Court admitted, “[p]unitive damages
are not explicitly authorized by PUFTA.” Klein III, 2010 WL
2671450, at *4. In other words, the PUFTA—like the
PHRA—does not include a specific provision stating, for
example, that a creditor “may obtain . . . punitive damages.”
However, its “Remedies of creditors” section does contain a
critical “catch-all” provision—Section 5107(a)(3)(iii)
expressly provides that a creditor may obtain “any other relief
the circumstances may require.” Based simply on the
language of this catch-all provision, a court evidently could
award punitive damages as a form of “any other relief” that a
creditor “may obtain” where “the circumstances may
require.”
According to Appellants, both statutes appear to
contain a catch-all phrase that may provide for unlimited
24
remedies. However, the so-called catch-all provision at issue
in Hoy, i.e., “any other legal or equitable relief as the court
deems appropriate,” actually constitutes a “subset” of another
statutory term or category, i.e., “affirmative action.” The
PHRA itself is clear on this point, stating that “the court shall
. . . order affirmative action which may include, but is not
limited to, reinstatement or hiring of employes, granting of
back pay, or any other legal or equitable relief as the court
deems appropriate.” 43 Pa. Stat. Ann. § 962(c)(3) (emphasis
added).
In contrast, the basic language and structure of Section
5107(a)(3)(iii), Section 5107 in general, and the PUFTA as a
whole differ in several significant ways from the language
and structure of the PHRA’s own remedial scheme. Initially,
the critical catch-all provision at issue here—“any other relief
the circumstances may require”—is not a “subset” of an
express statutory category, at least not in the same way in
which “any other legal or equitable relief as the court deems
appropriate” constitutes a subset of “affirmative action.”
Instead of simply authorizing the trial court to order “legal or
equitable relief” as a form of “affirmative action,” the
PUFTA provides the court with broad authority to fashion the
remedy—or package of remedies—based on the specific
circumstances of each individual case. We further note that
this catch-all provision is not even phrased in terms of “legal”
(e.g., compensatory damages) or “equitable” (e.g., an
injunction) forms relief. We acknowledge that, under Section
5107(a)(3), a creditor may obtain “any other relief the
circumstances may require” subject to the “applicable
principles of equity” and in accordance with the “applicable
25
rules of civil procedure.” Section 5107 likewise provides for
various forms of equitable relief, including an injunction
against further disposition of the asset under Section
5107(a)(3)(i) and the appointment of a receiver to take charge
of the asset pursuant to Section 5107(a)(3)(ii). However, the
statutory requirement that any relief be subject to, and in
accordance with, “applicable” principles of equity and rules
of civil procedure could simply mean that any relief granted
must comply with the rules and procedures implicated by the
specific kind of relief at issue. For example, a creditor
seeking an injunction would be required to meet the otherwise
generally applicable requirements for this form of equitable
relief (e.g., not have “unclean hands”), and a creditor seeking
punitive damages likewise must satisfy the prerequisites for
such an award (e.g., demonstrate that the defendant engaged
in outrageous conduct). At the very least, this “applicable
principles” language cannot really be compared to the
“affirmative action” language at issue in Hoy, and it thereby
does not reduce the PUFTA’s otherwise expansive and open-
ended catch-all provision into nothing more than a mere
subset of a larger term or category. Although the
Pennsylvania Supreme Court does not appear to have
addressed the issue, we believe that it would hold that
punitive damages are generally available in equitable actions.
See, e.g., Nebesho v. Brown, 846 A.2d 721, 728 (Pa. Super.
