Foisie v. Worcester Polytechnic Inst.

United States Court of Appeals
For the First Circuit
No. 19-2090
JANET H. FOISIE,
Plaintiff, Appellant,
v.
WORCESTER POLYTECHNIC INSTITUTE,
Defendant, Appellee.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Timothy S. Hillman, U.S. District Judge]
Before
Lynch, Selya, and Barron,
Circuit Judges.
Campbell D. Barrett, with whom Adam S. Mocciolo and Pullman
& Comley, LLC were on brief, for appellant.
Jennifer L. Chunias, with whom Roberto M. Braceras and Goodwin
Procter LLP were on brief, for appellee.
July 24, 2020
SELYA, Circuit Judge. Over two centuries ago, Sir Walter
Scott famously wrote about "what a tangled web we weave . . . when
first we practise to deceive." W. Scott, Marmion, canto VI,
st. 17 (1808). The factual scenario that undergirds this appeal
— a scenario in which a husband, embroiled in matrimonial
proceedings, allegedly concealed millions of dollars in assets in
order to shortchange his wife in the divorce settlement — is a
poster child for Scott's discerned wisdom.
The litigation out of which the appeal arises takes the
form of a suit by the allegedly defrauded ex-wife, plaintiff-
appellant Janet H. Foisie, against an eleemosynary institution,
defendant-appellee Worcester Polytechnic Institute (WPI), which
was a beneficiary of the ex-husband's largesse. The suit seeks to
recoup assets purportedly gifted for less than adequate
consideration by the ex-husband, now deceased, to WPI. The
district court dismissed the plaintiff's complaint for what the
court deemed an absence of statutory standing. See Foisie v.
Worcester Polytechnic Inst., 408 F. Supp. 3d 7, 17 (D. Mass. 2019).
After careful consideration, we vacate the judgment and remand for
further proceedings.
I. BACKGROUND
Because this appeal flows from the district court's
order granting a motion to dismiss, we draw the relevant facts
from the complaint, accepting all well-pleaded factual allegations
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as true. See SEC v. Tambone, 597 F.3d 436, 438, 441 (1st Cir.
2010) (en banc).
In September of 2010, Janet and Robert Foisie decided to
part ways after approximately fifty years of marriage. To start
unraveling the marital knot, the couple engaged a private mediator
in Connecticut. The couple agreed to make complete and accurate
disclosures of their assets. On two occasions during mediation,
Robert listed his assets and represented that he had no offshore
accounts or other undisclosed assets.
The mediation proved fruitful: Janet and Robert
eventually agreed to a mutually acceptable split of assets and
entered into a divorce settlement agreement (the Agreement). Under
the terms of the Agreement, the couple assented to a division of
assets that left each with roughly $20,000,000 in securities and
some real estate. Robert also retained ownership of several
corporations. The Agreement required the parties to certify that
each of them had "fully disclosed all of their assets."
In January of 2011, Janet initiated a marital
dissolution action in a Connecticut state court. Later that year,
Janet and Robert jointly submitted the Agreement to the state court
and moved for a stipulated judgment of dissolution (pursuant to
the terms of the Agreement). Shortly thereafter, the court entered
the stipulated judgment.
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In connection with the dissolution proceedings, Janet
and Robert exchanged sworn financial statements purporting to
disclose all of their respective assets. Robert also testified
before the state court, affirming the truthfulness of his earlier
disclosures and vouchsafing that he did not intend to collect on
a $700,000 promissory note executed by the couple's son — an asset
that Robert had previously disclosed. In accepting the terms of
the Agreement and consenting to the stipulated judgment, Janet
relied on Robert's representations about his assets.
Looking back, Janet now alleges that Robert deliberately
deceived her about the scope of his assets throughout the
negotiations leading to the divorce. Most prominently, she says
that Robert failed to disclose the existence of a Swiss trust (the
Vaduz Trust), valued at approximately $4,500,000 at the time of
the divorce. This allegation is not plucked out of thin air: in
November of 2016, Robert acknowledged (in a discovery response
related to Janet's effort to reopen the divorce case) that he
had failed to reveal the existence of the Vaduz Trust during the
divorce proceedings.
In addition, Robert is alleged to have concealed the
existence of twelve promissory notes, collectively valued at more
than $10,000,000. All of these notes were executed either by the
couple's son or by corporations owned at least partially by him,
and all were payable to Robert. None of these notes corresponds
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to the $700,000 promissory note that Robert made known during the
divorce proceedings. In December of 2015, Robert accepted payment
in the amount of $3,000,000 from his son against the promissory
notes. He did not disclose this payment to Janet.
This flim-flam set the stage for the allegedly
fraudulent transfers that lie at the heart of this litigation.
After the divorce, Robert transferred the Vaduz Trust and the
$3,000,000 he had surreptitiously collected from his son to WPI
(his alma mater) as charitable gifts. In discovery connected with
Janet's effort to reopen the divorce case, Robert appears to have
acknowledged transferring the Vaduz Trust to WPI in March of 2016,
ostensibly in partial satisfaction of an oral pledge that he made
in 2009 to donate between $40,000,000 and $60,000,000 to the
school. Janet further alleges that, in December of 2016, "Robert
transferred yet more money to WPI and/or to the government of
Antigua and Barbuda" to facilitate "unlimited" scholarships for
prospective students from that country. In all, Janet says, Robert
gave at least $39,000,000 to WPI following the divorce.
Robert died in June of 2018. Janet alleges, though,
that through his fraudulent concealment of assets, Robert
hoodwinked her into entering a disadvantageous divorce
settlement based on a woefully inaccurate picture of his assets;
that from and after the time of the divorce, she has had a claim
on all of the assets Robert concealed during the divorce
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proceedings (inasmuch as those assets were part of the marital
estate); that Robert's estate is liable to her for, among other
things, fraud and breach of contract; that Robert's various
transfers to WPI were made for either no consideration or for
less than equivalent value to thwart her legitimate claims; and
that those transfers left Robert insolvent.
Robert's deceit sparked a rash of litigation.1 To begin,
Janet moved in April of 2015 — before Robert's transfers of the
Vaduz Trust and funds collected on the promissory notes — to
reopen the financial aspects of the divorce case. When discovery
revealed that Robert had failed to disclose the Vaduz Trust and
1 Although the complaint does not provide chapter and verse
concerning the earlier litigation, it provides a docket number
for the plaintiff's divorce case, references to discovery
related to her motion to reopen that case, and allusions both
to her claims regarding the assets that Robert concealed and to
Robert's putative liability for the causes of action stated in
her civil suit. In addition, the parties attached copies of the
dockets associated with the plaintiff's state court proceedings
to their briefing below. Although a court reviewing the grant
of a motion to dismiss for failure to state a claim ordinarily
may not stray beyond the facts averred in the complaint and its
attachments, this rule admits of certain narrow exceptions for,
among other things, official public records. See Freeman v.
Town of Hudson, 714 F.3d 29, 35-36 (1st Cir. 2013). Judicial
decisions and records from related state court proceedings fall
within the public records exception. See San Gerónimo Caribe
Project, Inc. v. Acevedo-Vilá, 687 F.3d 465, 471 & n.2 (1st Cir.
2012) (en banc); Boateng v. InterAmerican Univ., Inc., 210 F.3d
56, 60 (1st Cir. 2000). Consequently, we incorporate pertinent
dates and details from the state court proceedings, including
the Connecticut Supreme Court's recent decision permitting the
plaintiff to substitute the executors of Robert's estate as
defendants in one such case. See Foisie v. Foisie, __ A.3d __
(Conn. 2020) [No. SC 20384].
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had subsequently transferred it to WPI, she brought a parallel
civil action in a Connecticut state court in January of 2017
(after some but not necessarily all of Robert's transfers to
WPI) against Robert and WPI for, among other things, fraud,
fraudulent transfer, and breach of contract.
After WPI moved to dismiss the fraudulent transfer
action for want of in personam jurisdiction, Janet withdrew her
claims against WPI without prejudice and sued WPI in the United
States District Court for the District of Massachusetts. Seeking
to avoid Robert's allegedly fraudulent transfers to WPI and to
recoup the assets allegedly concealed from her during the divorce
proceedings, Janet asserted claims of actual and constructive
fraudulent transfers under both the common law and Connecticut's
version of the Uniform Fraudulent Transfer Act (UFTA), see Conn.
Gen. Stat. §§ 52-552e to -552f. Following some procedural
skirmishing that resulted, among other things, in the filing of an
amended complaint,2 WPI moved to dismiss. It contended (as
relevant here) that Massachusetts law governed Janet's claims;
that she did not qualify as a "creditor" capable of prosecuting
UFTA claims; and that her common law claims were preempted by the
Massachusetts version of the UFTA. Janet opposed the motion but,
after briefing and oral argument, the district court dismissed the
2
For ease in reference, we refer throughout to the first
amended complaint as "the complaint."
