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Global State Investment USA, Inc. v. Las Properties, LLC

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

April 29, 2015

LAS PROPERTIES, LLC, individually and on behalf of PINNACLE RIDGE, LTD., Defendants.


DAVID C. NORTON, District Judge.

This matter is before the court on a motion to dismiss filed by plaintiffs Global State Investments USA, Inc. ("Global State"); Pinnacle Ridge Capital, LP ("Capital"); PR GP SPE, LLC; and GS/PR GP, LLC. Plaintiffs seek to dismiss the counterclaims asserted by defendants LAS Properties, LLC ("LAS") and Pinnacle Ridge, Ltd. ("PRLtd"). For the reasons stated below, plaintiffs' motion to dismiss is granted in part and denied in part.


The litigation arises out of an apartment complex located in Dallas, Texas and involves two limited partnerships as well as the various entities and individuals owning interests in those partnerships. Countercl. ¶ 68. The first of these limited partnerships, PRLtd, was formed in 2005 for the purpose of owning an interest in the Pinnacle Ridge Apartments Complex ("the complex"). Id . ¶¶ 67, 68. Anthony J. Skattell, III ("Skattell") loaned PRLtd $1.5 million to purchase the property on which the complex now sits. Id . ¶ 67. In September 2006, when PRLtd was repaid $1, 498, 000 for the land's purchase price, members of PRLtd offered Skattell an interest in PRLtd in lieu of repaying the entire loan. Id . Skattell accepted the offer to take one half of the money owed to him and convert the other half into a capital contribution for the purpose of becoming a limited partner of PRLtd. Id . Skattel transferred his 30% interest in PRLtd to his company, LAS. Id . ¶¶ 67, 68.

HHS Partners, LLC ("HHS") owned a 69% interest as a limited partner in PRLtd. Id . ¶ 68. The general partner of PRLtd, Pinnacle Ridge GP, LLC ("the GP"), owned a 1% interest. Id . The GP was owned and operated by its members David Hendricks ("Hendricks"), Fred Morgan ("Morgan"), and James Charnquist ("Charnquist"). Id . ¶ 70. HHS was owned by Hendricks, Housing 2000, Inc. (a corporation owned by Morgan), and Sage Properties Corp. (a corporation owned by Charnquist). Id . ¶ 71.

LAS alleges that it believed PRLtd owned the complex when it became a limited partner and did not learn otherwise until it received documents through subpoena in 2013. Id . ¶¶ 69, 120. The complex was actually owned by Pinnacle Ridge Apartments, LP ("PRApts"), a limited partnership governed by Texas law and formed in 2006 to construct, operate, and own the complex. Id . ¶ 69. Under the PRApts Limited Partnership Agreement, PRApts was owned by the GP (1%) as the General Partner; PRLtd as the sole Class A Limited Partner (49%); and Capital as the sole Class B Limited Partner (50%).[2] Id.

The PRApts Limited Partnership Agreement required that an "asset manager" essentially supervise the GP in its actions on behalf of PRApts. Id . Ex. 2 at 52 § 9.4. As the asset manager, Global State was to be provided with monthly reports regarding the budget and development progress of the complex, and any major changes to the original budget or development plan had to be approved by the asset manager before the GP could carry out the new plans. Id . LAS alleges that Global State became the asset manager of PRApts in December 2008 and that Capital "was merely a tool used by Global State to perpetrate its business needs." Id . ¶¶ 98, 99.

In 2010, Capital discovered that the GP "fraudulently transferred $1.8 million from PRApts." Id . ¶ 92. Capital and Global State then brought an action against the GP alleging misappropriation of funds (PRLtd was not a party to this suit despite being a victim of this fraud). Id . Before much litigation proceeded, the parties agreed to settle their disputes and entered into a settlement agreement. Id . ¶ 93.

As part of the settlement agreement and apparently without notice to LAS, the GP and PRLtd each agreed to assign to Global State (or its designee) all of their outstanding interest in PRApts. Id . ¶¶ 94, 95. On November 5, 2010, the GP assigned its 1% interest in PRApts to GS/PR GP, LLC and PRLtd assigned its 49% interest in PRApts to Global State. Id . LAS maintains that it was never told about the GP's misappropriation of funds and the resulting settlement agreement. Id . ¶ 100. LAS alleges that it did not discover the transfer of PRLtd's assets through the settlement agreement and the sale of the complex[3] until 2013, when it received documents through subpoena leading to this information. Id . ¶ 120. Because PRLtd previously "had no ability to bring suit... because [the misappropriation and transfer of PRLtd's assets] were hidden from the only innocent limited partner, " LAS asserts that "there was no party to bring this [action] on behalf of PRLtd until now." Id . ¶ 121.

