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In re LLS America, LLC

United States District Court, E.D. Washington

February 10, 2015

In Re LLS AMERICA, LLC, Debtor.
v.
ANGELA MIRROW, et al., Defendants. BRUCE P. KRIEGMAN, solely in his capacity as court-appointed Chapter 11 Trustee for LLS America, LLC, Plaintiff, Bankr. Case No. 09-06194-FPC11

ORDER GRANTING IN PART AND DENYING IN PART MOTION FOR SUMMARY JUDGMENT

ROSANNA MALOUF PETERSON, Chief District Judge.

Before the Court is Plaintiff's Motion for Summary Judgment against Defendant Angela Mirrow. ECF No. 26. On December 18, 2014, the parties presented oral argument. Michael L. Loft appeared on behalf of Plaintiff. Defendant was represented by Gregg R. Smith. The Court has considered the parties' arguments and all relevant filings. The Court is fully informed.

BACKGROUND

This matter is an adversary proceeding within the bankruptcy of the LLS Companies ("Debtor"), an extensive Ponzi scheme. Defendant's husband, Alex Mirrow, arranged for the investment of large sums of money in Debtor, both through his companies and by recruiting new lenders. See 2:11-cv-00362-RMP, ECF No. 219 at 10-18. Although the cases of Defendant and her husband originally were to be tried together, the parties stipulated to holding a separate trial for Defendant in light of her right to a trial by jury. See 2:11-cv-00362-RMP, ECF No. 114.

On December 16, 2005, Alex Mirrow arranged for $200, 000 to be loaned to Debtor from a line of credit that Weigh Station LLC held. See ECF No. 28-2 at 23. Defendant had no ownership interest in Weigh Station LLC, which was owned by her husband. ECF No. 28-2 at 23. However, at Alex Mirrow's request, Debtor issued an unsigned promissory note for the $200, 000 loan in Defendant's name. See ECF Nos. 28-4 at 116; 34-1. Until this litigation began, Defendant was not aware that the December 2005 promissory note had been made in her name, nor did she know that on December 19, 2006, the note had been converted into a new note in the name of Save It, LLC. ECF Nos. 27 at 4; 33 at 3; see also ECF No. 28-7 at 143-44 (December 2006 promissory note).

In relation to the promissory note, Debtor sent the Mirrows post-dated checks payable to "A. Mirrow." ECF No. 27 at 4. At her husband's request, Defendant signed at least eleven of the checks, each of which was in the amount of $7, 167. ECF No. 33 at 2-3. Debtor issued additional checks in various amounts payable to "A. Mirrow, " some of which were signed by Alex Mirrow. See ECF Nos. 28-3; 33 at 3-4. Defendant asserts that the checks for amounts other than $7, 167 were issued in consideration of other promissory notes or commissions owed to Alex Mirrow, not in relation to the 2005 promissory note. ECF No. 31 at 7-8. It is undisputed that all of the "A. Mirrow" checks at issue in this matter, totaling $139, 256.29 USD, were deposited into the Mirrows' family bank accounts. See ECF Nos. 27 at 5; 28-6 at 10.

Alex Mirrow filed a proof of claim in Debtor's bankruptcy but did not assert a right to credit for the December 2005 loan. See ECF No. 28-8. Alex Mirrow included the December 2005 loan, however, in the proof of claim that he filed on behalf of Save It, LLC. See ECF No. 28-9 at 157. Defendant did not file a proof of claim in Debtor's bankruptcy. ECF No. 28 at 3-4. In Alex Mirrow's case, the Court included the $200, 000 December 2005 deposit in its calculation of the total amount that Save It, LLC had invested in Debtor. See ECF No. 28-6 at 3 and 2:11cv-00362-RMP, ECF No. 219 at 17.

Plaintiff seeks judgment against Defendant for $139, 256, which is the amount of payments and commissions that the Court found that Alex Mirrow personally had received from Debtor, 2:11-cv-00362-RMP, ECF No. 219 at 18. Defendant disputes this amount, claiming that the full amount that Plaintiff could claw back would be $78, 837, the proceeds that she claims that Debtor transferred as payment for the December 2005 loan. See ECF No. 31 at 7-8, 13. Defendant further contends that this figure should be subtracted from the $200, 000 investment made in December 2005, such that Defendant would be a net-negative investor. See ECF No. 28-11 at 198.

ANALYSIS

Plaintiff moves for summary judgment, asserting that the fact and amount of the deposits is not in dispute and that Defendant cannot succeed under the defense of good faith. Defendant argues that multiple issues must be resolved by a jury.

Summary Judgment Standard

Summary judgment is appropriate when there is no genuine dispute as to any material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a). The moving party bears the initial burden of demonstrating the absence of a genuine issue of material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). The party asserting the existence of an issue of material fact must show "sufficient evidence supporting the claimed factual dispute... to require a jury or judge to resolve the parties' differing versions of the truth at trial.'" T.W. Elec. Serv. v. P. Elec. Contractors Ass'n, 809 F.2d 626, 630 (9th Cir. 1987) (quoting First Nat'l Bank v. Cities Serv. Co., 391 U.S. 253, 288-89 (1968)). The nonmoving party "may not rely on denials in the pleadings, but must produce specific evidence, through affidavits or admissible discovery material, to show that the dispute exists." Bhan v. NME Hosps., Inc., 929 F.2d 1404, 1409 (9th Cir. 1991).

In deciding a motion for summary judgment, a court must construe the evidence and draw all reasonable inferences in the light most favorable to the nonmoving ...


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