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complaint. See Foisie, 408 F. Supp. 3d at 17. This timely appeal
ensued.
II. ANALYSIS
The plaintiff attacks the district court's dismissal of
her complaint primarily on two fronts. First, she objects to the
court's threshold determination that Massachusetts law governs her
claims. Second, she assigns error to the court's determination
that she does not qualify as a "creditor" for purposes of the UFTA.
WPI defends the district court's rescript on both of these points.
In addition, it asserts an alternative basis for dismissal: that
the plaintiff failed to plead her claims with sufficient
particularity. After an examination of Article III standing and
ripeness, we grapple with these issues sequentially.
A. Constitutional Standing & Ripeness.
During oral argument in this court, it was suggested for
the first time that the existence of a Connecticut divorce
judgment, as yet unmodified, might undermine the plaintiff's
Article III standing and render her claims unripe. Because this
suggestion implicates our subject matter jurisdiction, ordinary
waiver principles do not apply. See Pollard v. Law Office of Mandy
L. Spaulding, 766 F.3d 98, 101 (1st Cir. 2014). We must,
therefore, confront this suggestion head-on.
The "'irreducible constitutional minimum' of standing"
comprises three elements: a plaintiff "must have (1) suffered
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an injury in fact, (2) that is fairly traceable to the challenged
conduct of the defendant, and (3) that is likely to be redressed
by a favorable judicial decision." Spokeo, Inc. v. Robins, 136
S. Ct. 1540, 1547 (2016) (quoting Lujan v. Defs. of Wildlife,
504 U.S. 555, 560 (1992)). To establish an injury in fact, a
plaintiff must demonstrate that "she suffered 'an invasion of a
legally protected interest' that is 'concrete and
particularized' and 'actual or imminent, not conjectural or
hypothetical.'" Id. at 1548 (quoting Lujan, 504 U.S. at
560). And to demonstrate that a case is ripe within the meaning
of Article III, the facts alleged must "'show that there is a
substantial controversy, between parties having adverse legal
interests, of sufficient immediacy and reality to warrant the
issuance of' the judicial relief sought." Reddy v. Foster, 845
F.3d 493, 500 (1st Cir. 2017) (quoting Labor Relations Div. of
Constr. Indus. of Mass., Inc. v. Healey, 844 F.3d 318, 326 (1st
Cir. 2016)). The constitutional standing and ripeness inquiries
are interrelated and often duplicative. See id. at 499-500.
Importantly, however, both inquiries stand separate and apart
from the plaintiff's qualifications as a creditor capable of
pursuing claims under the UFTA. See Enter. Fin. Grp. v. Podhorn,
930 F.3d 946, 950 (8th Cir. 2019).
Even though the Article III concerns raised at oral
argument centered on the plaintiff's effort to reopen the divorce
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judgment, her fraudulent conveyance claims are not premised
exclusively on that effort. She also alleges that Robert's
transfers were made to hinder her ability to hold him accountable
under a number of civil causes of action. But whether we view
the plaintiff's fraudulent conveyance claims through the prism
of her underlying civil suit or her underlying effort to reopen
the divorce case, we conclude that the plaintiff easily satisfies
the three elements of Article III standing.
To start, she has plausibly alleged a concrete economic
injury — that Robert fraudulently concealed millions of dollars
that were part and parcel of the marital estate, triggering his
liability to her for various tort and contract claims; that he
gratuitously transferred the concealed assets to WPI to
frustrate her claims; and that he subsequently conveyed millions
more to WPI without adequate consideration and in a manner that
rendered him insolvent. See Gianfrancesco v. Town of Wrentham,
712 F.3d 634, 638 (1st Cir. 2013) (describing financial harm as
quintessential injury in fact). Furthermore, the plaintiff's
claimed injury is fairly traceable to WPI's role in the transfers
because WPI's alleged receipt of the transferred assets deprived
the plaintiff of those assets and rendered Robert insolvent.
See Enter. Fin., 930 F.3d at 950. The UFTA, like the common
law, provides a broad spectrum of remedies that would, if the
plaintiff's fraudulent conveyance claims prove meritorious,
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redress her alleged injury by allowing her, for instance, to
avoid the transfers or secure an injunction prohibiting WPI from
disposing of the transferred assets. See Conn. Gen. Stat.
§ 52-552h; Mass. Gen. Laws ch. 109A, § 8; Robinson v. Coughlin,
830 A.2d 1114, 1117-19 (Conn. 2003); Cavadi v. DeYeso, 941 N.E.2d
23, 32-34 (Mass. 2011).
To put the frosting on the cake, the plaintiff's
fraudulent conveyance claims — at least to the extent that those
claims are predicated on her underlying civil suit — appear ripe
for adjudication. The parties' legal interests are
unquestionably adverse, and they are at loggerheads with respect
to every facet of the plaintiff's fraudulent conveyance claims.
What is more, the controversy between the parties is "'of
sufficient immediacy and reality to warrant the issuance of' the
judicial relief sought." Reddy, 845 F.3d at 500 (quoting Labor
Relations Div., 844 F.3d at 326). The plaintiff's underlying
civil claims are actively being litigated and, if she
successfully prosecutes her fraudulent conveyance claims,
various remedies could be crafted to redress her injury
regardless of whether her civil claims have been reduced to
judgment by that time. See, e.g., Conn. Gen. Stat. § 52-552h;
Mass. Gen. Laws ch. 109A, § 8.
Similarly, the plaintiff's fraudulent conveyance
claims appear ripe to the extent that they are based on her
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motion to reopen the divorce case. Although an unresolved effort
to exhume a divorce judgment might conceivably spawn ripeness
concerns in some circumstances, the circumstances here do not
engender such concerns. The plaintiff filed her motion to reopen
the divorce case well before she lodged her fraudulent conveyance
claims in this action, and her motion to reopen remains pending.
Indeed, the Connecticut Supreme Court recently breathed new life
into it, reversing the superior court's denial of the plaintiff's
motion to substitute the executors of Robert's estate as
defendants in the aftermath of Robert's death. See Foisie v.
Foisie, __ A.3d __, __ (Conn. 2020) [No. SC 20384, slip op. at
13]. And in any event, in considering how the existence of a
settled divorce judgment alters the ripeness calculus, we think
it relevant that, at bottom, the plaintiff's motion to reopen
the divorce case is premised on plausible allegations that the
judgment was secured through fraud. See id. at __ [slip op. at
2].
Finally, the fact that the plaintiff must reopen the
divorce judgment before she can secure an adjustment of the
marital estate is a barrier functionally indistinguishable from
the barriers facing the plaintiff in her civil suit against
Robert. In each instance, she must overcome certain obstacles
in order to establish Robert's liability before prevailing. If
the absence of a final judgment in the underlying civil suit
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does not automatically make this case a green banana — and we
do not think that it does — we fail to see how the still-unopened
divorce judgment could have such an effect. When all is said
and done, we conclude that, under these circumstances, the
plaintiff's motion to reopen the divorce case is of sufficient
concreteness and immediacy to warrant a finding that her
fraudulent conveyance claims (to the extent that they are
premised on that motion) are ripe within the purview of Article
III.
B. Choice of Law.
As a threshold matter, the record makes manifest that
the requirements for diversity jurisdiction, see 28 U.S.C.
§ 1332(a), are satisfied. Janet is a citizen of Florida, WPI is
a Massachusetts corporation and maintains its principal place of
business there, and the amount in controversy comfortably exceeds
$75,000. Moreover, it is apodictic that a federal court sitting
in diversity jurisdiction must apply state substantive law. See
Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78 (1938); Crellin Techs.,
Inc. v. Equipmentlease Corp., 18 F.3d 1, 4 (1st Cir. 1994).
In this case, the parties disagree about whether
Connecticut or Massachusetts law supplies the substantive rules of
decision. The plaintiff insists that Connecticut law governs,
emphasizing that Robert's deception took place in Connecticut, the
divorce judgment was entered by a Connecticut court, and her
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underlying claims against Robert arise under Connecticut law. WPI
rejoins that Massachusetts law applies, noting that both WPI itself
and at least a substantial portion of the disputed funds are
located in the Commonwealth. The district court chose to apply
Massachusetts law. See Foisie, 408 F. Supp. 3d at 14. We review
this determination de novo. See Levin v. Dalva Bros., 459 F.3d
68, 73 (1st Cir. 2006).
Of course, a choice-of-law determination is obligatory
only if a material conflict exists between the laws of the
interested states. See id. If "nothing turns on more precise
refinement," there is no need to make a formal choice of law.
Fashion House, Inc. v. K mart Corp., 892 F.2d 1076, 1092 (1st Cir.
1989). Without further ado, we turn to this inquiry.
