Amerscape, LLC v. Acacia Commercial Services, Inc. ( 2022 )

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE
AMERSCAPE, LLC, )
)
Plaintiff, )
)
v. )
) C.A. No. N21C-01-078 CLS
ACACIA COMMERCIAL )
SERVICES, INC., ACACIA )
FACILITIES SERVICES, LLC; )
ISAAC HOWELL, REBECCA )
HOWELL and EQUVEST LLC. )
)
Defendants.
Date Submitted: May 9, 2022
Date Decided: June 22, 2022
Upon Defendant’s Motion to Dismiss Count 4 of Plaintiff’s Amended Complaint.
DENIED.
ORDER
Charles J. Brown, III, Esquire, Gellert Scali Busenkell & Brown, LLC,
Wilmington, Delaware, 19801, Attorney for Plaintiff, Amerscape, LLC.
Artemio C. Aranilla, Esquire, MacElree Harvey, LTD., Hockessin, Delaware,
19707, Attorney for Defendants, Acacia Commercial Services, Inc., Acacia
Facilities Services, LLC, Isaac Howell, Rebecca Howell, and Equvest LLC.
SCOTT, J.
1
INTRODUCTION
Before the Court is Defendants Acacia Commercial Services, Inc., Acacia
Facilities Services, LLC, Isaac Howell, Rebecca Howell, and Equvest LLC’s
(“Defendants”) Motion to Dismiss (“Motion”) Count 4 of Plaintiff Amerscape
LLC’s (“Amerscape”) Complaint. The Court has reviewed the Motion and
Amerscape’s opposition. For the reasons below, Defendants’ Motion to Dismiss is
DENIED.
ALLEGED FACTS
This cause of action arises out of a representation agreement (“Agreement”)
between Defendants and Amerscape. According to the Amended Complaint,
Defendant Isaac Howell along with his spouse Rebecca Howell own and control
Acacia and Acacia Facility. Both Amerscape and Acacia were engaged in the
business of providing landscape, property maintenance, and snow and ice removal
services. Pursuant to the Agreement, Amerscape facilitated the transfer of both its
Landscaping and Snow clients to Acacia identified as the “Legacy Portfolio” and
agreed to refrain from engaging in any future business of landscape, property
maintenance and snow and ice removal services. Pursuant to the Agreement Acacia
agreed to pay Amerscape a total of $300,000.00 with $50,000.00 due at the time that
all of the Amerscape client’s identified as the Legacy Portfolio signed contracts as
listed in the Agreement Exhibit A with Acacia and with Acacia paying the balance
2
of $250,000.00 based upon monthly payments of ten percent of the gross margin as
defined in Agreement Paragraph 2 that Acacia received from the Amerscape snow
removal clients listed in the Agreement Exhibit C who had signed contracts with
Acacia.
The Agreement also provided that Acacia could but was not obligated to offer
employment to certain employees of Amerscape as Acacia required those employees
to pass drug and background checks prior to being hired. Acacia did hire some
employees (“Amerscape Former Employees”)
In or about September of 2019, Acacia began to terminate the Amerscape
Former Employees. Amerscape alleges Defendants breached their obligations under
the Agreement in that Acacia has failed to remit monthly payments to Amerscape
required under the Agreement Paragraph 2 within 20 days of the following calendar
month and Acacia has failed to provide Amerscape with the detailed calculations as
required by contract for determining the gross profit margin.
Further, Amerscape alleges after termination of the Amerscape Employees,
Isaac Howell and Rebecca Howell and Equvest formed Acacia Facility in or about
June of 2020. Amerscape further alleges Equvest, Isaac Howell and Rebecca Howell
formed Acacia Facility for the purpose of shifting the Legacy accounts that
Amerscape had transferred to Acacia to Acacia Facility.
