Wadi Food Indus. Co. S.A.E. v. Barclays Bank Del.

WADI FOOD INDUSTRIES CO. S.A.E., Plaintiff, v. BARCLAYS BANK DELAWARE, et al., Defendants.

Civil Action No. 2:18cv554

UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF VIRGINIA Norfolk Division

May 2, 2019

REPORT AND RECOMMENDATION

Before the Court is Defendant Barclays Bank Delaware's ("Barclays") Motion to Dismiss and accompanying memorandum. ECF Nos. 34-35. Plaintiff Wadi Food Industries Co. S.A.E. ("Wadi Food") filed a brief in opposition, ECF No. 39, and Barclays filed a reply brief, ECF No. 42. This matter was referred to the undersigned United States Magistrate Judge for a report and recommendation pursuant to a Referral Order from the United States District Judge. ECF No. 44; see also 28 U.S.C. §§ 636(b)(1)(B); Fed. R. Civ. P. 72(b); E.D. Va. Local Civ. R. 72. This matter was set for a hearing on April 23, 2019, at which time the Court heard oral argument.¹ ECF No. 50. For the foregoing reasons, the undersigned RECOMMENDS that Barclays' Motion to Dismiss, ECF No. 34, be DENIED.

I. PROCEDURAL BACKGROUND

Wadi Food filed its original Complaint in this Court on October 16, 2018, against BGI International, LLC ("BGI") and Barclays. ECF No. 1. Barclays filed a Motion to Dismiss thatComplaint on December 11, 2018, for failure to state a claim under Rule 12(b)(6). ECF No. 12. Wadi Food responded, ECF No. 18, and Barclays filed a reply brief, ECF No. 21. On January 22, 2019, prior to resolution of the outstanding Motion to Dismiss, Wadi Food filed its Amended Complaint. ECF No. 26. Wadi Food's Amended Complaint, which is subject to Barclays' instant Motion to Dismiss, includes two counts. Count One alleges fraudulent transfer pursuant to Va. Code. § 55-80. Id. at 12-14. Count Two alleges conveyance not upon consideration deemed valuable in law pursuant to Va. Code § 55-81. Id. at 14. Wadi Food seeks a personal judgment from Barclays, requests the transfers made from BGI to Barclays be voided, and requests an award of attorneys' fees from BGI. Id. at 13-14.

On October 16, 2018, the same day it filed its original Complaint in this case, Wadi Food filed a separate four-count Complaint in this Court against BGI and Gary Bartel. See Wadi Food Indus. Co. S.A.E. v. Gary Bartel, et al, No. 2:18cv557 (ECF No. 1). In that Complaint, Wadi Food alleged facts in support of its conclusion that BGI is the alter ego of Bartel, sought to pierce the corporate veil between BGI and Bartel, and requested relief in the form of a judgment against Bartel for the obligations that BGI owes to Wadi Food pursuant to Count III and Count IV. Id. (ECF No. 1 at 19-20). Count I of that Complaint alleged fraudulent transfer pursuant to Va. Code. § 55-80 and Count II alleged conveyance not upon consideration deemed valuable in law under Va. Code § 55-81 for transfers made from BGI to Barclays. Id. (ECF No. 1 at 14-19). Relatedly, Wadi Food requested relief in the form of a personal judgment against Barclays and BGI, or alternatively to have the transfers to Barclays voided, and sanctions and attorneys' fees awarded against BGI.² Id. (ECF No. 1 at 16). Wadi Food filed an amended complaint (hereinafter the "Veil Piercing Complaint") in that case on January 11, 2019. Id. (ECF No. 11). The Veil PiercingComplaint alleges fraudulent transfer pursuant to Va. Code. § 55-80 and Count II alleges conveyance not upon consideration deemed valuable in law pursuant to Va. Code § 55-81 for transfers made from BGI to Bartel and seeks a personal judgment against BGI and Bartel, or alternatively to have the transfers to Bartel voided, and to have sanctions and attorneys' fees awarded against BGI. Id. (ECF No. 11 at 11-13). Related to Counts III and IV, Wadi Food alleges facts in support of its conclusion that BGI is the alter ego of Bartel, seeks to pierce the corporate veil between BGI and Bartel, and requested relief in the form of a judgment against Bartel for the obligations that BGI owes to Wadi Food pursuant to Count III and Count IV. Id. (ECF No. 11 at 14-21). Wadi Food's case related to the Veil Piercing Complaint is still ongoing.