LAS originally filed suit in Texas State District Court against the GP for claims related to LAS's request for access to PRLtd's records and accounting. Id. at ¶ 83. The state court stayed the case and referred all claims to arbitration. Defs.' Resp. to Pls.' Mot. Prelim. Inj. Ex. 2. LAS later added plaintiffs to the arbitration. Id. at 5.

On November 21, 2014, plaintiffs filed a civil action in this court against defendants asserting four claims, seeking: (1) a declaratory judgment that they are not subject to an arbitration agreement with LAS, and thus there is no basis for defendants to proceed in arbitration against them; (2) a declaratory judgment that any claims that defendants may seek to assert against them have been fully released; (3) an injunction permanently enjoining defendants from proceeding in the arbitration against the plaintiffs; and (4) indemnification by LAS (standing in the shoes of PRLtd) for breach of warranty based on PRLtd's representation that there were no interested parties such as LAS. On January 9, 2015, this court denied plaintiffs' motion for a preliminary injunction to enjoin defendants from proceeding against them in arbitration.

On February 6, 2015, LAS, on behalf of PRLtd, filed an answer and counterclaim, asserting claims against plaintiffs for: (1) fraudulent transfer, related to plaintiffs' receipt of PRLtd's interest in PRApts; (2) breach of fiduciary duty related to Global State's failure to protect PRLtd's interest in PRApts; (3) negligence related to Global State's work as the asset manager for PRApts; and (4) breach of contract related to Global State's role as the asset manager of PRApts. On March 2, 2015, plaintiffs moved to dismiss defendants' counterclaims. Defendants filed a response on March 19, 2015, to which plaintiffs replied on March 30, 2105. The parties have fully briefed the motion and it is ripe for the court's review.


Under Federal Rule of Civil Procedure 12(b)(6), a party may move to dismiss for "failure to state a claim upon which relief can be granted." When considering a Rule 12(b)(6) motion to dismiss, the court must accept the plaintiff's factual allegations as true and draw all reasonable inferences in the plaintiff's favor. See E.I. du Pont de Nemours & Co. v. Kolon Indus., 637 F.3d 435, 440 (4th Cir. 2011). But "the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). On a motion to dismiss, the court's task is limited to determining whether the complaint states a "plausible claim for relief." Id. at 679. Although Rule 8(a)(2) requires only a "short and plain statement of the claim showing that the pleader is entitled to relief, " "a formulaic recitation of the elements of a cause of action will not do." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). The "complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.'" Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 570). "Facts pled that are merely consistent with' liability are not sufficient." A Soc'y Without a Name v. Virginia, 655 F.3d 342, 346 (4th Cir. 2011) (quoting Iqbal, 556 U.S. at 678). The court may consider only the facts alleged in the complaint, which may include any documents either attached to or incorporated in the complaint, and matters of which the court may take judicial notice. Tellabs v. Makor Issues & Rights, Ltd., 551 U.S. 308, 322 (2007).


Plaintiffs seek to dismiss defendants' counterclaims on five grounds. First, plaintiffs argue that defendants lack standing to bring a claim for fraudulent transfer under the Texas Uniform Fraudulent Transfer Act ("TUFTA"). Pls.' Mot. 7. Second, plaintiffs contend that defendants lack standing to bring claims for negligence, breach of fiduciary duty, and breach of contract, because such claims belong to PRApts, and defendants cannot bring claims on behalf of PRApts. Id . Third, plaintiffs assert that defendants fail to allege sufficient facts to state a claim for breach of fiduciary duty under Texas law. Id. at 12-18. Fourth, plaintiffs argue that defendants' negligence claim is barred by the economic loss rule. Id. at 18-19. Lastly, plaintiffs argue that defendants' claim for breach of contracts fails as a matter of law because it is not sufficiently pleaded under Rule 8. Id. at 19-20.

The court will address each argument in turn.

A. Standing under TUFTA

Plaintiffs first argue that defendants are not creditors within the meaning of TUFTA, and they therefore cannot assert a claim under the Act. Pls.' Mot. 7. Plaintiffs further argue that TUFTA "was not intended to ...

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