3
Upon information and belief, Acacia received no consideration from Acacia
Facility for the transfer of former Amerscape Legacy accounts. Acacia, Acacia
Facility, Equvest, Isaac Howell and Rebecca Howell failed to disclose to Amerscape
that the former Amerscape accounts had been transferred from Acacia to Acacia
Facility.
Equvest, Isaac Howell and Rebecca Howell transferred the former Amerscape
accounts from Acacia into the name of Acacia Facility for the purposes of ensuring
that Acacia would be unable to satisfy its obligations owed to Amerscape.
Equvest, Isaac Howell and Rebecca Howell transferred the former Amerscape
accounts from Acacia into the name of Acacia Facility with the intent to hinder,
delay or defraud Amerscape and remove assets from Amerscape’s reach. Equvest,
Isaac Howell and Rebecca Howell transferred the former Amerscape accounts from
Acacia into the name of Acacia Facility without fair consideration and at a time or
times when Acacia was legally insolvent or rendered insolvent by the conveyances.
Equvest, Isaac Howell and Rebecca Howell transferred the former Amerscape
accounts from Acacia into the name of Acacia Facility believing that Acacia would
incur debts beyond its ability to payas they matured.
The transfer by Equvest, Isaac Howell and Rebecca Howell of the former
Amerscape Legacy accounts from Acacia into the name of Acacia Facility were
4
fraudulent as to Amerscape who is a creditor of Acacia with a claim in excess of
$250,000.00.
STANDARD OF REVIEW
In Delaware, “courts have consistently followed the standards of Superior
Court Civil Rule 12(b)(6) when considering motions to dismiss writ of mandamus
petitions.”1 The test for sufficiency of a complaint challenged by a Rule 12(b)(6)
motion to dismiss is whether a plaintiff may recover under any reasonably
conceivable set of circumstances susceptible of proof under the complaint.2 In
making its determination, the Court must accept all well-pleaded allegations in the
complaint as true and draw all reasonable factual inferences in favor of the non-
moving party.3 The complaint must be without merit as a matter of fact or law to be
dismissed.4 Therefore, if the plaintiff can recover under any conceivable set of
circumstances susceptible of proof under the complaint, the motion to dismiss will
not be granted.5
1
Allen v. Coupe, 2016 WL 676041, at *2 (Del. Super. Ct. Feb. 18, 2016).
2
Spence v. Funk, 396 A.2d 967, 968 (1978); see Cambium Ltd. v. Trilantic Capital
Partners III L.P., 2012 WL 172844, at *1 (Del. Jan. 20, 2012)(citing Cent. Mortg.
Co. v. Morgan Stanley Mortg. Capital Holdings LLC, 27 A.3d 531, 537 (Del. 2011)).
3
Ramunno v. Cawley, 705 A.2d 1029, 1034-36 (Del. 1998); Nix v. Sawyer, 466 A.2d
407, 410 (Del. Super. Ct.1983).
4
Diamond State Tel. Co. v. University of Delaware, 269 A.2d 52 (Del. 1970).
5
Ramunno, 705 A.2d at 1034; see Cambium, 2012 WL 172844, at *1 (citing Cent.
Mortg., 27 A.3d at 537)).
5
Delaware is a “notice pleading” state, and in most civil actions the rules of
procedure require that the plaintiff simply provide a short and plain statement which
gives the defendant “fair notice of a claim[.]”6 The plaintiff “need not plead
evidence, but allege facts that, if true, state a claim upon which relief can be
granted.”7 Superior Court Civil Rule 9(b) deviates from this general rule and imposes
a heightened pleading standard for allegations of fraud.
Rule 9(b) states that “[i]n all averments of fraud, negligence or mistake, the
circumstances constituting fraud, negligence or mistake shall be stated with
particularity.”8 “The factual circumstances that must be stated with particularity
refer to the time, place, and contents of the false representations; the facts
misrepresented; the identity of the person(s) making the misrepresentation; and what
that person(s) gained from making the misrepresentation.”9 Intent, knowledge,
malice, and other states of mind may be averred generally.10 However, if the central
facet of the claim of fraud is a “charge that the defendant knew something, there
must be sufficient well-pled facts from which it can be reasonably inferred that this
6
VLIW Technology, LLC v. Hewlett-Packard Co., 840 A.2d 606, 611 (Del. 2003)
(citing Michelson v. Duncan, 407 A.2d 211, 217 (Del. 1979)).