Ct. 2004) (indicating that attorney’s fees “in the nature of
punitive damages” would be proper in equitable action to
nullify deed). Appellants, for their part, do not contest the
general availability of punitive damages in equitable actions
under Pennsylvania law. Furthermore, the PUFTA expressly
allows for an award of compensatory damages, at least under
26
certain circumstances (i.e., pursuant to Section 5108(b), “the
creditor may recover judgment for the value of the asset
transferred, as adjusted under subsection (c), or the amount
necessary to satisfy the creditor’s claim, whichever is less”).4
In contrast with the statutory scheme at issue in Hoy,
the PUFTA also includes an express “Supplementary
provisions” section. Specifically, Section 5110 states in
relevant part that, “[u]nless displaced by the provisions of this
chapter, the principles of law and equity, including . . . the
law relating to . . . fraud, [and] misrepresentation, . . .
supplement its provisions.” The commentary to Section 5107
likewise indicates that this section’s remedies “are
cumulative” in nature, 12 Pa. Cons. Stat. Ann. § 5107 cmt. 6
(citations omitted), and “are not exclusive,” 12 Pa. Cons. Stat.
Ann. § 5107 cmt. 1. We have already noted that punitive
damages are likely available in equitable actions under
Pennsylvania law. It is also uncontested that, at least in the
context of common law fraud, defendants may be ordered to
pay punitive damages. In fact, “[i]t is difficult to picture a
fact pattern which would support a finding of intentional
fraud without providing proof of ‘outrageous conduct’ to
support an award of punitive damages.” Delahanty v. First
Pa. Bank, 464 A.2d 1243, 1263 (Pa. Super. Ct. 1983). As Ms.
Klein and the District Court also point out, punitive damages
have been awarded in the domestic relations context. See,
4
We also note that, while Sections 5107 and 5108
clearly limit the monetary damages that a creditor may
recover from a transferee, they less clearly limit the damages
recoverable from the debtor.
27
e.g., Hess v. Hess, 580 A.2d 357, 358-59 (Pa. Super. Ct.
1990) (upholding jury’s punitive damages award in favor of
ex-wife on tort claim of fraud arising out of ex-husband’s
fraudulent execution of property settlement agreement).
Accordingly, it appears that, based on the language of Section
5110, these well-established “principles of law and equity”
governing the availability of punitive damages under
Pennsylvania law “supplement” the PUFTA (or, in the words
of the District Court, are “implicitly incorporated” into this
statutory scheme, Klein III, 2010 WL 2671450, at *4 (citing §
5110)).
More broadly, we also believe that the underlying
nature and purposes of the two statutory schemes
substantially differ. The Hoy court specifically addressed an
anti-discrimination statute meant to improve, in the words of
its title, “human relations” and remedy past harms. Hoy, 720
A.2d at 749. In short, the PHRA was designed to foster and
protect the employment of all individuals without regard to
race, sex, or other invidious considerations and, in order to
achieve such remedial goals, attempts to make the victims of
discrimination whole. Id. After all, the notion of “affirmative
action” appears to contemplate a range of make-whole
remedies, and the PHRA itself provides some examples of
such remedies, such as reinstatement. Id. (“Likewise, the
examples of appropriate remedies offered by the statute are
make-whole measures, i.e., reinstatement, hiring, and back
pay. We believe that in the context of this statute,
‘affirmative action’ is that action which serves to achieve the
remedial goals of the Act.”). The PUFTA does place
particular emphasis on the “preservation of assets and making
28
the creditor whole” (Appellants’ Brief at 8), but it also
includes an expansive and open-ended catch-all provision as
well as a “Supplemental provisions” section. Unlike anti-
discrimination legislation (which created a much-needed
statutory remedy for the victims of discrimination and does
not have a clear common law analogue), this uniform
fraudulent transfer statute arises out of a long history of
fraudulent conveyance law dating back to Queen Elizabeth I.
As we have already noted, punitive damages are often
awarded in cases of common law fraud, and, in turn, this
kind of relief is likely available in the equity (and domestic
relations) context under Pennsylvania law.
The facts of this case provide further support for this
approach and, more broadly, for why punitive damages exist
in the first place. The District Court ordered Mr. Weidner to
pay punitive damages in the amount of $548,797.07 on
account of his outrageous conduct in connection with two
fraudulent transfers. This behavior included his intent to
evade support obligations to his former wife and children
even after those obligations were reduced to a judgment, and
his various attempts to insulate and structure his assets and
finances in order to evade his obligations and avoid paying
any debt to Ms. Klein. He even forged Ms. Weidner’s
signature on a January 2010 mortgage of the Property
intended to reduce even further the value of this asset. Mr.