As pertinent here, Connecticut and Massachusetts have
adopted facially identical iterations of the UFTA.3 Each version
of the statute provides that a debtor's transfer is actually
fraudulent as to a creditor with a preexisting claim if the debtor
makes the transfer "[w]ith actual intent to hinder, delay or
3
When relevant, we cite Massachusetts precedent interpreting
provisions of the UFTA's predecessor statute, the Uniform
Fraudulent Conveyance Act (UFCA), which remained in effect in the
Commonwealth until the UFTA's enactment in 1996. See Innis v.
Robertson, 854 N.E.2d 105, 110 n.5 (Mass. App. Ct. 2006). Because
the UFTA preserves the UFCA's basic approach and structure, see
Cavadi, 941 N.E.2d at 35 n.15, we deem this precedent authoritative
for how Massachusetts courts would (and do) interpret the UFTA.
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defraud any creditor."4 Conn. Gen. Stat. § 52-552e(a)(1); see
Mass. Gen. Laws ch. 109A, § 5(a)(1). So, too, both versions
provide that a debtor's transfer is constructively fraudulent as
to a creditor with a preexisting claim if the debtor makes the
transfer "without receiving a reasonably equivalent value in
exchange for the transfer . . . and the debtor was insolvent at
that time or the debtor became insolvent as a result of the
transfer." Conn. Gen. Stat. § 52-552f(a); Mass. Gen. Laws ch.
109A, § 6(a). The two versions also contain materially identical
delineations of both the remedies available to creditors and the
limitations on those remedies. See Conn. Gen. Stat. §§ 52-552h
to -552i; Mass. Gen. Laws ch. 109A, §§ 8-9.
4 To be sure, the Massachusetts version of the UFTA — unlike
its Connecticut counterpart, see Conn. Gen. Stat. § 52-552e(a) —
permits a claim for actual fraudulent transfer even when the
creditor's claim arises after the transfer. See Mass. Gen. Laws
ch. 109A, § 5(a). But the two states appear to have adopted a
similarly broad view of when a putative creditor's claim arises.
See Canty v. Otto, 41 A.3d 280, 290-91 (Conn. 2012) (observing
that UFTA plaintiff's claim arose "on the date of the injury"
in underlying tort action (quoting Davenport v. Quinn, 730 A.2d
1184, 1198 (Conn. App. Ct. 1999))); Jorden v. Ball, 258 N.E.2d
736, 738 (Mass. 1970) (deeming UFCA plaintiff a "creditor" based
on "unperfected" and "possible" claims that "merely await[ed]
some further step on her part which . . . was likely to occur");
Innis, 854 N.E.2d at 107, 110 (noting that unresolved fraud
claim was sufficient to make plaintiff a creditor under UFCA).
Because the plaintiff had viable claims against Robert before
the first transfer described in the complaint under either
state's understanding of when a claim arises — through, say, the
tort claims that developed at the time of Robert's deception or
the plaintiff's motion to reopen the divorce case — this
distinction between the Massachusetts and Connecticut versions
of the UFTA is inconsequential here.
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Diving deeper, it appears that Connecticut applies a
distinctive gloss on the elements of a claim for actual fraudulent
conveyance. Both Massachusetts and Connecticut permit a
transferee to assert as a defense to the avoidance of actually
fraudulent transfers that it received the transfer "in good faith
and for a reasonably equivalent value." Conn. Gen. Stat.
§ 52-552i(a); see Mass. Gen. Laws ch. 109A, § 9(a). Connecticut
courts, though, have indicated that (at least in some
circumstances) a transfer is not actually fraudulent in the first
instance unless the plaintiff can show "that the conveyance was
made with a fraudulent intent in which the grantee participated."
McKay v. Longman, 211 A.3d 20, 38 (Conn. 2019) (quoting Certain
Underwriters at Lloyd's, London v. Cooperman, 957 A.2d 836, 843
(Conn. 2008)).5 It is less clear whether Massachusetts courts view
5The scope of this requirement is uncertain. Noting that
the UFTA's actual fraudulent conveyance provision makes no mention
of the transferee's intent, see Conn. Gen. Stat. § 52-552e(a)(1),
the Connecticut Appellate Court has stated that this requirement
attaches only to common law claims, see, e.g., Kosiorek v.
Smigelski, 54 A.3d 564, 584 (Conn. App. Ct. 2012). The Connecticut
Supreme Court and the Connecticut Appellate Court, however,
continue to list a showing of the transferee's intent as an element
of actual fraudulent conveyance under both the UFTA and the common
law. See, e.g., McKay, 211 A.3d at 38; Smith v. Marshview Fitness,
LLC, 212 A.3d 767, 772 (Conn. App. Ct. 2019). Here, the plaintiff
has not set forth allegations directed to WPI's knowing
participation, if any, in Robert's claimed fraud. Even so, WPI
has made no developed argument that she was required to do so.
Thus, the issue is not before us. See United States v. Zannino,
895 F.2d 1, 17 (1st Cir. 1990) ("[I]ssues adverted to in a
perfunctory manner, unaccompanied by some effort at developed
argumentation, are deemed waived.").
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a transferee's knowing participation in the debtor's intentional
fraud as a necessary ingredient of an actual fraudulent conveyance
claim. Cf. Frank Sawyer Tr. of May 1992 v. Comm'r, 712 F.3d 597,
603, 607 (1st Cir. 2013) (indicating that section 5(a)(1)
concerns transferee's intent but later suggesting transferee's
knowledge of transferor's intentions is "irrelevant"); Bakwin v.
Mardirosian, 6 N.E.3d 1078, 1081 n.2, 1083-85 (Mass. 2014) (holding
that innocent transferees may be added as "relief defendants" in
UFTA actions and affirming reconveyance order against good-faith
transferee who took from transferor harboring actual fraudulent
intent). The parties have done nothing to clarify this murky area
of the law.
The plot thickens when we consider each state's
treatment of the interplay between the UFTA and the common law.
The court below deemed a choice-of-law determination necessary
because (in its view) all common law fraudulent conveyance claims
are preempted by the UFTA under Massachusetts law but not under
Connecticut law. See Foisie, 408 F. Supp. 3d at 14. We think
that the matter is more nuanced.
Contrary to the district court's assertion that
Massachusetts's version of the UFTA bars all common law causes of
action related to fraudulent conveyances, the Massachusetts
Supreme Judicial Court (SJC) has held no more than that the UFTA
"establish[es] a uniform statutory baseline for fraudulent
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transfer actions which is supplemented by the common law unless
there is an inherent conflict." Cavadi, 941 N.E.2d at 36.
Although the plaintiff seems to concede that her common law claims
would conflict with the UFTA and thus be preempted under
Massachusetts law, her claims are presently pleaded under
Connecticut law. She has not yet had the opportunity to articulate
what common law causes of action she might try to pursue under
Massachusetts law. To the extent that her claims might resemble
reach and apply actions seeking the imposition of a constructive
trust to set aside Robert's transfers to WPI for her benefit as a
creditor, the SJC has indicated that such actions would be
preempted by the UFTA. See id. at 34, 36, 39. Even so, the SJC
has emphasized that "[a]n analysis of the circumstances in a
particular case is necessary to determine whether the basis of" a
particular common law claim overlaps with the UFTA. Id. at 36.
Connecticut courts take a different tack, allowing
parties to pursue UFTA and common law claims simultaneously, with
the possibility of securing comparatively broader remedies under
the UFTA. See Lloyd's, 957 A.2d at 843. These more varied remedies
are chiefly available in circumstances (not now present here)
involving the transferee's reconveyance or dissipation of the
transferred property. See Robinson, 830 A.2d at 1117-19
(explaining that Connecticut UFTA sometimes permits damages when
transferee either reconveys property and retains no proceeds or
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dissipates property); cf. Bakwin, 6 N.E.3d at 1085, 1093-94
(acknowledging possibility of damages in similar circumstances
under Massachusetts UFTA).
For the sake of completeness, we note two other potential
(but ultimately illusory) points of conflict. First, WPI asserts
that a choice-of-law determination is necessary because
Massachusetts, unlike Connecticut, imposes a $20,000 damages cap
on a charitable organization's liability in suits arising from
torts committed in the course of activity meant to further the
organization's charitable goals. See Mass. Gen. Laws ch. 231,
§ 85K. Massachusetts courts typically style this provision as
covering tortious conduct attributable to the charitable
organization itself. See, e.g., Goldberg v. Ne. Univ., 805
N.E.2d 517, 521 (Mass. App. Ct. 2004). Here, however, the
plaintiff alleges simply that WPI was the beneficiary of Robert's
fraudulent transfers, not that WPI itself engaged in tortious
conduct. At this juncture — particularly given the plaintiff's
lack of any opportunity to plead her complaint under Massachusetts
law and the parties' consensus at oral argument that the
applicability of the statutory cap to the facts of this case is
uncertain — we cannot now find a material conflict between the
laws of the two interested states premised on Mass. Gen. Laws
ch. 231, § 85K.