7
Id.8
Super. Ct. Civ. R. 9(b).
9
Trenwick Am. Litig. Tr. v. Ernst & Young, L.L.P., 906 A.2d 168, 207-08 (Del. Ch.
2006), aff'd sub nom. Trenwick Am. Litig. Tr. v. Billett, 931 A.2d 438 (Del. 2007).
10
Super. Ct. Civ. R. 9(b).
6
something was knowable and that the defendant was in a position to know it.”11
Failure to plead with sufficient particularity can warrant dismissal of a fraud claim.
In most cases, when the Superior Court considers a 12(b)(6) motion, it limits
analysis to the “universe of facts” within the complaint and any attached
documents.12 This rule protects parties from the harm that may be caused by a lack
of notice.13 The court, however, may consider documents outside the pleadings when
“the document is integral to a plaintiff's claim and incorporated into the complaint,”
or “when the document is not being relied upon to prove the truth of its contents.”14
11
Trenwick, 906 A.2d at 208.
12
In re General Motors (Hughes) S'holder Litig., 897 A.2d 162, 168 (Del. 2006)
(citing Malpiede v. Townson, 780 A.2d 1075, 1082 (Del. 2001), In re Santa Fe
Pac. Corp. S'holder Litig., 669 A.2d 59, 69 (Del. 1995),
13
In re Gardner Denver, Inc., 2014 WL 715705, at *2 (Del. Ch. Feb. 21, 2014)
(citing In re Morton's Rest. Grp., Inc. S'holders Litig., 74 A.3d 656, 658 n.3 (Del.
Ch. 2013) (quoting Chambers v. Time Warner, Inc., 282 F.3d 147, 153 (2d Cir.
2002)), and State ex rel. Brady v. Pettinaro Enters., 870 A.2d 513, 523 (Del. Ch.
2005)); 5C Fed. Prac. & Proc. Civ. § 1366 (3d ed.) (In the federal context:
“Generally, the harm to the plaintiff when a court considers material extraneous to
a complaint on a Rule 12(b)(6) motion is the lack of notice that the material may
be considered. Accordingly, when the plaintiff has actual notice of all the
information in the movant's papers and has relied upon these documents in framing
the complaint, the necessity of converting a Rule 12(b)(6) motion into one under
Rule 56 is largely dissipated.”).
14
Vanderbilt Income & Growth Assoc., L.L.C. v. Arvida/JMB Managers, Inc., 691
A.2d 609, 613 (Del. 1996) (citing In re Santa Fe, 669 A.2d at 69–70).
7
Additionally, “[t]he trial court may also take judicial notice of matters that are not
subject to reasonable dispute.”15
DISCUSSION
To establish a fraudulent transfer claim, a plaintiff must show either “actual
intent to hinder, delay or defraud any creditor” or inadequate value received for a
transfer, combined with either insufficient assets for business or at least
constructive belief that the transferor would incur debts exceeding its ability to
repay them as they come due.16 It is not enough to make conclusory allegations
mirroring the elements in the fraudulent transfer statute.17 Claims for actual
fraudulent transfer under Section 1304(a)(1) “must meet the heightened pleading
standard of Superior Court Civil Rule 9(b).”18 Under Rule 9(b), Amerscape must
include “specific supporting facts describing the circumstances of the transfer.”19
15
In re General Motors, 897 A.2d at 169 (citing D.R.E. 201(b)); see In re Gardner
Denver, Inc., 2014 WL 715705, at *2 (Noting that this Court has recognized three
occasions where a court may consider documents extraneous to a complaint: “(i)
when the document is integral to a plaintiff's claim and incorporated into the
complaint; (ii) when the document is not being relied upon to prove the truth of its
contents; and (iii) when the document, or a portion thereof, is an adjudicative fact
subject to judicial notice.”
