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Dz Bank Ag Deutsche Zentral-Genossenschaftsbank v. Meyer Irrevocable Trust

United States District Court, W.D. Washington, Seattle

June 9, 2015

MEYER IRREVOCABLE TRUST, et al., Defendants.


JAMES L. ROBART, District Judge.


Before the court are Plaintiff DZ Bank AG Deutsche Zentral-Genossenschaftsbank, Frankfurt AM Main, New York Branch's ("DZ Bank") combined motion to amend its complaint and stay the case (Combined Mot. (Dkt. # 18)) and Defendants Meyer Irrevocable Trust ("the Trust"), Insurance Choices 4 U, Inc. ("IC4U"), and Insurance Choices For You, Inc.'s ("ICFY") motion for summary judgment (MSJ (Dkt. # 17)). Defendants have filed objections to DZ Bank's motion (Obj. (Dkt. # 22)), and DZ Bank has filed a reply in support of its motion (Reply (Dkt. # 24)) and also a response to Defendants' motion for summary judgment (Resp. (Dkt. # 19)). The court has reviewed the submissions of the parties, the balance of the record, and the applicable law. Being fully advised, [1] the court GRANTS DZ Bank's motion to stay and STRIKES DZ Bank's motion to amend and Defendants' motion for summary judgment without prejudice.


This case arises out of a debt owed to DZ Bank as well as subsequent transfers of assets that DZ Bank alleges were fraudulent. Most of the underlying facts are set forth in this court's order in a related case, see DZ Bank AG Deutsche Zentral-Genossenschaftsbank, Frankfurt AM Main, New York Branch v. Louis Meyer (In re Meyer), No. C14-0869JLR, Dkt. # 37 (W.D. Wash.), and are only summarized in part here.

DZ Bank filed an adversary complaint in the bankruptcy proceedings of debtors (and non-parties here) Louis Phillipus Meyer and Lynn Meyer ("the Meyers"). See id. at 6; (Obj. at 1.) The Meyers had personally guaranteed a debt of over $1.7 million to DZ Bank on behalf of Mr. Meyer's business, Choice Cash Advance, LLC[2] ("Choice"), which Choice had taken out in order to finance the purchase of several insurance franchises. See In re Meyer, No. C14-0869JLR, Dkt. # 37 at 3. Choice's assets were collateral for the debt. See id. After Choice and the Meyers began experiencing difficulties, Mr. Meyer initiated a series of transactions that transferred Choice's assets to Meyer Insurance ("MI"), a company that he owned; then transferred MI's assets to Defendant IC4U; then caused Defendant the Trust to purchase all the stock of IC4U; and finally caused the Trust to sell IC4U to another entity. See id. at 5. In the adversary proceedings, DZ Bank alleged that these transfers were fraudulent and that as a result a portion of the Meyers' overall indebtedness was non-dischargeable under § 523(a)(2)(A) of the Bankruptcy Code. See id. at 6-7.

On May 9, 2014, the United States Bankruptcy Court for the Western District of Washington entered a non-dischargeable judgment in favor of DZ Bank and against the Meyers in the amount of $123, 200.00, which was the value of the MI assets traceable to DZ Bank's collateral.[3] See id. at 7; (Combined Mot. at 2; Obj. at 4.) DZ Bank appealed to this court on June 13, 2014, arguing that the judgment should have been for $385, 000.00-the value of all the MI assets transferred to IC4U. See In re Meyer, No. C14-0869JLR, Dkt. # 1 at 96-98 (Notice of Appeal), Dkt. # 12 (Appellant's Brief). The legal basis of this argument is the Washington Uniform Fraudulent Transfers Act ("WUFTA"). See id. Dkt. # 37 at 11-12. The court denied DZ Bank's appeal and affirmed the bankruptcy court. See id. at 19. The court concluded that WUFTA requires a plaintiff-creditor at a minimum to demonstrate some claim to the transferred assets before a transfer can be deemed fraudulent under WUFTA. See id. at 11-19. Because MI was not indebted to DZ Bank and because DZ Bank could trace its collateral to only $123, 200.00 of MI's assets, the court held that DZ Bank was entitled to a judgment of only $123, 200.00. See id. at 18-19. On January 27, 2015, DZ Bank appealed this court's order to the Ninth Circuit. See id. Dkt. # 39.

