Vieira v. Think Tank Logistics, LLC (In re Levesque)

661 B.R. 731

IN RE, Alan Keith LEVESQUE, Debtor(s).

Michelle Vieira, Chapter 7 Trustee for Alan Keith Levesque, Plaintiff(s), v. Think Tank Logistics, LLC IGL Logistics, Inc. James Burke, Defendant(s).

C/A No. 20-03330-EG

Adv. Pro. No. 22-80008-EG

United States Bankruptcy Court, D. South Carolina

Signed June 10, 2024

Christine E. Brimm, Barton Brimm, PA, Myrtle Beach, SC, for Plaintiff.

Richard R. Gleissner, Gleissner Law Firm, L.L.C., Columbia, SC, for Defendants.

ORDER

Elisabetta G. M. Gasparini, United States Bankruptcy Judge.

THIS MATTER is before the Court for trial on the Complaint filed by Michelle Vieira, Chapter 7 Trustee (the "Trustee" or "Plaintiff") for Alan Keith Levesque.¹ Defendants Think Tank Logistics, LLC ("TTL"), IGL Logistics, Inc. ("IGL"), and James Burke ("Burke") (collectively, "Defendants") filed an Answer.² The dispute relates to redemption agreements entered in May of 2019 whereby Alan Keith Levesque ("Levesque" or "Debtor") transferred his minority ownership interests in TTL and IGL back to the respective companies and agreed to guarantee and indemnify Burke, the majority owner, for debts incurred by the companies prior to the transfer—all for $10.00. The Trustee alleges the redemption agreements resulted in avoidable transfers under the Bankruptcy Code and state law and constitute a breach of Burke's fiduciary duty owed to Debtor as the minority member and shareholder of TTL and IGL. The dispute is exacerbated by altogether conflicting expert reports regarding the going-forward prospects of the companies and the value of the ownership interests transferred— Defendants' expert, John Markel ("Markel"), opining that the companies had no value; and Plaintiff's expert, Christopher Nowell ("Nowell"), concluding that the IGL's value at the time of the transfer was over $6 million.

Following a lengthy discovery period and motions practice, the Court conducted a three-day trial. The Trustee and her counsel; Burke, in his individual capacity and as representative of TTL and IGL; Mystina Vogel ("Vogel"), as representative of IGL; and counsel for Defendants were in attendance. The Court admitted 80 exhibits into evidence and heard the testimony of Levesque, Burke, Vogel, the Trustee, and the two experts. The submission of Plaintiff's Exhibits 36-37, 63-65A, and Defendants' Appendix I were taken under advisement. At the conclusion of Plaintiff's evidence, Defendants orally moved for judgment on partial findings pursuant to Fed. R. Civ. P. Rule 52(c), made applicable to adversary proceedings pursuant to Fed. R. Bankr. P. 7052, which the Court denied. The parties agreed to brief their closing arguments and submitted them on March 1, 2023.³

The Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 157 and 1334. The parties contend that this proceeding contains non-core causes of action or core claims which this Court does not have constitutional authority to finally adjudicate. Nevertheless, the Court may make final determinations in this matter because the parties have expressly consented to this Court's entry of final orders and judgments.⁴ 28 U.S.C. § 157(c); see Wellness Int'l Network, Ltd. v. Sharif, 575 U.S. 665, 674, 135 S.Ct. 1932, 191 L.Ed.2d 911 (2015).

After a thorough review of the record before it, applicable law, the documents introduced into evidence, and the testimony of witnesses, including the excerpts of the deposition transcripts presented for impeachment purposes, the Court admits Exhibits 36, 37, and Appendix I into evidence, excludes the reports of Plaintiff's expert, and holds that the Trustee is entitled to judgment in her favor on the claims seeking avoidance of Levesque's transfer of his 49% interest in IGL pursuant to (a) 11 U.S.C. § 544 and S.C. Code Ann. § 27-23-10 and (b) 11 U.S.C. § 548(a)(1)(B). As to the 11 U.S.C. § 550 claim, the Court awards the Trustee the value of Levesque's ownership interest in IGL as of the time of the transfer, which the Court determines to be $13,558.97. As to the remaining causes of action, the Court rules in favor of Defendants. The Court makes the following findings of fact and conclusions of law pursuant to Fed. R. Civ. P. 52, which is made applicable to this proceeding by Fed. R. Bankr. P. 7052.⁵

FINDINGS OF FACT

The Individual Parties and Businesses Involved in the Litigation

Levesque is the debtor in the underlying Chapter 7 bankruptcy case and a current employee of IGL and former 49% owner of IGL and TTL. Burke is Levesque's former business partner, as the former 51% owner of IGL and TTL. He currently is the 100% owner of IGL and TTL; as such, he is presently Levesque's supervisor.