16
6 Del. C. § 1304(a)(2).
17
See Hospitalists of Del., LLC v. Lutz, 2012 WL 3679219, at *13 (Del. Ch. Aug.
28, 2012) (“[S]imply reciting the statutory or common law elements of an
offense...is insufficient to state a claim upon which relief may be granted.”).
18
Ki-Poong Lee v. So, 2016 WL 6806247 at * 3 (Del. Super. Nov. 17, 2016).
19
Id. at *4.
8
Allegations based “upon information and belief” are not enough to satisfy Rule
9(b)’s requirements.20
Amerscape’s allegations satisfy Rule 9(b)’s particularity requirements.
Under Section 1304(a), Amerscape must plead Defendants actually intended to
hinder, delay, or defraud Amerscape.21 Amerscape’s allegations seem conclusory;
however, Section 1304(b) provides otherwise.
One of the factors that may be given consideration when determining actual
intent is whether the transfer was to an insider.22 Under Section 1301(7)(d), a
person in control of a corporation or a partnership is an insider.23 Amerscape
alleges Isaac and Rebecca Howell own and operate Acacia and along with Equvest,
they formed Acacia Facility for the purpose of transferring accounts. These
relationships, at this stage of the proceedings, satisfy “insider” statutory definition
under Section 1301(1) and, therefore, support Amerscape’s allegation that the
Defendants were “insiders.”24
In addition, Amerscape states that Defendants failed to disclose the transfer.
Another factor to consider when determining actual intent is whether the transfer
20
See id.
21
See 6 Del. C. § 1304(a).
22
See 6 Del. C. § 1304(b)(1).
23
See 6 Del. C. § 1301(7)(b)(3) and (c)(5).
24
6 Del. C. § 1304(d)(1).
9
was concealed.25 Factual allegations regarding concealment and insider status are
enough to satisfy Civil Rule 9.26
Amerscape alleges sufficient facts that show the Defendants were insolvent
or became insolvent shortly after the transfer was made or the obligation was
incurred.27 Under Section 1302(b), a “debtor who is generally not paying debts as
they become due is presumed to be insolvent.”28 Amerscape alleges Defendants
transferred the accounts so Defendants would not be able to satisfy its obligations
owed to Amerscape and additionally alleges Defendants failed to remit monthly
payments to Amerscape required under the Agreement. Accordingly, the Court
finds that Amerscape alleged sufficient facts to show that the debtor was insolvent
or became insolvent shortly after the transfer was made.
Finally, Amerscape also alleges sufficient facts to show that Defendants
retained possession or control of the property after the transfer. Amerscape alleges
that Defendants, by virtue of its ownership interest and control in Acacia, retained
possession or control of the property transferred even after the transfers. As such,
Amerscape plead specific facts with sufficient particularity to support the
25
6 Del. C. § 1304(d)(3).
26
CIBC Bank USA v. JH Portfolio Debt Equities, LLC, 2021 WL 2230976, at *10
(Del. Super. Ct. June 2, 2021).
27
See 6 Del. C. § 1304(b)(9).
28
6 Del. C. § 1302(b).
10
allegation that Defendants retained possession or control of the property after the
transfer.
The Court finds that Amerscape has alleged facts to satisfy the statute as to
actual intent. Moreover, Amerscape alleges with sufficient particularity that
Defendants became insolvent shortly after the transfer and that Defendants retained
control of the distributions after the transfer. The Court finds that allegations of
actual intent are sufficient for Amerscape's fraudulent transfer claim to survive.
CONCLUSION
For the foregoing reasons, Defendants’ Motion to Dismiss is DENIED.
/s/ Calvin L. Scott
Judge Calvin L. Scott, Jr.
11