On July 25, 2014, after the bankruptcy court entered its final judgment, DZ Bank filed the instant lawsuit asserting fraudulent transfer claims against Defendants for their receipt of the assets transferred by the Meyers and MI. ( See Compl. (Dkt. # 1); Combined Mot. at 4.) DZ Bank's complaint in this case prays for judgment in the amount of $123, 200.00; fees, costs, and interest; recovery of the transferred property; and "such further relief as the court deems just and proper under the circumstances." (Compl. ¶¶ 28, 33, 38.) After Defendants answered, the court issued a scheduling order which did not set a deadline for filing amended pleadings.[4] (Sched. Ord. (Dkt. # 16).)

On January 14, 2015, following this court's order in In re Meyer, the Meyers sent DZ Bank a check for $123, 290.00. ( See Stern Decl. (Dkt. # 17-1) ¶¶ 2-3 Exs. 1-2.) DZ Bank accepted the check and recorded a satisfaction of its judgment against the Meyers on February 20, 2015. (Id. ¶ 4 Ex. 3.) The satisfaction is conditional, however, insofar as it notes DZ Bank's pending appeal to the Ninth Circuit and provides that DZ Bank's acceptance of the amount of the "unsatisfactory judgment" does not satisfy its entire claim. (Id. )

On March 4, 2015, Defendants filed their motion for summary judgment. ( See MSJ.) Defendants' motion, which is two pages in length, seeks dismissal of DZ Bank's claims on the basis that DZ Bank has received the entire sum sought in its complaint; namely, $123, 200.00. ( See id. ) Defendants argue that DZ Bank's acceptance of this sum from the Meyers constitutes a release of Defendants, who are the Meyers' joint tortfeasors according to DZ Bank's allegations. ( See id. ) On March 23, 2015, DZ Bank filed both its response to Defendants' motion and its combined motion to amend its complaint and stay the case. ( See Resp. at 1; Combined Mot. at 1.)

DZ Bank's combined motion asks the court to permit DZ Bank to amend its complaint to seek damages in the amount of $385, 000.00, and requests that the court stay all proceedings in this case pending the outcome of DZ Bank's appeal in In re Meyer. (Combined Mot. at 2.) In support of its motion to amend, DZ Bank argues that it should be permitted to pursue "all of its potential monetary damages against the Defendants, " and that amendment will not prejudice Defendants. (Id. at 5-6.) Regarding its motion to stay, DZ Bank contends that the outcome of its appeal in In re Meyer will significantly impact this litigation. ( See id. at 2 ("If DZ Bank's appeal is successful, DZ Bank's damages against the defendants herein will be established at $385, 000. If unsuccessful, DZ Bank may have no claims against the defendants herein, as the amount of damages originally sought by DZ Bank, $123, 200, has been paid.").) Accordingly, DZ Bank concludes that it would not be economical for the court or the parties to continue litigating this case while DZ Bank's appeal is pending. (Id. at 2, 6.) The parties' motions are now before the court.


The court first turns to DZ Bank's request to stay this case pending the outcome of its appeal before the Ninth Circuit in In re Meyer. (Mot. at 2.) A district court has the discretionary power to stay its proceedings. Lockyer v. Mirant Corp., 398 F.3d 1098, 1109 (9th Cir. 2005). This power to stay is "incidental to the power inherent in every court to control the disposition of the causes on its docket with economy of time and effort for itself, for counsel, and for litigants." Landis v. N. Am. Co., 299 U.S. 248, 254 (1936); see also Gold v. Johns-Manville Sales Corp., 723 F.2d 1068, 1077 (3rd Cir. 1983) (holding that the power to stay proceedings comes from the power of every court to manage the cases on its docket and to ensure a fair and efficient adjudication of the matter at hand). When considering whether to stay a case, the court weighs a series of competing interests: (1) the possible damage that may result from the granting of the stay; (2) the hardship or inequity which a party may suffer in being required to go forward; and (3) the orderly course of justice measured in terms of the simplifying or complicating of issues, proof, and questions of law which could be expected to result from a stay. CMAX, Inc. v. Hall, 300 F.2d 265, 268 (9th Cir. 1962) (citing Landis, 299 U.S. at 254-55); see also Lockyer, 398 F.3d at 1110.

With respect to the first factor-possible damage if a stay is granted-Defendants object to DZ Bank's requested stay but offer no discussion of how a stay might damage them. ( See Obj. at 8-9.) Rather Defendants simply assert that DZ Bank improperly seeks to "keep Defendants on the hook for another year while it pursues a frivolous appeal." (Id. at 9.) Defendants fail to explain, however, what harm they might suffer from waiting for the resolution DZ Bank's appeal. Furthermore, delay alone cannot be a sufficient reason not to stay a case, as every stay by its very nature causes delay.[5] Cf. Lockyer, 398 F.3d at ...

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