PCS Nitrogen, Inc. v. Ross Dev. Corp.

126 F.Supp.3d 611

PCS NITROGEN, INC., Plaintiff,

v.ROSS DEVELOPMENT CORPORATION; T. Heyward Carter, Jr.; Grayson G. Hanahan; William O. Hanahan, III; Katharyne H. Rike; Estate of G.L. Buist Rivers, Jr.; Mikell R. Scarborough ; C. Cotesworth Pinckney and T. Heyward Carter, As Co–Trustees of the Trust of William O. Hanahan, Jr.; Ann Hanahan Blessing; Donald Buhrmaster, III; Eleanor W. Carter; Margaret H. Carter; Elizabeth H. Clark; Maria Grayson–Metaxas; Buist L. Hanahan; Elizabeth A. Hanahan; Frances G. Hanahan; Mary Ross Hanahan; Muriel R. Hanahan; Roger Parke Hanahan, Jr.; Grayson C. Jackson; Oriana H. Kirby; and Jeanne Deforest Smith Hanahan, Defendants.

Case No. 2:09–cv–03171–MBS.

United States District Court, D. South Carolina, Charleston Division.

Signed Aug. 21, 2015.

Kirby D. Shealy, III, Adams and Reese, Columbia, SC, John Buchanan Williams, Williams Lopatto, Sandra Kaczmarczyk, Alton Associates, Washington, DC, for Plaintiff.

Daniel S. McQueeney, Jr., George Trenholm Walker, Kathleen Fowler Monoc, John Phillips Linton, Jr., Pratt–Thomas Walker, Charleston, SC, for Defendants.

ORDER AND OPINION

MARGARET B. SEYMOUR, Senior District Judge.

This matter is before the court on the various post-trial motions of the Ross Directors, the Ross Shareholders, and PCS Nitrogen, Inc. ("PCS").

I. Relevant Factual and Procedural Background

The claims in this case arise out of litigation that resolved liability under the Comprehensive Environmental Response Compensation and Liability Act ("CERCLA") for the remediation of the Columbia Nitrogen Superfund Site ("Site") in Charleston, South Carolina. Ashley II of Charleston, LLC v. PCS Nitrogen, Inc., Case No. 2:05–cv–02782–MBS (D.S.C.) (hereinafter Ashley II ). Both PCS and Ross Development Corp. ("Ross") are former owners and operators of the Site that were parties to the Ashley II action and were found liable for response costs at the Site. PCS brought this action on December 8, 2009, to recover funds from Ross, T. Heyward Carter, Jr. ("Carter"); Grayson G. Hanahan; William O. Hanahan, III ("Hanahan"); Katharyne H. Rike ("Rike"); Mikell R. Scarborough ("Scarborough"); and the Estate of G.L. Buist Rivers ("Rivers") (collectively the "Ross Directors"); as well as C. Cotesworth Pinckney and T. Heyward Carter as co-trustees of the Trust of William O. Hanahan, Jr.; Anne Hanahan Blessing; Donald Buhrmaster, III; Eleanor W. Carter; Margaret H. Carter; Elizabeth H. Clark; Maria Grayson–Metaxas; Buist L. Hanahan; Elizabeth A. Hanahan; Mary Ross Hanahan; Muriel R. Hanahan; Roger Parke Hanahan, Jr.; Grayson C. Jackson; Orianna H. Kirby; and Jeanne Deforest Smith Hanahan (collectively the "Ross Shareholders").¹ ECF No. 1. PCS dismissed its claim against the Estate of G.L. Buist Rivers on June 10, 2011 (ECF No. 91), and against Maria Grayson–Metaxas on July 17, 2014 (ECF No. 294).

PCS proceeded to trial on three of the causes of action in its Amended Complaint: (1) an action under the Statute of Elizabeth (S.C.Code Ann. § 27–3–10(A) ) to set aside alleged fraudulent conveyances brought against Ross, the Ross Directors, and the Ross Shareholders; (2) an action for an alleged civil conspiracy brought against the Ross Directors; and (3) a direct claim for alleged breach of fiduciary duty brought against the Ross Directors. ECF No. 34.

The underlying facts are fully stated in the Amended Findings of Fact and Conclusions of Law which accompany this order. In brief, however, Ross is liable for remediation costs at the Site. PCS alleges that it is bearing those costs and is entitled to contribution from Ross for those costs, making it a creditor of Ross. PCS alleged that the Ross board of directors knew about Ross's potential environmental liability for the Site and then dissolved Ross in 2006 with the intent to evade that liability after distributing all of the corporation's assets to its shareholders. Ross itself is now a dissolved corporation and no longer exists.

The parties tried the equitable claim for fraudulent conveyance to the court at the same time as they tried the two legal claims to the jury. At the conclusion of the trial on July 31, 2014, the jury returned a verdict for the Ross Directors on the civil conspiracy claim and a verdict for PCS in the amount of $5,555,158.00 against the Ross Directors on the breach of fiduciary duty claim. ECF No. 319. According to the joint stipulations submitted to the jury, $5,555,158.00 is the exact amount of all distributions to all the shareholders of Ross from 1999 to 2006, when Ross dissolved. ECF No. 312. The jury declined to award PCS punitive damages. ECF No. 319.