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Second, a material conflict might arise if we were to
credit WPI's reading of the Massachusetts Appeals Court's decision
in Welford v. Nobrega, 565 N.E.2d 1239 (Mass. App. Ct. 1991),
aff'd, 586 N.E.2d 970 (Mass. 1992). There, the ex-wife of the
purchaser of a winning lottery ticket, bought eleven years after
the couple's divorce, filed suit against her ex-husband in the
probate court, asserting that she was entitled to an adjustment of
alimony and support based on the lottery winnings. See Welford,
565 N.E.2d at 1240. The ex-husband's new companion (a beneficiary
of the trust to which the ex-husband had assigned the ticket)
retaliated by seeking a declaratory judgment in the superior court,
asking that she be recognized as the co-owner of the lottery
ticket. See id. at 1240-42.
After some preliminary jousting, the superior court
entered summary judgment in the ex-wife's favor, declaring that
the lottery winnings were the ex-husband's sole property; that
they had been "in substance" assigned fraudulently to the trust;
that the trust failed under a state statute governing the
assignment of prize winnings to trusts; and that, therefore, the
winnings were subject to any modification of the alimony and/or
support that might be ordered by the probate court. Id. at 1243.
The Appeals Court reversed, concluding that an uncontradicted
affidavit from the ex-husband's companion established an oral
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agreement between the two to share the winnings. See id. at 1243-
44, 1246.
In reviewing the superior court's finding that the ex-
husband had in essence fraudulently assigned the winnings to the
trust, the Appeals Court deemed the premise of this finding
"faulty" because the ex-wife did not qualify as her ex-husband's
creditor under the UFCA. Id. at 1243-44. The Appeals Court noted
that although spouses may qualify as creditors with respect to
transfers that occur when divorce is imminent, no Massachusetts
case ever had acknowledged "that a divorced spouse seeking
modification of outstanding orders long after the divorce became
final is a 'creditor' entitled to challenge prior transfers of
property." Id. at 1244. In order for the ex-wife's "continuing
right to modification of support orders" to make her a creditor of
her ex-husband for her lifetime, the Appeals Court reasoned,
"[t]here must be special circumstances unrelated to the prior
marriage."6 Id.6
Although the SJC affirmed the Appeals Court's decision in
Welford, it did so on a narrow ground that rested on the undisputed
evidence that the ex-husband and his companion were co-owners of
the lottery winnings. See Welford, 586 N.E.2d at 973-74. The SJC
stated only that it "substantially agree[d]" with the Appeals
Court's reasoning and remained pointedly silent about the ex-
wife's creditor status. Id. at 972. Understandably, then, the
parties — like the district court — focus exclusively on the
Appeals Court's decision.
- 21 -
WPI argues that Welford establishes a limitation on the
UFTA's definition of "creditor" that Connecticut courts would also
adopt given the materially identical statutory definition of
"creditor" in both versions of the UFTA and the existence of
Connecticut precedent that (like certain Massachusetts precedent)
limits the circumstances under which one spouse may challenge the
transfers of the other during marriage. See, e.g., Molitor v.
Molitor, 440 A.2d 215, 218 (Conn. 1981); Yacobian v. Yacobian, 508
N.E.2d 1389, 1389-90 (Mass. App. Ct. 1987) (rescript). Even
assuming for the sake of argument that Connecticut courts would
embrace Welford — a matter on which we take no view — this would
only bring the two state's laws into alignment rather than create
a meaningful gulf between them.
If, however, Connecticut courts were not disposed to
adopt a Welford-style limitation on the creditor status of
ex-spouses, a conflict could arise. Any such conflict, though,
would not be material to this case because, as the district court
candidly acknowledged, see Foisie, 408 F. Supp. 3d at 17, Welford
is factually distinguishable. There, the disputed assets, the
supposedly fraudulent transfer of those assets, and the
plaintiff's claim to the assets all came into being many years
after the divorce. See Welford, 565 N.E.2d at 1240, 1243. Here,
however, the disputed assets and the plaintiff's claim to those
assets, as well as her right to payment based on Robert's tortious
- 22 -
activity, existed at the time of the divorce proceedings, albeit
unbeknownst to her as a result of Robert's chicanery. So, too,
even though the plaintiff — like the ex-wife in Welford — seeks to
modify "outstanding orders long after the divorce became final,"
id. at 1244, her divorce settlement — unlike in Welford — was
allegedly procured by fraud. And unlike in Welford, the plaintiff
does not seek merely to reopen the financial aspects of her divorce
but, rather, seeks as well to prosecute claims for fraud and breach
of contract.
We readily acknowledge that Welford is not a model of
clarity and that language in that opinion, if unmoored from the
case's factual context, can be read expansively to suggest either
that ex-spouses seeking modification of long-settled orders may
never qualify as creditors absent special circumstances or that
the transfers of a former spouse can only be challenged if they
occurred while divorce proceedings were underway or imminent. See
id. But this language is dictum and, in all events, we do not
think that Welford's discussion of creditor status can be so easily
disentangled from its unique facts. Consequently, Welford cannot
form a credible basis for a claim of material conflict between
Connecticut law and Massachusetts law.
The short of it is that there may be material conflicts
between Connecticut law and Massachusetts law as to the elements
of the plaintiff's actual fraudulent conveyance claims and the
- 23 -
potential preemption of her common law claims. But without
further elaboration from the parties on each of these points,
it is surpassingly difficult at this nascent stage of the
litigation to discern the practical import of these potential
conflicts. This uncertainty feeds into our principal concern:
that the district court's choice-of-law determination was
premature. To put this concern into perspective, we first sketch
the contours of the applicable analytic framework.
When resolving disagreements about which state's law
applies, we employ the choice-of-law principles of the forum state
(here, Massachusetts). See Klaxon Co. v. Stentor Elec. Mfg. Co.,
313 U.S. 487, 496 (1941); Okmyansky v. Herbalife Int'l of Am.,
Inc., 415 F.3d 154, 158 (1st Cir. 2005). Massachusetts courts
normally settle choice-of-law disputes using a functional
approach, looking to the Restatement (Second) of Conflict of Laws
as "[o]ne obvious source of guidance." Bushkin Assocs. v. Raytheon
Co., 473 N.E.2d 662, 668-69 (Mass. 1985); see McKee v. Cosby, 874
F.3d 54, 59-60 (1st Cir. 2017).
At their core, fraudulent conveyance actions are both
remedial in nature and auxiliary to underlying actions to recover
debts (which can sound in tort, contract, or some admixture of the
two). See Ferrari v. Barclays Bus. Credit, Inc. (In re Morse Tool,
Inc.), 108 B.R. 384, 386-87 (Bankr. D. Mass. 1989); Jorden v.
Ball, 258 N.E.2d 736, 737 (Mass. 1970). Regardless of the
- 24 -
particular flavor of the underlying action, it is pellucid that
Massachusetts would apply the law of the state with the "most
significant relationship" to the parties, the conveyances, and the
creditor's underlying claims. Restatement (Second) of Conflict of
Laws §§ 145, 188 (Am. Law Inst. 1971); see Brennan v. Carvel Corp.,
929 F.2d 801, 806 (1st Cir. 1991); In re Morse Tool, 108 B.R. at
385; Cosme v. Whitin Mach. Works, Inc., 632 N.E.2d 832, 834-35,
834 n.3 (Mass. 1994).
In administering the "most significant relationship"
test, a variety of data points must be examined. These data points
include the character and site of the conveyed assets, the state
(or states) from which the assets were transferred, and the
whereabouts of the debtor, the creditor, and the transferee. See
Murphy v. Meritor Sav. Bank (In re O'Day Corp.), 126 B.R. 370, 391
(Bankr. D. Mass. 1991); In re Morse Tool, 108 B.R. at 387-88. The
analysis must also be informed by the factors enumerated in
section 6 of the Restatement, including "the relevant policies of
the forum" and other interested states, "the relative interests of
those states in the determination of the particular issue," the
need to protect the parties' "justified expectations," and "the
basic policies underlying the particular field of law."
Restatement (Second) of Conflict of Laws § 6(2); see Cosme, 632
N.E.2d at 835; Bushkin, 473 N.E.2d at 669.
- 25 -
Relative to this inquiry, the district court harvested
several relevant pieces of information from the complaint and its
attachments. The court noted that Robert's deception transpired
during the couple's divorce proceedings in Connecticut; that the
plaintiff resided in Florida at the time she filed this suit; and
that Robert maintained various residences (in Nevada, Florida, and
Antigua) after the divorce. See Foisie, 408 F. Supp. 3d at 14.
The court acknowledged that "it is not clear from where the money
was transferred" but that the plaintiff's "allegations that Robert
hid money in offshore accounts" rendered it "unlikely that [the
funds were] transferred from Connecticut." Id. Ultimately, the
court concluded that the basic policies underlying fraudulent
conveyance law — which it deemed "the most significant factor"
in the choice-of-law analysis — centered on the location of the
conveyed assets. Id. At the end of the day, the court applied
Massachusetts law because, as it read the complaint, "the assets
Janet seeks are presently located" in the Commonwealth. Id.
