Dream Med. Grp., LLC v. Church Enters. (In re Church)

657 B.R. 69

IN RE, Brendan Hampton CHURCH, Debtor(s).

Dream Medical Group, LLC, Joseph Agresti, Plaintiff(s), v. Church Enterprises, Inc. et al.,

Defendant(s).

C/A No. 23-01436-HB

Adv. Pro. No. 23-80047-HB

United States Bankruptcy Court, D. South Carolina

Signed February 6, 2024

Joshua J. Hudson, Smith Hudson Law, LLC, Greenville, SC, for Plaintiffs.

Christine E. Brimm, Barton Brimm, PA, Myrtle Beach, SC, for Defendants Bridging Interests, LLC, Invictus Maneo Real Estate, LLC, Michael A. Wade, Enterprises, LLC, Mowry Ave Hospitality, LLC, Paris Mountain Holdings, LLC, Richardson Poultry Group, LLC, Shtah, Inc., Simpson Enterprises, LLC, Wild Frontier, LLC, Abbott W. Dees, Austin Ohly, Bradley Burkholder, Brian A. Siktberg, Brian Wenger, Charles Kert Hartsel, Jr., Christopher Scott Spires, David Terhune, Jr., Gary M. Soriano, Jamie Fuller, John W. Leary, John Donald Pitner, Joshua Patrick Crowe, Kevin Skarin, Lance Eason, Marshall D. Davis, Michael Gonzalez, Monica E. Daniel, Randolph J. Saxon, Robert Shaffer, Ryan Powell, Ryan Smith, Stevan Stein, Stevan Nolan Patrick, Todd David Kanzinger, Vincent W. Teng, Vivien Teng, William M. Lane, KKY Enterprise, Inc., Gary F. Caldwell, James Walter Scott Fuller, Tommie J. Bryant.

Mary M. Caskey, Haynsworth Sinkler Boyd, PA, Columbia, SC, for Defendants Asher Collins, Inc., Becston, Inc., Bridging Interests, LLC, Bruce Investments, LLC, Gemini Ventures, LLC, Invictus Maneo Real Estate, LLC, KKY Enterprise, Inc., MCT Enterprises, LLC, Michael A. Wade, Enterprises, LLC, Mowry Ave Hospitality, LLC, Nothing Wasted Foods II, Inc., P&C Enterprises of Ohio, LLC, Paris Mountain Holdings, LLC, Richardson Poultry Group, LLC, Shtah, Inc., Simpson Enterprises, LLC, Swindler Revocable Family Trust, Wild Frontier, LLC, Abbott W. Dees, Adaobi Dhinelo Gwacham, Andrew L. Anderson, Austin Ohly, Benjamin Swanson, Bradley Burkholder, Brian A. Siktberg, Brian Wenger, Chad L. Eisenga, Chad Saxon, Charles Kert Hartsel, Jr., Christopher Scott Spires, Clayton May, David Terhune, Jr., Douglas K. Jordan, Evan Williamson, Evelyn L. Hines, Garry Brumels, Gary F. Caldwell, Gary M. Soriano, James Walter Scott Fuller, James R. Goff, Jason Deyo, Jeremy Slouder, Jim Saxon, Dycos Staffing, John W. Leary, John Donald Pitner, Joshua Patrick Crowe, Kevin Skarin, Lance Eason, Mark A. Cabrera, Marshall D. Davis, Michael Gonzalez, Michael Joseph Kelley, Michael Wagner, Monica E. Daniel, Randolph J. Saxon, Robert Shaffer, Robert S. Swindler, Ronald Szczepanski, Ryan Bilton, Ryan Powell, Ryan Smith, Stephen D. Lowery, Stevan Stein, Stevan Nolan Patrick, Todd David Kanzinger, Tony Stewart, Vincent W. Teng, Vivien Teng, William M. Lane.

Gregory J. English, Miranda Bliss Nelson, Wyche, P.A., for Defendants Becston, Inc., Gemini Ventures, LLC, Nothing Wasted Foods II, Inc., Adaobi Dhinelo Gwacham, Andrew L. Anderson, Benjamin Swanson, Chad Saxon, Clayton May, Evan

Williamson, James R. Goff, Jim Saxon, Dycos Staffing, Mark A. Cabrera, Michael Joseph Kelley, Michael Wagner, Ryan Bilton, Tony Stewart.

Frank B.B. Knowlton, Scott Douglas MacLatchie, II, Nelson Mullins Riley Scarborough LLP, Columbia, SC, for Defendants Church Enterprises, Inc., Betsy Anderson, Edwin Church, Jr., Jean Church, Kirsten Church.

Michael H. Weaver, Rogers Townsend, LLC, Columbia, SC, for Defendants Bruce Investments, LLC, Swindler Revocable Family Trust, Chad L. Eisenga, Garry Brumels, Jason Deyo, Robert S. Swindler, Stephen D. Lowery.

ORDER DENYING MOTION TO ABSTAIN AND REMAND WITHOUT PREJUDICE

Helen E. Burris, Chief United State Bankruptcy Judge

THIS MATTER came before the Court for hearing on January 4, 2024, for consideration of the Motion to Remand and Abstain (the "Motion") filed by Scott D. MacLatchie and Frank B.B. Knowlton on behalf of Defendants Church Enterprises, Inc., Edwin N. "Chuck" Church, Jr., Kirsten G. Church, Jean P. Church, and Betsy J. Anderson (the "Nelson Mullins Defendants"), requesting the Court abstain from hearing this action pursuant to 28 U.S.C. § 1334(c)(1) (i.e., discretionary abstention) and remand it to the State Court (defined below) pursuant to 28 U.S.C. § 1452(b) (i.e., equitable remand).² Gregory J. English and Miranda Nelson filed a joinder in the Motion on behalf of Defendants Andrew Anderson, Becston, Inc., Ryan Bilton, Mark Cabrera, Gemini Ventures, LLC, James Randy Goff, Adaobi Gwacham, Michael Joseph Kelley, C.R. May, Nothing Wasted Foods, II, Inc., Chad Saxon, Jim Saxon, Tony Stewart, Benjamin Swanson, Michael Wagner, and Evan Williamson (the "Wyche Defendants").³ Collectively, the Nelson Mullins Defendants and the Wyche Defendants are referred to herein as the "Moving Defendants."