TTL was a North Carolina limited liability company engaged in the business of logistics and supply chain management. At the time of its organization on or about April 28, 2017, Burke, Levesque, and Adam Lawrence ("Lawrence") were TTL's members, each holding membership interests of 34%, 33%, and 33%, respectively. Not long after TTL was organized, a dispute arose among its members, and Lawrence filed a lawsuit against Burke and Levesque. TTL, in turn, filed a lawsuit against Lawrence. The parties reached a resolution of both lawsuits on or about August 29, 2018. Pursuant to the settlement, Lawrence agreed to surrender his interest in TTL in exchange for $140,000.00, and the parties agreed to a mutual release of all claims. As a result, Burke and Levesque held a 51% and 49% interest in TTL, respectively. TTL's sole business was to operate as an agent of ICAT Logistics, Inc. ("ICAT"). Burke testified that ICAT had a "franchise-like" business model and controlled the software, billing, licenses, and all the tools needed for TTL to track and trace its customer shipments.

While the dispute with Lawrence was pending, on or about January 22, 2018, Burke and Levesque incorporated IGL, a carrier-based logistics company, in North Carolina.⁶ Burke testified that ICAT represented 75% of IGL's business. At the time of its incorporation, Burke and Levesque were the sole shareholders of IGL, with Burke and Levesque holding 51% and 49% of the shares, respectively. At startup, Burke contributed $6,000.00 to IGL, but Levesque did not make a capital contribution. At all times relevant to this matter, Burke was the president and controlling majority shareholder of IGL,⁷ and the majority member and manager of TTL.

Events Occurring Prior to the Execution of the Redemption Agreements

In the beginning of 2019, IGL, as a start-up company, continued to have cash flow issues as Burke and Levesque worked to grow the business. To maintain operations and pay its employees, IGL received a loan from Logistics Link, an unrelated company owned by Bill Pharris, which Burke managed, on January 24, 2019 in the amount of $40,000.00.⁸ IGL's financial wherewithal continued on shaky ground, as, on January 29, 2019, an employee of IGL, April Heffner ("Heffner"), was terminated due to suspected embezzlement of approximately $200,000.00.⁹ In January of 2019, Vogel was hired as an independent consultant to investigate the suspected embezzlement and review the financial records pertaining to TTL and IGL.¹⁰ Subsequently, on April 8, 2019, ICAT terminated its contract with TTL and refused to pay its accounts receivable.

As a result of these events, TTL and IGL suffered economic hardships and a temporary downturn in revenue. Burke testified that IGL lost its truck drivers and was forced to return its two trucks to the leasing company, incurring termination fees and costs for repairs. He further testified that ICAT was attempting to lure TTL's employees and customers away and that IGL and TTL had lost access to their emails and ICAT's insurance, licenses, and software. While Burke and other members of IGL's sales team immediately began contacting former customers to recruit their business going forward, as Burke testified, there was great uncertainty whether customers would move their business to or remain with IGL because of other available, more stable options.

Burke and Levesque realized that a capital contribution would be necessary to keep the businesses afloat and allow them to obtain additional software, insurance, and licensing. Burke told Levesque they would both have to contribute capital to keep IGL and TTL going. Burke was willing to infuse cash into the businesses if he held 100% of their interest. Levesque believed his share of the necessary capital contribution for the combined companies would have been approximately $150,000.00; however, he did not have any capital to contribute and became concerned about becoming liable for the two companies' debts. Due to cash flow issues for both IGL and TTL, Levesque had not received any salary from January through April of 2019. He had, however, taken some member distributions during that time with Burke's approval, which Vogel testified totaled $24,500.00.¹¹ At some point in early 2019, Burke personally loaned Levesque $10,000.00. The lack of a steady income was causing Levesque financial as well as marital issues, and in early April of 2019, he approached Burke to ask if he could redeem his interest in the companies. Around that time, Burke helped facilitate a position for Levesque at Logistics Link. On April 15, 2019, Levesque began working for Logistics Link. On April 30, 2019, IGL received an additional $60,000.00 loan from Logistics Link.¹² Burke testified that this loan was used to pay IGL employees.

The Redemption Agreements

On or about May 31, 2019, TTL, Burke, and Levesque entered into a Membership Interest Redemption Agreement ("TTL Redemption Agreement") and IGL, Burke, and Levesque entered into a similar Ownership Interest Redemption Agreement ("IGL Redemption Agreement", collectively, the "Redemption Agreements").¹³ The Redemption Agreements contain similar language and provided for, inter alia, the transfer of Levesque's membership and ownership interest in TTL and IGL, respectively, back to the companies. As a result...