On this record, we conclude that the court below should
not have made a choice-of-law determination at the motion-to-
dismiss stage. In reaching this conclusion, we emphasize that the
optimal timing for a choice-of-law determination is case-specific.
In many cases, the relevant facts are sufficiently clear that delay
in making a choice-of-law determination would serve no useful
purpose. In such cases, the court is free to make a choice-of-
- 26 -
law determination on the basis of the plaintiff's complaint. See,
e.g., Carton v. Gen. Motors Acceptance Corp., 611 F.3d 451, 454-
55 (8th Cir. 2010); Bartel v. Tokyo Elec. Power Co., 371 F. Supp.
3d 769, 790 (S.D. Cal.), appeal dismissed, 2019 WL 5260743 (9th
Cir. July 30, 2019) (unpublished order); Reginella Constr. Co.
v. Travelers Cas. & Sur. Co. of Am., 949 F. Supp. 2d 599, 609 (W.D.
Pa. 2013), aff'd, 568 F. App'x 174 (3d Cir. 2014).
In other cases, though, the record is more tenebrous,
and the complaint itself leaves unanswered questions about
critical aspects of the pertinent facts. In such cases, a district
court is well-advised to refrain from making an immediate choice-
of-law determination. After all, when there are important holes
in the record, discovery will likely illuminate critical facts
bearing on the unanswered questions and, thus, on the ultimate
question of which state's law should apply. See, e.g., Bristol-
Myers Squibb Co. v. Matrix Labs. Ltd., 655 F. App'x 9, 13 (2d Cir.
2016); Jones v. Lattimer, 29 F. Supp. 3d 5, 10 n.3 (D.D.C. 2014);
Speedmark Transp., Inc. v. Mui, 778 F. Supp. 2d 439, 444 (S.D.N.Y.
2011). We think that this case falls into the latter camp.
Here, discovery may well reveal salient facts bearing on
the choice-of-law calculus, such as Robert's primary residence at
the time of the transfers and the geographic focal points of any
relevant meetings or communications between Robert and WPI.
Discovery also promises to shed light upon the types and kinds of
- 27 -
property transferred and the locations from which the disputed
funds were sent to WPI. Although the district court deemed it
unlikely that the funds were transferred from Connecticut, see
Foisie, 408 F. Supp. 3d at 14, the complaint leaves this issue
wide open. While the complaint alleges that some of the funds
were held in an offshore account, Robert is also alleged to have
transferred the proceeds of a gaggle of promissory notes. The
complaint contains nothing to suggest where those proceeds were
held at the time of the transfers. What is more, the geographic
origins of the disbursements that allegedly rendered Robert
insolvent — such as the transfer of funds "to WPI and/or to the
government of Antigua and Barbuda" in December of 2016 — must be
factored into the mix. The complaint contains no allegations about
the locations from which these funds were disbursed.
To cinch the matter, the complaint alleges that "a
substantial part" of the funds are now located in Massachusetts.
This leaves open the possibility that other substantial portions
of the disputed funds and/or parcels of as-yet unknown real
property lie outside the Commonwealth (possibly in Connecticut).
Given the fungibility of money and the fluidity with which it can
be moved, assuming that all of the disputed funds are being held
in Massachusetts comes dangerously close to applying the law of a
state whose only significant relationship to the case is that it
- 28 -
is the transferee's principal place of business.7 According
dispositive weight to the transferee's base of operations is not
encouraged by the case law. See In re O'Day Corp., 126 B.R. at
391; In re Morse Tool, 108 B.R. at 388. That is especially true
where, as here, we cannot say with any assurance whether a
significant portion of the disputed assets was conveyed to WPI
either from Connecticut or from some other domestic locus. Indeed,
we cannot even be sure, at this early stage, about precisely
what types of property Robert transferred to WPI. Cf. U.S. Bank
Nat'l Ass'n v. Bolling, 57 N.E.3d 1033, 1035 (Mass. App. Ct.
2016) (explaining that when claims involve real property,
Massachusetts ordinarily privileges law of state where real
property is located in choice-of-law calculus). To the extent
that Robert transferred money to WPI, that fact might reduce the
importance of the site of the transferred assets in the choice-
of-law inquiry since money is difficult to pin to a single
geographic location. Cf. In re Morse Tool, 108 B.R. at 387-88(affording significant weight to location of transferred assets
7 WPI takes pains to point out that the Uniform Commercial
Code (U.C.C.) expressly excludes "money" from its definition of a
"general intangible." See U.C.C. § 9-102(a)(42). Regardless of
the U.C.C.'s taxonomy, the practical reality remains that money is
easily and frequently shifted into different shapes and forms.
This means, we think, that it would be folly to assume that all of
the disputed funds are located in Massachusetts merely because WPI
maintains its principal place of business there.
- 29 -
in choice-of-law analysis where transferred assets consisted at
least partially of tangible inventory).
We add, moreover, that the district court's choice-of-
law determination appears to have been based on a truncated
assessment of the factors limned in the Restatement. For
instance, the court seems not to have analyzed the relevant
policies and interests of the affected jurisdictions. See
Restatement (Second) of Conflict of Laws § 6(2)(c). The court
also appears not to have considered the plaintiff's justifiable
expectations. See id. § 6(2)(d). Taking the totality of the
relevant factors into account may well affect the outcome of the
inquiry.
The upshot is that both Connecticut and Massachusetts
have significant relationships to this litigation. As the factual
record matures, strong arguments may well emerge for applying
either state's law. Although the choice itself is not clear, what
is clear is that gathering further pertinent information will
assist the district court in making it. A choice-of-law
determination in this type of case ought not to be made
prematurely, cf. Mandel v. Bos. Phoenix, Inc., 456 F.3d 198, 201
(1st Cir. 2006) ("The oenologist's creed teaches that we should
drink no wine before its time."), and we conclude that this is
a situation in which a choice-of-law analysis would be better
performed on a more fully developed factual record. The district
- 30 -
court's premature choice-of-law determination must, therefore, be
set aside.
Following discovery, the district court will be better
positioned to determine whether a material conflict exists between
the laws of the interested states. In making this determination,
we invite the district court, on a more mature record, to undertake
an assessment of the elements of fraudulent conveyance claims under
each state's law and to reevaluate the practical ramifications of
any potential preemption of the plaintiff's common law claims. If
in the end the court determines that such a conflict exists and
that a choice of law is required, it should revisit the question
and assess afresh which state — Connecticut or Massachusetts —
possesses the most significant relationship to the plaintiff's
claims. We take no view on the answer to that question.
C. UFTA Claims.
We turn next to the district court's dismissal of the
plaintiff's UFTA claims for what the court described as lack of
standing. In the court below, WPI styled its argument that the
plaintiff lacked standing to sue under the UFTA under Federal Rule
of Civil Procedure 12(b)(1). Arguments concerning the absence of
statutory standing, unlike arguments concerning the absence of
constitutional standing, do not address a court's subject matter
jurisdiction but, rather, address the merits of the plaintiff's
claims. See Katz v. Pershing, LLC, 672 F.3d 64, 75 (1st Cir.
- 31 -
2012). Consequently, such arguments are more appropriately
evaluated under the umbrella of Federal Rule of Civil Procedure
12(b)(6), see id. at 75-76, and we — like the district court, see
Foisie, 408 F. Supp. 3d at 9, 15 — consider WPI's arguments
concerning statutory standing under that umbrella.
We review de novo a district court's grant of a Rule
12(b)(6) motion to dismiss. See Tambone, 597 F.3d at 441. In
undertaking this review, we accept as true all well-pleaded facts
contained in the complaint and draw all reasonable inferences in
the pleader's favor. See id. We may supplement these facts and
inferences with information gathered from "matters of public
record" and "facts susceptible to judicial notice." Haley v.
City of Boston, 657 F.3d 39, 46 (1st Cir. 2011). Having laid
this foundation, we proceed to appraise the substance of the
district court's dismissal of the plaintiff's UFTA claims.
Both the Connecticut and Massachusetts versions of the
UFTA identically provide that a plaintiff must qualify as a
"creditor" of the debtor who made allegedly fraudulent transfers.
See Conn. Gen. Stat. §§ 52-552e(a), 52-552f(a) (delineating
circumstances in which transfers by debtor are "fraudulent as
to a creditor"); Mass. Gen. Laws ch. 109A, §§ 5(a), 6(a) (same).
The district court viewed the matter through the prism of the
Massachusetts UFTA and, extrapolating from its reading of the
Massachusetts Appeals Court's decision in Welford, the district
- 32 -
court determined that the plaintiff did not qualify as a creditor
and, thus, could not pursue UFTA claims. See Foisie, 408 F. Supp.
3d at 16-17.