Weidner also repeatedly harassed Ms. Klein herself (e.g., he
filed a frivolous lawsuit against Ms. Klein alleging that she
had stolen a horse and sent several e-mails to their children
denigrating her attempts to collect the debt and threatening to
withdraw his financial support) and made deeply disturbing
29
threats against her attorneys in this case (e.g., he sent a fax to
one of her attorneys stating, inter alia, that “‘I will spend the
time to find everything I can about you,’” including where the
attorney lived, the car he drove, and “‘what kind of coffee
you drink,’” Klein III, 2010 WL 2671450, at *4 n.8)).
Simply put, “the facts of this case are extreme in that the
defendant willfully defied a court order and used unlawful
and threatening means to impede the judicial process.” Id. at
*10. Emphasizing the open-ended nature of the penalty set
forth in the PUFTA, the District Court added that “[n]ot every
PUFTA case will contain such conduct beyond a single
fraudulent transfer.” Id. Mr. Weidner has presented the
District Court—and us—with an example of the very kind of
outrageous and intolerable behavior that punitive damages are
designed to punish and deter. See, e.g., Hoy, 720 A.2d at
749, 751 (recognizing that punitive damages promote
deterrence and that such damages may deter future
discrimination); Delahanty, 464 A.2d at 1263 (highlighting
difficulty of picturing fact pattern that would support finding
of intentional fraud but not finding of outrageous conduct).
Simply put, where “a plaintiff can show outrageous conduct
coupled with a fraudulent transfer,” Klein III, 2010 WL
2671450, at *5, a court may award punitive damages as a
form of “any other relief the circumstances may require.”
In turn, we do not believe that Pennsylvania’s general
preference for statutory remedies has any real effect in the
present context. Although the Hoy court did not expressly
mention Section 1504 of the Pennsylvania Statutory
Construction Act, Appellants do cite to case law relying on
this specific rule of statutory construction to conclude that
30
punitive damages are not available under either the
Pennsylvania Whistleblower Law, Rankin v. City of
Philadelphia, 963 F. Supp. 463, 477-80 (E.D. Pa. 1997), or a
section of the Pennsylvania Welfare Code requiring attorneys
to notify the Pennsylvania Department of Public Welfare of
tort damages recovered in medical malpractice suits, Dep’t of
Pub. Welf. v. Portnoy, 566 A.2d 336, 339-41 (Pa. Commw.
Ct. 1989), aff’d, 612 A.2d 1349 (Pa. 1992) (per curiam).
However, the District Court properly distinguished both cases
because the whistleblower statute and the welfare code set
forth detailed and specific remedial schemes and, in turn, do
not include either a catch-all provision like Section
5107(a)(3)(iii) or a “Supplementary provisions” section
resembling Section 5110.5 See Rankin, 963 F. Supp. at 477-
80; Portnoy, 566 A.2d at 339-41.
5
At oral argument, Appellants cited to two other
Pennsylvania Supreme Court decisions for support. In Wertz
v. Chapman Township, 741 A.2d 1272 (Pa. 1999), the court,
conducting an analysis similar to the one it undertook in Hoy,
concluded that a plaintiff is not entitled to a jury trial under
the PHRA, id. at 1274-75. Relying on Wertz, the state
supreme court then determined in Mishoe v. Erie Insurance
Co., 824 A.2d 1153 (Pa. 2003), that there is no right to a jury
trial in a bad faith action against an insurer under a section of
the Pennsylvania Judicial Code, id. at 1155-59. Neither case
has any real relevance to our current inquiry. We have
already addressed Hoy and Pennsylvania’s anti-
discrimination statute, and the Mishoe court actually rejected
the contention that the provision “affords the right to a jury
trial because it permits an award of punitive damages, which
31
Prior fraudulent transfer case law, applying both
Pennsylvania and (especially) non-Pennsylvania law, also
weigh in favor of our position regarding the availability of
punitive damages. The District Court, after its discussion of
Section 1504, Rankin, and Portnoy, went on to observe that
“courts sitting within this district have concluded punitive
damages are available under PUFTA and the statute which
preceded it.” Klein III, 2010 WL 2671450, at *5 (citing State
Farm Mut. Auto. Ins. Co. v. Tz’Doko V’Chesed of
Klausenberg, 543 F. Supp. 2d 424, 431-32 (E.D. Pa. 2008);
UGI Corp. v. Piccione, No. 88-1125, 1997 WL 698011, at *8-
*9 (E.D. Pa. Nov. 5, 1997); Shervin v. Liebersohn¸ 200 B.R.