Christine E. Brimm filed Objections to the Motion on behalf of a large group of defendants listed on Exhibit A thereto (the "Brimm Defendants").⁴ Joshua J. Hudson, Paul S. Landis, and Wilson F. Green filed a response on behalf of Plaintiffs Dream Medical Group, LLC ("DMG") and Joseph Agresti (collectively, the "Plaintiffs") asking the Court to deny the Motion.⁵

This matter is related to the bankruptcy case of Brendan Hampton Church ("Debtor"), pending in this Court.

PROCEDURAL BACKGROUND

The relevant facts are found on the Court's dockets in the bankruptcy case and this adversary proceeding. On March 2, 2022, Plaintiffs filed an Amended Complaint naming numerous parties (the "Defendants"), including the Moving Defendants and the Brimm Defendants, in the Court of Common Pleas, Thirteenth Judicial Circuit, Greenville County, South Carolina (the "State Court") (C.A. No.: 2022-CP-23-0576) (the "State Court Litigation").⁶ The Amended Complaint alleges the following: Plaintiffs entered into an agreement with Old South Trading Co., LLC ("OST") and Debtor, its owner, in April of 2020—the beginning of the COVID-19 pandemic—whereby Debtor and OST would provide Plaintiffs with protective masks at a contract price of about $11.5M. In May of 2020, after failing to provide all masks timely, Debtor and OST entered into an agreement with Plaintiffs to refund them approximately $5.5M. Debtor and OST failed to refund the money to Plaintiffs, so Plaintiffs sought and obtained an arbitration award for approximately $5.5M against Debtor and OST. Instead of paying Plaintiffs the refund, Plaintiffs allege Debtor and OST used their money to fuel a "Ponzi scheme"⁷ in which the Defendants received exorbitant returns as investors. Plaintiffs assert that (1) a constructive trust should be placed over the returns, with such funds being returned to Plaintiffs; (2) the payments to Defendants were fraudulent conveyances under the Statute of Elizabeth (S.C. Code Ann. § 27-23-10); (3) Defendants were engaged in a civil conspiracy with Debtor and OST to defraud Plaintiffs; and (4) Defendants were unjustly enriched by receiving money that should have gone to Plaintiffs. Neither Debtor nor OST are defendants in the State Court Litigation.

On May 18, 2023, Debtor filed a petition for relief under Chapter 11 of the Bankruptcy Code to begin the above bankruptcy case. On August 1, 2023, Debtor's case was converted to Chapter 7, and John K. Fort was appointed Chapter 7 Trustee (the "Trustee"). Many, but not all, of the Defendants have filed claims against Debtor's estate, as has Plaintiff DMG for $5,845,626.89. On August 15, 2023, Plaintiffs filed a timely Notice of Removal pursuant to 28 U.S.C. §§ 1452(a), 1334(a), 1334(b), and 1334(e), Fed. R. Bankr. P. 9027, and Local Rule 83.IX.01 (D.S.C.) to remove the State Court Litigation to this Court and initiate the above adversary proceeding. As of the date of the entry of this Order, OST has not filed a bankruptcy petition, and the Trustee has not yet taken any position in this proceeding nor pursued or abandoned any similar claims.

Plaintiffs set forth the basis for this Court assuming jurisdiction over the State Court Litigation in the Notice of Removal and their response to the Motion. Plaintiffs assert they are the largest non-priority unsecured creditors of the Debtor's estate, and thus resolution of their claim against the estate is core to estate administration. Further, resolution of Plaintiffs' claims against those Defendants whose aggregate returns were less than their principal investment is core to estate administration because any recovery on those claims would reduce Plaintiffs' claims against the estate and increase those Defendants' claims against the estate. Likewise, resolution of Plaintiffs' claims against those Defendants whose aggregate returns exceeded their principal investment is core to estate administration because Plaintiffs assert the Trustee is likely to bring (core) turnover claims against such Defendants. Plaintiffs contend that even if their claims against Defendants were determined to be non-core, it would be more appropriate for this Court to resolve all claims by and against all Defendants—all of which arise from the actions of Debtor and OST—than to have piecemeal litigation with the possibility of inadequate or double recoveries. They assert that only this Court can resolve all claims on an "equitable" basis.

The Brimm Defendants support keeping the action in this Court. They argue that the Trustee has the sole authority to pursue the estate's fraudulent transfer claims until he has abandoned them, and thus Plaintiffs' fraudulent transfer claims and all other claims with a similar underlying focus are property of the estate. Accordingly, they conclude this Court has exclusive jurisdiction over such claims and this adversary proceeding. The Brimm Defendants note that little progress has been made in the State Court Litigation and assert the State Court may not have personal jurisdiction over, or may be an improper venue as to, many of the Defendants. They also contend that the outcome of this action will impact the validity and amount of the proofs of claim filed by Defendants and Plaintiff DMG in the underlying bankruptcy case, noting that they intend to file counterclaims against Plainti...