Inasmuch as the Connecticut and Massachusetts versions
of the UFTA identically define the term "creditor" and WPI
insists that Connecticut courts would impose a Welford-type
limitation on an ex-spouse's ability to qualify as a creditor,
we are constrained to tackle this controversy despite the absence
of a definitive choice of law. Our appraisal of the correctness
vel non of the district court's determination about the plaintiff's
creditor status necessarily starts with the statutory text. See
Stornawaye Fin. Corp. v. Hill (In re Hill), 562 F.3d 29, 32 (1st
Cir. 2009). If a statute defines a term in plain and unambiguous
language, that is generally the end of the matter. See Ruiz v.
Bally Total Fitness Holding Corp., 496 F.3d 1, 8 (1st Cir. 2007).
Both Massachusetts and Connecticut courts cleave to the time-
honored principle that clear statutory language should generally
control unless adhering to it would produce absurd, unworkable, or
illogical results. See State v. Menditto, 110 A.3d 410, 413 (Conn.
2015); In re Custody of Victoria, 39 N.E.3d 418, 425 (Mass. 2015).
The UFTA defines a "creditor" simply as "a person who
has a claim." Conn. Gen. Stat. § 52-552b(4); Mass. Gen. Laws ch.
109A, § 2. A "claim," in turn, is defined expansively as "a right
to payment, whether or not the right is reduced to judgment,
- 33 -
liquidated, unliquidated, fixed, contingent, matured, unmatured,
disputed, undisputed, legal, equitable, secured or unsecured."
Conn. Gen. Stat. § 52-552b(3); accord Mass. Gen. Laws ch. 109A,
§ 2. Under the statutory definition — which the district court
did not analyze — the plaintiff appears at first blush to qualify
as Robert's creditor. After all, she has plausibly alleged that
she had a right to payment from Robert (albeit a contingent
right) at the time of the transfers. This right was manifested
both by her motion to reopen the divorce case and by the various
tort and contract causes of action for which Robert became liable
when he practiced his deception and that she eventually brought
against him in a parallel civil suit. See Canty v. Otto, 41
A.3d 280, 290-91 (Conn. 2012) (explaining that creditor's claim
arose on date of injury in underlying tort action); Jorden, 258
N.E.2d at 738 (deeming UFCA plaintiff a creditor based on
"unperfected" and "possible" claims that "merely await[ed] some
further step on her part"); Innis v. Robertson, 854 N.E.2d 105,
110 (Mass. App. Ct. 2006) (concluding that unresolved fraud
claim was sufficient to make UFCA plaintiff a creditor). As the
statutory definition of "claim" makes luminously clear, the
plaintiff is not barred from creditor status merely because her
claims are disputed or have not been reduced to judgment. See
Conn. Gen. Stat. § 52-552b(3); Mass. Gen. Stat. ch. 109A, § 2.
- 34 -
Nor is the plaintiff precluded from creditor status
because one of her claims — her claim for reallocation of the
marital estate, which depends on the granting of her motion to
reopen the divorce case — requires her to crack open the divorce
judgment. If unresolved civil claims (and even civil causes of
action that have not yet been brought) are sufficient to confer
creditor status, we can think of no persuasive reason to conclude
that a claim that depends on the reopening of a divorce judgment
is too speculative to invest an individual with that status.
Such claims are not anomalous: in exercising their equitable
powers, Connecticut courts "consistently have granted motions
to open dissolution judgments on the basis of fraud for the
limited purpose of reconsidering the financial orders." Foisie,
__ A.3d at __ [slip op. at 8, 11]. The UFTA's incorporated
definitions make abundantly clear that a "claim" may be either
legal or equitable in nature. See Conn. Gen. Stat. § 52-552b(3);
Mass. Gen. Laws ch. 109, § 2.
In any event, motions to reopen divorce judgments are
not very different, for purposes of establishing creditor
status, from unresolved civil claims. Although the divorce
judgment's current terms do not entitle the plaintiff to the
desired reallocation of the marital estate, neither will she be
entitled to the damages she seeks against Robert in her parallel
civil suit unless and until she successfully prosecutes her
- 35 -
claims. In both instances, the plaintiff must jump through
various hoops before she can establish liability and gain
monetary relief. Consequently, we believe that the plaintiff's
claim for reallocation of the marital estate fits within the
broad confines of a "claim" under the UFTA.
We recognize, of course, that courts have imposed a few
limitations on the UFTA's commodious definition of "creditor." In
Massachusetts, one such limitation is triggered when a spouse
attempts to challenge as fraudulent transfers by her spousal
counterpart during the currency of the marriage. In such
situations, marriage alone is not sufficient to make one a creditor
of her spouse. See Yacobian, 508 N.E.2d at 1389. As a result,
Massachusetts has thus far recognized spouses as creditors only
when allegedly fraudulent transfers occurred while divorce
proceedings were either ongoing or imminent. See, e.g., Du Mont
v. Godbey, 415 N.E.2d 188, 190 (Mass. 1981); McDonough v.
McDonough, 769 N.E.2d 798, at *1 & n.5 (Mass. App. Ct. 2002)
(unpublished table decision). The same framework exists under
Connecticut's version of the UFTA. See, e.g., Molitor, 440 A.2d
at 218 (explaining that transfers "made after notice of an actual
or imminent action seeking alimony or support may be found
fraudulent and set aside").
Another limitation — never expressly recognized by
Connecticut courts — is exemplified by the Massachusetts Appeals
- 36 -
Court's decision in Welford. But in light of the factual
distinctions between Welford and this case, see supra Part II(B),
we do not read Welford as foreclosing the plaintiff from creditor
status under the UFTA.
Shutting its eyes to the obvious import of the UFTA's
definition of "creditor," WPI mounts a series of counterarguments.
As an opening salvo, it emphasizes that Massachusetts and
Connecticut courts have thus far only deemed spouses creditors
under the UFTA when divorce was imminent at the time of the
challenged transfers and that the plaintiff has failed to cite
precedent recognizing an ex-spouse as a creditor under
circumstances analogous to those presented here. But this dearth
of on-point precedent is a two-edged sword: when a statute's plain
text appears to invest a plaintiff with a right to pursue a
particular claim and no on-point case law demands a contrary
result, a court's inquiry ought to end. Cf. Menditto, 110 A.3d
at 413 (counseling that Connecticut courts should cease further
inquiry if statute's plain meaning does not produce absurd
results); In re Custody of Victoria, 39 N.E.3d at 425 (explaining
tenet that plain meaning of statutory text should govern unless
illogical results would ensue). So it is here.
WPI has a fallback position: it strives to convince us
that limiting the circumstances under which a spouse's transfers
can be challenged as fraudulent to the period just before divorce
- 37 -
ensures that spousal fraudulent conveyance claims are sufficiently
concrete. In WPI's view, spouses facing imminent divorce have
concrete claims on the marital estate, whereas ex-spouses proceed
on the comparatively "conjectural" basis that a court may reopen
a divorce judgment. Allowing an ex-spouse to qualify as a creditor
premised only on an "attenuated chance" that a court will modify
a divorce judgment entered many years earlier would, WPI submits,
open the floodgates to putative creditors with any asserted right
to payment, no matter how speculative. We are not persuaded.
To begin, we are skeptical of WPI's characterization of
the plaintiff's right to payment as based only "on the purely
hypothetical possibility that she might someday convince a
Connecticut court to reconsider [her] long-settled final divorce
judgment." This self-serving characterization places a heavy
thumb on the scale and downplays the scope of the plaintiff's
underlying claims. Along with her effort to reopen the divorce
case, the plaintiff is pursuing plausible claims against Robert's
estate for, among other things, fraud and breach of contract. At
least under Connecticut law (and likely under Massachusetts law
as well), these claims arose — for purposes of establishing
creditor status under the UFTA — at the time of Robert's
deception in 2011 and therefore existed well before the first
transfer referenced in the complaint. See Canty, 41 A.3d at
290-91; Jorden, 258 N.E.2d at 738. These claims alone are
- 38 -
sufficient (at this stage of the proceedings) to confer creditor
status on the plaintiff.8
We add that it is wishful thinking for WPI to attempt to
brand the plaintiff's underlying claims as "purely hypothetical"
or unlikely to succeed. The UFTA casts a wide net, and its
definitions of "claim" and "creditor" make crystal clear that the
plaintiff's right to payment is not too speculative simply because
her underlying claims are disputed or have not been reduced to
judgment. See Conn. Gen. Stat. § 52-552b(3)-(4); Mass. Gen. Laws
ch. 109A, § 2. Nor do we have any reason to think that her claims
are doomed to fail. It is uncontested that the plaintiff secured
a prejudgment remedy in her civil action against Robert — a feat
that required a showing of probable cause to believe that the
claims were viable. See Canty, 41 A.3d at 293. So, too, the
Connecticut Supreme Court lately reversed the denial of the
plaintiff's motion to substitute the executors of Robert's estate
as defendants in her action to reopen the divorce case. See
Foisie, __ A.3d at __ [slip op. at 2]. In that decision, the
8 WPI contends that the plaintiff cannot gain creditor status
simply because she has a prospect of achieving a damages award
following the entry of an order of default against the executors
of Robert's estate and has secured a prejudgment remedy in her
parallel civil suit upon a showing of probable cause that her
claims are viable. This contention serves only to erect a straw
man. The plaintiff does not argue that these facts, singly or in
combination, make her a creditor but, rather, argues that the
existence of her civil claims makes her a creditor. She is correct
on this point.