At an August 19, 2014, hearing, Defendants moved for judgment as a matter of law on the fraudulent conveyance claim. ECF No. 325. The court ordered the parties to prepare briefs addressing whether the jury's verdict provided PCS with an adequate remedy at law that precluded its recovery of equitable relief. Id. Those briefs were submitted to the court by September 12, 2014. ECF Nos. 326, 327, 328, and 329. On October 29, 2014, this court determined that the jury's verdict did not preclude the court from awarding PCS relief under its fraudulent conveyance claim. ECF No. 344. The court did, however, dismiss without prejudice PCS's claim to the extent that it was also brought against the Ross Directors—Carter, Grayson Hanahan, Hanahan, Rike, and Scarborough—because the breach of fiduciary duty claim tried to the jury provided an adequate remedy at law precluding equitable relief as to those Defendants. Id. at 8. The court permitted PCS's fraudulent conveyance claim to proceed against the Ross Shareholders. Id.

PCS's fraudulent conveyance claim alleged that the Ross Directors knew of contamination at the Site and that Ross could be liable for such contamination when the Ross Directors approved all the distributions to the Ross Shareholders from 1992 through 2006.² On February 12, 2015, the court issued its Findings of Fact and Conclusions of Law disposing of PCS's fraudulent conveyance claim. ECF No. 345. A detailed recitation of the facts of this case can be found therein. Id. at 1–28. For the purposes of this order, however, the following conclusions of the court are particularly relevant. The court concluded that cash transfers may be voided under the Statute of Elizabeth, id. at 33–34; that the challenged transfers were intrafamily transfers and, therefore, Ross bore the burden of proof, id. at 36–40; that Ross had not shown valuable consideration was exchanged for the transfers, id. at 40–41; and that Ross had not shown the bona fides of the transfers, id. at 41–43. Accordingly, the court declared the transfers to the Ross Shareholders void, id. at 43, and ordered that a constructive trust be placed over the funds, id. at 44. The various amounts of the voided transfers can be found in Appendix A to the Findings of Fact and Conclusions of Law. Id. at 47–51. The sum total of the voided transfers was $4,123,736.88.

On March 12, 2015, the Ross Directors filed a motion for a judgment as a matter of law notwithstanding the verdict, or, alternatively, for remittitur. ECF No. 351. PCS filed a response in opposition on April 27, 2015. ECF No. 364. Ross filed a reply on May 15, 2015. ECF No. 368. Also on March 12, 2015, the Ross Shareholders filed a motion for reconsideration of various parts of the court's Findings of Fact and Conclusions of Law. ECF No. 352. PCS filed a response in opposition on April 27, 2015. ECF No. 363. Ross filed a reply on May 15, 2015. ECF No. 369. Finally, on April 27, 2015, when it filed its responses to Ross's two post-trial motions, PCS also moved for sanctions against the Ross Directors and the Ross Shareholders. ECF Nos. 361 and 362. Ross filed responses in opposition on May 15, 2015. ECF No. 370. PCS filed replies on May 26, 2015. ECF Nos. 371 and 372.

II. Judgment as a Matter of Law Notwithstanding the Verdict

The Ross Directors move pursuant to Federal Rule of Civil Procedure 50(b) for judgment as a matter of law notwithstanding the verdict. See generally ECF No. 351; Fed.R.Civ.P. 50(b).

A. Legal Standard

Rule 50(b) provides: "[i]f the court does not grant a motion for judgment as a matter of law made under Rule 50(a) [i.e., after a party has been fully heard on an issue], the court is considered to have submitted the action to the jury subject to the court's later deciding the legal questions raised by the motion." Fed.R.Civ.P. 50(b). "In ruling on the renewed motion, the court may: (1) allow judgment on the verdict, if the jury returned a verdict; (2) order a new trial; or (3) direct the entry of judgment as a matter of law." Id.

When a jury has returned a verdict, the court may grant a Rule 50(b) motion for judgment as a matter of law only if, " ‘viewing the evidence in a light most favorable to the non-moving party (and in support of the jury's verdict) and drawing every legitimate inference in that party's favor, the only conclusion a reasonable jury could have reached is one in favor of the moving party.’ " Pitrolo v. Cnty. of Buncombe, 407 Fed.Appx. 657, 659 (4th Cir.2011) (quoting Int'l Ground Transp. v. Mayor & City Council of Ocean City, 475 F.3d 214, 218–19 (4th Cir.2007) ). If reasonable minds could differ, the court must affirm the jury's verdict. Id. (citing Dennis v. Columbia Colleton Med. Cntr., Inc., 290 F.3d 639, 645 (4th Cir.2002) ).

In drawing all reasonable inferences in favor of the non-movant, the court may not weigh the evidence or assess the credibility of the witnesses. Id. (citing Dennis, 290 F.3d at 645 ). "A renewed motion for judgment as a matter of law is not an occasion for the [c]ourt to usurp the jury's authority to weigh the evidence and gauge the credibility of witnesses." Thompson v. Direct Impact, Co., 63 F.Supp.2d 721, 723 (E.D.Va.1998), aff'd 188 F.3d 503 (4th Cir.1999) (citing Taylor v. Home Ins. Co., 777 F.2d 849, 854 (4th Cir.1985) ). "[T]he defendant bears a ‘heavy burden’ in establishing that the evidence is insufficient...