109, 112 (E.D. Pa. 1996)). While these opinions were
conclusory at best, Appellants themselves do not cite to any
case specifically holding that punitive damages are
unavailable under either the PUFTA or the PUFCA. In any
event, we follow Appellants’ own example and look to the
law in other jurisdictions that have also adopted these
respective uniform schemes. See Moody, 971 F.2d at 1063.
In DFS Secured Healthcare Receivables Trust v.
Caregivers Great Lakes, Inc., 384 F.3d 338 (7th Cir. 2004),
the Seventh Circuit certified three questions regarding the
Indiana Uniform Fraudulent Transfer Act (“IUFTA”) to the
Indiana Supreme Court, including “the question whether
punitive damages are available under the IUFTA,” id. at 355.
It certified this specific question because of the absence of
Indiana case law as well as the existence of disagreement in
other states on this particular point:
is traditionally within the domain of the jury,” id. at 1158.
32
No Indiana court, however, has addressed the
question whether punitive damages can be
awarded under the IUFTA, and other states are
split on the question. Compare Macris &
Assocs., Inc. v. Neways, Inc., 60 P.3d 1176,
1181 (Utah Ct.App. 2002) (allowing punitive
damages under Utah’s UFTA); Volk Constr.
Co. v. Wilmescherr Drusch Roofing Co., 58
S.W.3d 897, 900 (Mo.Ct.App. 2001) (same
under Missouri’s UFTA); Henderson v.
Henderson, No. CV-00-53, 2001 WL 1719192,
at *2 (Me.Super. 2001) (same under Maine’s
Uniform Fraudulent Conveyance Act);
Locafrance United States Corp. v. Interstate
Distribution Servs., Inc., [451 N.E.2d 1222,
1225 (Ohio 1983)] (same under Ohio’s Uniform
Fraudulent Conveyance Act), with [Morris v.
Askeland Enters., Inc., 17 P.3d 830, 833
(Col.Ct.App. 2000)] (finding punitive damages
are not available under Colorado’s UFTA), and
Northern Tankers Ltd. v. Backstrom, 968 F.
Supp. 66, 67 (D.Conn.1997) (same under
Connecticut’s UFTA).
Id. at 354-55. Appellants exhibit admirable candor by
acknowledging that “Ohio and Missouri have held that
punitive damages may be available for violations of their
respective UFTAs,” while adding that these decisions were
based on “pre-existing bodies of law and unique
interpretations of their UFTAs.” (Appellants’ Brief at 12 n.3
(citing Volk, 58 S.W.3d at 900; Aristocrat Lakewood Nursing
33
Home v. Mayne, 729 N.E.2d 768, 774-75 (Ohio Ct. App.
1999)).) They also claim that Texas and New York have
concluded that punitive damages may not be recovered.
However, the federal decisions cited by Appellants on this
point did not actually address the specific question of whether
punitive damages are available and instead indicated that
fraudulent transfer laws generally have a remedial (as
opposed to a punitive) purpose. See ASARCO LLC v.
Americas Mining Corp., 404 B.R. 150, 161 (S.D. Tex. 2009);
In re Best Prods. Co., 168 B.R. 35, 57 (Bankr. S.D.N.Y.
1994), appeal dismissed, 177 B.R. 791 (S.D.N.Y. 1995),
aff’d, 68 F.3d 26 (2d Cir. 1995).
In the end, we believe that the Pennsylvania Supreme
Court would reach the same result as the courts of Maine,
Missouri, Ohio, and Utah.