- 39 -
Court observed that the parties had agreed to reopen the divorce
judgment "for the limited purpose of conducting discovery
regarding the plaintiff's allegations of fraud" and that Robert
had stipulated that the plaintiff could show "'beyond a mere
suspicion' that he had engaged in fraud." Id. at __ & n.3 [slip
op. at 2 & n.3].
We are equally unconvinced by WPI's importunings that
the fraudulent conveyance claims of ex-spouses are inherently more
attenuated than the claims of spouses challenging transfers that
take place while divorce is either ongoing or imminent. Although
the right to payment asserted by a spouse facing divorce is both
urgent and concrete (as the marital estate is about to be divided),
this does not mean that every claim asserted by an ex-spouse is
necessarily speculative. It would be perverse to interpret the
UFTA's broad definition of "creditor" so that a wife would qualify
if she has the good fortune of discovering her spouse's fraud
before the divorce but not if her spouse was cunning enough to
conceal assets during the divorce proceedings and transfer them
fraudulently only after the dust had settled. Cf. Bennett v. City
of Holyoke, 362 F.3d 1, 11 (1st Cir. 2004) (observing that courts
should not "interpret a statute in a way that would produce an
entirely illogical result").
In a last-ditch attempt to derail the plaintiff's
claims, WPI contends that according the plaintiff creditor status
- 40 -
would undermine public policy favoring the finality of judgments
generally and, in particular, the finality of divorce judgments.
This contention builds on a solid foundation: the policy favoring
the finality of judgments is both sound and important. See Comfort
v. Lynn Sch. Comm., 560 F.3d 22, 26 (1st Cir. 2009) (explaining
that "finality is fundamental to our judicial system"); Loughlin
v. Loughlin, 910 A.2d 963, 973 (Conn. 2006) (noting "the need for
finality between parties in a divorce proceeding" (quoting
Delahunty v. Mass. Mut. Life Ins. Co., 674 A.2d 1290, 1298 (Conn.
1996))). But the structure that WPI erects on this foundation is
as insubstantial as a house built upon the shifting sands. The
importance of finality is in no way undercut by acknowledging an
ex-spouse as a creditor based in part on claims that a stipulated
divorce judgment was procured through fraud. See Foisie, __ A.3d
at __ [slip op. at 8-9] ("Allowing parties to open dissolution
judgments, when financial fraud has been alleged, for the limited
purpose of reconsidering the financial orders . . . is both
equitable and sound public policy."). And at any rate, the
principal concern with respect to the finality of divorce judgments
is the need to eliminate doubt about an individual's marital
status. See Loughlin, 910 A.2d at 973. This concern is not
implicated where, as here, the plaintiff seeks to reopen the
divorce case for the sole purpose of securing a new allocation of
- 41 -
the marital estate. See Foisie, __ A.3d at __ [slip op. at 8-9,
13].
To say more about the UFTA claims would be pointless.
The bottom line is that the plaintiff qualifies as a creditor
within the purview of the UFTA in light of her nonfrivolous claims
against Robert's estate. Hence, the district court erred by
dismissing the plaintiff's UFTA claims on the basis that she lacked
standing as a creditor.
D. Common Law Claims.
This leaves the plaintiff's common law fraudulent
conveyance claims. Those claims need not detain us. Our
conclusion that the district court's choice-of-law determination
must be set aside, see supra Part II(B), erodes the foundation
for the court's dismissal of the plaintiff's common law claims.
After all, the court premised that dismissal on its conclusion
that those claims were preempted by the UFTA under Massachusetts
law. See Foisie, 408 F. Supp. 3d at 14. Because the district
court must reevaluate whether a formal choice of law is necessary
and, if so, which state's law applies, the dismissal of the
plaintiff's common law claims on preemption grounds cannot stand.
E. Adequacy of the Complaint.
We have one hill left to climb. WPI asserts that even
if the plaintiff qualifies as a creditor, dismissal of her UFTA
claims is nonetheless warranted due to her failure to plead those
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claims with the requisite specificity. It advances essentially
the same assertion with respect to the plaintiff's common law
claims. Although the district court rejected these assertions,
see id. at 15, we are free to affirm the dismissal of the
plaintiff's claims on any ground made manifest by the record. See
Keach v. Wheeling & Lake Erie Ry. Co. (In re Montreal, Me. & Atl.
Ry.), 888 F.3d 1, 8 n.4 (1st Cir. 2018).
Generally, a civil complaint must contain only "a short
and plain statement of the claim showing that the pleader is
entitled to relief." Fed. R. Civ. P. 8(a)(2); see Ashcroft v.
Iqbal, 556 U.S. 662, 677-78 (2009); Bell Atl. Corp. v. Twombly,
550 U.S. 544, 567-68, 570 (2007). Complaints alleging fraud,
though, are subject to a heightened pleading standard, which is
embodied in Federal Rule of Civil Procedure 9(b). That rule
demands that the "circumstances constituting fraud" be pleaded
"with particularity." Fed. R. Civ. P. 9(b); see Rodi v. S. New
Eng. Sch. of Law, 389 F.3d 5, 15 (1st Cir. 2004). We have explained
that when Rule 9(b) applies, the pleader ordinarily must "specify
the who, what, where, and when" regarding the alleged fraud. Alt.
Sys. Concepts, Inc. v. Synopsys, Inc., 374 F.3d 23, 29 (1st Cir.
2004). Other facets of fraud, such as intent, may be pleaded in
general terms. See Fed. R. Civ. P. 9(b); Rodi, 389 F.3d at 15.
Under our jurisprudence, Rule 9(b)'s heightened pleading
requirements apply not only to claims of fraud simpliciter but
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also to related claims as long as the central allegations of those
claims "effectively charge fraud." Mulder v. Kohl's Dep't Stores,
Inc., 865 F.3d 17, 21-22 (1st Cir. 2017) (quoting N. Am. Cath.
Educ. Programming Found., Inc. v. Cardinale, 567 F.3d 8, 15 (1st
Cir. 2009)).
WPI posits that Rule 9(b)'s particularity requirements
apply to all of the plaintiff's fraudulent conveyance claims.
Whether and to what extent Rule 9(b) applies to fraudulent
conveyance claims, brought under either the UFTA or the common
law, is a matter of some uncertainty — and it is a matter that we
have never squarely addressed. At least one of our sister circuits
has applied Rule 9(b) to fraudulent conveyance claims to the extent
that such claims allege that the transferor acted with the intent
to hinder, delay, or defraud the plaintiff. See Sharp Int'l Corp.
v. State St. Bank & Tr. Co. (In re Sharp Int'l Corp.), 403 F.3d
43, 56 (2d Cir. 2005). But whether Rule 9(b)'s particularity
requirements apply to claims of fraudulent transfer alleging only
that the transferor received no "reasonably equivalent value in
exchange for the transfer," Conn. Gen. Stat. § 52-552e(a)(2); Mass.
Gen. Laws ch. 109A, § 5(a)(2), or to analogous claims of
constructive fraudulent transfer, see Conn. Gen. Stat. § 52-552f;
Mass. Gen. Laws ch. 109A, § 6, presents a more complex question.
Such claims are predicated on a theory of "implied fraudulent
intent," Cavadi, 941 N.E.2d at 33, and at least one circuit has
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expressed reservations about applying Rule 9(b)'s requirements in
that situation, see Life Partners Creditors' Tr. v. Cowley (In re
Life Partners Holdings, Inc.), 926 F.3d 103, 120 (5th Cir. 2019).
Two other circuits, though, have not hesitated to do so. See
Stoebner v. Opportunity Fin., LLC, 909 F.3d 219, 225, 226 n.6 (8th
Cir. 2018); Gen. Elec. Capital Corp. v. Lease Resolution Corp.,
128 F.3d 1074, 1078-79 (7th Cir. 1997).
We need not probe these points too deeply. We think it
evident that even if we assume (without deciding) that Rule 9(b)
applies across the board to claims of actual and constructive
fraudulent conveyance, it would require only that a plaintiff
specify in sufficient detail the who, what, where, and when of the
challenged transfers. See Alt. Sys. Concepts, 374 F.3d at 29.
Rule 9(b)'s particularity requirements simply have no bearing with
respect to the other pertinent elements of fraudulent conveyance
claims, such as whether the debtor made the transfers with actual
fraudulent intent; whether the debtor made the transfers without
receiving reasonably equivalent value; or whether the debtor was
insolvent at the time of the transfers or rendered insolvent by
them. Those elements do not fall within the "who, what, where,
and when" taxonomy. Accordingly, allegations with respect to those
elements need only comply with the plausibility standard that
customarily controls the adequacy of pleadings. See Iqbal, 556
U.S. at 678; Twombly, 550 U.S. at 567-68, 570.