II. STANDARD OF REVIEW

Rule 8(a) requires that "[a] pleading that states a claim for relief must contain . . . a short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a). To be sufficient under Rule 8, the pleading must meet two basic requirements: it must contain sufficient factual allegations and those allegations must be plausible. Adiscov, LLC v. Autonomy Corp., 762 F. Supp. 2d 826, 829 (E.D. Va. 2011) (citing Ashcroft v. Iqbal, 556 U.S. 662 (2009); Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007)). First, sufficient factual allegations include "more than labels and conclusions, and a formulaic recitation of the elements of the cause of action will not do;" rather, "factual allegations must be enough to raise a right to relief above the speculative level." Twombly, 550 U.S. at 555. Second, to "nudge[] their claims across the line from conceivable to plausible," id. at 570, "plaintiff[s] [must] plead[] factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged," Iqbal, 556 U.S. 678. Indeed, to achieve factual plausibility, plaintiffs must allege more than "naked assertions . . . without some further factual enhancement." Twombly, 550 U.S. at 557.Otherwise, the complaint will "stop[] short of the line between possibility and plausibility of entitlement to relief." Id. In deciding a motion to dismiss, a court may consider facts alleged on the face of the complaint, as well as "'matters of public record, orders, items appearing in the record of the case, and exhibits attached to the complaint.'" Moore v. Flagstar Bank, 6 F.Supp.2d 496, 500 (E.D. Va. 1998) (quoting 5A CHARLES A. WRIGHT & ARTHUR R. MILLER, FEDERAL PRACTICE & PROCEDURE § 1357 (1990)).

"[T]he purpose of Rule 12(b)(6) is to test the legal sufficiency of the complaint." Randall v. United States, 30 F.3d 518, 522 (4th Cir. 1994). When considering a motion to dismiss, only those allegations which are factually plausible are "entitled to the assumption of truth." Iqbal, 556 U.S. at 679 (noting that legal conclusions must be supported by factual allegations). In other words, "the court should accept as true all well-pleaded allegations and should view the complaint in a light most favorable to the plaintiff." Mylan Labs., Inc. v. Matkari, 7 F.3d 1130, 1134 (4th Cir. 1993). "At bottom, determining whether a complaint states on its face a plausible claim for relief and therefore can survive a Rule 12(b)(6) motion will be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Francis v. Giacomelli, 588 F.3d 186, 193 (4th Cir. 2009) (citations omitted).

III. PLAINTIFF WADI FOOD'S AMENDED COMPLAINT

To resolve Barclays' Motion to Dismiss, the Court accepts as true the following factual allegations in the Amended Complaint.³ Defendant BGI, the alter-ego company to One World,⁴made two purchases from Plaintiff Wadi Food for Bistro Reserve brand olives. ECF No. 26 at 3. BGI's first purchase order (hereinafter "Purchase Order One") was submitted to Wadi Food on October 23, 2013. Id. Gary Bartel was the primary contact for delivery of goods by Wadi Food from 2010 to 2014. Id. at 4. Bartel was the owner of both One World and BGI. Id. Wadi Food generated invoices for BGI for Purchase Order One and four of those invoices remain unpaid. Id. at 3. BGI's second purchase order (hereinafter "Purchase Order Two") was submitted to Wadi Food on January 6, 2014. Id. Wadi Food generated invoices for BGI for Purchase Order Two and all seven invoices remain unpaid. Id.

BGI made sixty-two payments to Barclays between February 2014 and October 2017, totaling $544,622.39, to pay the Barclays personal credit card of BGI's sole manager, Gary Bartel. Id. at 8-9. Neither BGI or One World had an obligation to pay Barclays, nor did either receive direct consideration from Barclays for the transfers to it. Id. at 9. BGI made other payments to TowneBank, Toyota Motor Credit Company, Cape Henry Collegiate School, Inc., Bank of America, Chase Bank U.S.A., N.A., Gary Bartel, and Capital One Bank USA, N.A., but owed no obligation to these entities and received no consideration from them in return for these payments. Id. at 9.

Wadi Food filed suit in this Court against BGI and One World on July 6, 2017, for non-payment of the purchase orders. Id. at 6. A judgment was entered in Wadi Food's favor against BGI and One World, jointly and severally, for $285,000 plus interest. Id. at 3. From 2014 to December 2017, BGI paid out almost one million dollars but had a total revenue of $346,720.71 from January 2014 to December 2017. Id. at 9. BGI's 2015 federal tax returns show business income of negative $113,301, business assets at the beginning of the year as $0, assets at the endof the year of $162,440, and liabilities in excess of $2.8 million. Id. at 10. BGI's 2016 federal tax returns show business assets at the beginning of the year as $162,440, assets at the end of the year of$521,391, and liabilities in excess of $2.8 million. Id. at 11. BGI never had more than $200,000 in its bank account from February 3, 2014, to the present, and One World never had more than $260,000 in its bank account from February 3, 2014, to the present. Id. at 11. Most of the time from February 20014 to the present, BGI had less than $10,000 in its bank account at the end of each month, and One World had less than $70,000 in its bank account at the end of each month during that same period. Id.

IV. ANALYSIS

Barclays' instant Motion to Dismiss seeks to dismiss Wadi Food's Amended Complaint for failure to state a claim upon which relief can be granted. ECF No. 34 at 1. Barclays argues that, related to Count I, the Amended Complaint fails to adequately allege actual fraud or the presence of badges of fraud. ECF No. 35 at 1. Related to Count II, Barclays contends...