Both the Seventh Circuit as well as the Missouri Court
of Appeals have emphasized the expansive and open-ended
nature of the statutory language at issue, especially the catch-
all provision. Although it did not resolve the question (and
the case was settled before the Indiana Supreme Court could
decide the certified question, see Rose v. Mercantile Nat’l
Bank of Hammond, 844 N.E.2d 1035, 1051 n.14 (Ind. Ct.
App. 2008), aff’d in part and vacated in part on other
grounds, 868 N.E.2d 772 (Ind. 2007)), the Seventh Circuit
observed that the defendant—just like their counterparts in
the current proceeding—argued that state law construes
statutory remedies narrowly and only allows for punitive
damages when the state legislature expressly includes them in
the statute itself. DFS, 384 F.3d at 355. The Seventh Circuit
34
pointed out that “in none of the cases . . . did the statute in
question contain anything like the catchall provision which is
present in the IUFTA.” Id. (citations omitted). On the
contrary, “a straightforward reading of the IUFTA’s catchall
provision would seemingly allow for punitive damages.” Id.at 354 (citing Ind. Code § 32-18-2-17(c)). As the Missouri
Court of Appeal noted in Volk, “[t]his language does not
evidence an intent to prohibit punitive damage awards,” and it
instead “expressly grants courts the authority to employ the
full array of remedial measures insofar as they are warranted
under the particular facts of the case.” Volk, 58 S.W.3d at
900.
The DFS, Volk, and Locafrance courts likewise turned
to pre-existing principles of law and equity. In certifying the
question to the Indiana Supreme Court, the Seventh Circuit
noted that the IUFTA “incorporates principles of state
common law” and that, under Indiana law, tortious conduct
involving malice, fraud, gross negligence, or oppressiveness
may be punished by an award of punitive damages. DFS, 384
F.3d at 354 (citing Ind. Code § 32-18-2-20). Citing to
Missouri’s equivalent of Section 5110, the Missouri Court of
Appeals similarly observed that the “[t]he UFTA therefore
specifically incorporates pre-existing legal and equitable
principles related to the law of fraudulent conveyances
insofar as those principles do not conflict with the provisions
of the UFTA.” Volk, 58 S.W.3d at 900 (footnote omitted).
Missouri law provides that punitive damages are available
where a debtor intentionally effectuates a fraudulent transfer
in order to shield his or her assets. Id. Applying the state’s
UFCA, the Ohio Supreme Court held that “common-law
35
remedies, including the law of fraud, may be applied when
appropriate in fraudulent conveyance cases pursuant to R.C.
1336.11” because “the action herein is not specifically
provided for in either of the remedy sections” and “R.C.
1336.11 allows that the rules of law and equity may govern.”
Locofrance, 451 N.E.2d at 1225. Previous Ohio case law, in
turn, “has established that punitive damages and attorney’s
fees are permissible in cases of fraud involving malicious and
intentional conduct.” Id. In fact, the Colorado Court of
Appeals in Morris and the Connecticut district court in
Northern Tankers likewise relied on pre-existing legal and
equitable principles to conclude that punitive damages are not
available. See Northern Tankers, 968 F. Supp. at 67; Morris,
17 P.3d at 832. It is well established that, under Pennsylvania
law, punitive damages may be awarded in cases of common
law fraud, and we also predict that the Pennsylvania Supreme
Court would hold that punitive damages are generally
available in equitable actions. Pennsylvania’s general
principles of law and equity therefore more closely resemble
the pre-existing state law principles discussed in Volk and
Locafrance than in either Morris or Northern Tankers. See
Volk, 58 S.W.3d at 900 n.3 (“Likewise, the Connecticut
courts, while holding that punitive damages are not available
under that state’s UFTA, also relied upon pre-existing state
law to inform their interpretation of the remedies available
under the UFTA.”).
In conclusion, we predict that, based on the language,
nature, and purposes of the PUFTA as well as past case law,
the Pennsylvania Supreme Court would conclude that
punitive damages are available under the PUFTA.
36
IV.
For the foregoing reasons, we will affirm the orders
entered by the District Court.
37