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Against this backdrop, we proceed to inspect WPI's
compendium of supposed pleading deficiencies. At the outset, WPI
suggests that the plaintiff has failed to spell out the who, what,
where, and when of the alleged fraudulent transfers with sufficient
particularity. This suggestion overlooks (or at least
undervalues) the painstaking detail in which the complaint depicts
Robert's alleged fraud. This detail includes each instance of
Robert's claimed deception and the specific assets he is said to
have concealed.
In addition, the complaint contains specific allegations
about Robert's transfers to WPI that are sufficient to pass through
the Rule 9(b) screen. These allegations touch upon the "who,"
indicating that Robert and WPI were the protagonists in the
transfers; the "where," indicating that the funds were transferred
to WPI and/or the government of Antigua and Barbuda for WPI's
benefit, with at least some portion of the funds ending up in
Massachusetts; and the "what" and "when," indicating that Robert
donated at least $39,000,000 to WPI following the 2011 divorce,
including roughly $4,500,000 from the Vaduz Trust in March of 2016,
$3,000,000 from the promissory notes between December of 2015 and
December of 2016, and some portion of the remainder of the claimed
$31,500,000 from and after that time (when Robert allegedly started
funding "unlimited" scholarships for Antiguan students).
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To be sure, the plaintiff has not alleged each and every
scrap of information relating to Robert's transfers to WPI. The
complaint does not specify, for example, whether Robert
transferred the remainder of the $39,000,000 pledge to WPI in
December of 2016 or whether additional transfers had to be made.
In a similar vein, the complaint does not delineate who at WPI may
have negotiated or facilitated Robert's various transfers, the
locations from which the funds were transferred, the sites of any
meetings between Robert and representatives of WPI, or the
particular means used to effectuate the transfers. But Rule 9(b)
does not demand a blow-by-blow account; as long as a plaintiff has
adequately pleaded the who, what, where, and when of the alleged
fraudulent conduct, the rule does not obligate her to allege every
conceivable detail incident to the fraud. See Dumont v. Reily
Foods Co., 934 F.3d 35, 38-39 (1st Cir. 2019). This principle
applies with special force when — as in this case — the plaintiff's
claims concern transactions between the defendant and a third party
and many, if not all, of the facts missing from the complaint are
in the exclusive possession of those other parties. See Corley
v. Rosewood Care Ctr., Inc. of Peoria, 142 F.3d 1041, 1051 (7th
Cir. 1998); see also Alt. Sys. Concepts, 374 F.3d at 29 n.4
(citing Corley as example of "extraordinary circumstances" that
might warrant relaxation of Rule 9(b) requirements). And this
is all the more true when — as in this case — the missing details
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are "either irrelevant or the potential subjects of discovery."
Dumont, 934 F.3d at 39.
To sum up, the primary purposes undergirding Rule 9(b)
are "to place the defendants on notice and enable them to prepare
meaningful responses," "to preclude the use of a groundless
fraud claim as a pretext to discovering a wrong," and "to
safeguard defendants from frivolous charges which might damage
their reputations." New Eng. Data Servs., Inc. v. Becher, 829
F.2d 286, 289 (1st Cir. 1987); see Dumont, 934 F.3d at 39. Here,
the complaint contains enough factual detail to make it apparent
that the plaintiff's claims are far from "groundless." New Eng.
Data Servs., 829 F.2d at 289. And notwithstanding its insistence
on more granular detail, WPI nowhere contends that the complaint's
allegations are so vague as to inhibit its ability to file a
responsive pleading. Given the totality of the circumstances, we
hold that the plaintiff's allegations about the fraudulent
transfers are sufficiently detailed to satisfy Rule 9(b).
Relatedly, WPI argues that the plaintiff has failed to
state claims for actual fraudulent conveyances because she does
not adequately allege fraudulent intent. Rule 9(b) itself rebuffs
this argument: it specifically provides that averments of
fraudulent intent "may be alleged generally." Fed. R. Civ. P.
9(b); see Rodi, 389 F.3d at 15. The plaintiff's allegations easily
pass muster under this standard. She alleges that Robert made the
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various transfers to WPI "with the actual intent to hinder, delay,
or defraud [her]"; that Robert "sought to dispose of the assets
[owed to her] for a purpose of his personal preference" rather
than allow the assets to fall into her hands; and that Robert
sought to dispose of the assets "in a way that would not bring the
existence of the undisclosed assets to [her] attention and prompt
her to seek to collect on his obligation[s] to her."
In any event, fraudulent intent is notoriously difficult
to prove, and the party pleading fraudulent intent is customarily
permitted to rely on certain badges of fraud to fortify her case.
See In re Sharp Int'l Corp., 403 F.3d at 56. Badges of fraud are
"circumstances so commonly associated with fraudulent transfers
that their presence gives rise to an inference of intent." Id.(quoting Wall St. Assocs. v. Brodsky, 684 N.Y.S.2d 244, 247 (App.
Div. 1999)). The plaintiff's complaint alleges several of the
badges of fraud mentioned in the UFTA. See Conn. Gen. Stat. § 52-
552e(b); Mass. Gen. Laws ch. 109A, § 5(b). For instance, it
furnishes detailed allegations that Robert concealed assets from
the plaintiff.
In addition, the allegations of the complaint and the
reasonable inferences therefrom illuminate other familiar badges
of fraud. Specifically, these allegations indicate that Robert's
transfers were of substantially all of his assets and rendered him
insolvent. As indicated by the Agreement, Robert left the marriage
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with approximately $20,000,000 in securities, parcels of real
property valued at $370,000, and a cash payout of $790,000. When
this total is compared to the amounts of the allegedly fraudulent
transfers and the considerable debt purportedly owed to the
plaintiff, it is at least plausible that Robert's aggregate
transfers consumed substantially all of his assets and left him
insolvent.
To cap the matter, the plaintiff plausibly alleges that
Robert's transfers to WPI were made without adequate
consideration. This allegation is supported by Robert's belated
disclosure of the Vaduz Trust, attached to the complaint, which
indicates that he received no consideration for transferring the
Trust to WPI.9
Under siege, WPI seeks to take refuge in the proposition
that the plausibility standard is not satisfied when allegations
of misconduct are equally consistent with some innocent
explanation. See Twombly, 550 U.S. at 567-68. It suggests that
9 WPI asseverates that another attachment to the complaint
shows that Robert received consideration for the challenged
transfers in the form of fulfilling his "dream of establishing a
scholarship fund" for WPI students. The rub, though, is that the
UFTA provides that "[v]alue is given for a transfer" only "if, in
exchange for the transfer . . ., property is transferred or an
antecedent debt is secured or satisfied." Conn. Gen. Stat.
§ 52-552d(a); Mass. Gen. Laws ch. 109A, § 4(a); see Fed. Refinance
Co. v. Klock, 352 F.3d 16, 24 (1st Cir. 2003) (noting lack of
precedential support for argument that "intangibles" such as "love
and affection . . . may supplant money, property, or satisfaction
of an antecedent debt as fair consideration" under UFCA).
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in this instance there is an "obvious alternative explanation"
with respect to the intent underlying Robert's transfer of the
scholarship funds to WPI in December of 2016: that Robert's
purpose was exclusively charitable. Id. at 567. This suggestion
elevates hope over reason.
For one thing, the December 2016 transfer is not the
only transfer described in the complaint, and the plaintiff
plausibly alleges that Robert's earlier transfers of the Vaduz
Trust and funds collected against the promissory notes were
motivated by actual fraudulent intent. For another thing, the
plaintiff's allegations about the December transfer chiefly
concern her constructive fraudulent conveyance claims — claims
that do not require proof of actual fraudulent intent. See Conn.
Gen. Stat. § 52-552f(a); Mass. Gen. Laws ch. 109A, § 6(a).
Shifting gears, WPI asserts that the plaintiff has not
adequately pleaded constructive fraudulent conveyance. But as we
have just explained, the plaintiff has plausibly alleged both lack
of adequate consideration and insolvency as badges of fraud. No
more is exigible to blunt the force of WPI's assertion. See Conn.
Gen. Stat. § 52-552f(a); Mass. Gen. Laws ch. 109A, § 6(a).
That ends this aspect of the matter. We hold, without
serious question, that the plaintiff's UFTA and common law claims
are adequately pleaded and impervious to WPI's ferocious assault.
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III. CONCLUSION
We need go no further. Having endeavored to unravel
some strands of the tangled web of facts and law in which this
case is enmeshed, we remain mindful that there is more unraveling
yet to be done. That additional unraveling, though, is for the
district court. For the reasons elucidated above, we vacate the
judgment below and remand the matter for further proceedings
consistent with this opinion.
Vacated and remanded. Costs shall be taxed in favor of the
plaintiff.
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