An appeals court in the District of Columbia has affirmed a ruling that the principal of a corporation is individually liable for his corporation’s failure to pay fees associated with the use of an executive suite and other amenities at FedEx Field, the home venue for the Washington Redskins.
The liability was exercised under the Uniform Fraudulent Transfer Act (UFTA), D.C. Code §§ 28-3101 to 28-3111 (2001), after it was determined “that the corporation had conveyed all of its property to another company, which was created by the corporation’s lenders to receive the assets of the corporation when the corporation defaulted on its loans to the lenders.”
Kevin Bertram is the chief executive officer and majority owner of defendant Distributive Networks, Inc. In October 2009, WFI Stadium, Inc. obtained a Maryland judgment against Distributive on the basis of the company’s failure to pay the aforementioned fees. On July 9, 2010, WFI sought its Maryland judgment against Distributive in the Superior Court. WFI subsequently learned, however, that Distributive had conveyed all of its property to a company called ArX Mobile, Inc. WFI then filed the instant litigation against Bertram individually, alleging fraudulent conveyance, in an effort to hold him liable for the amount of the Maryland judgment against Distributive.
After Bertram failed to answer WFI’s complaint, the superior court entered a default judgment against him.
Bertram appealed, arguing that the court erred in entering the judgment against him “because (1) the stadium’s complaint failed to allege the elements of a fraudulent transfer under the Uniform Fraudulent Transfer Act and otherwise failed to state a claim; and, in any event, (2) the court heard no evidence, and made no finding, that the value of the property alleged to have been fraudulently transferred was at least equal to the amount of the $1,883,230.70 judgment.”
The appeals court disagreed with Distributive’s first argument, finding that ‘the allegations of the amended complaint were sufficient to state a claim under the UFTA.”
The court elaborated, writing that courts applying the UFTA “have held that where an individual who controlled a debtor company participated in the decision to make a fraudulent conveyance and did so with an intention to hinder the company’s creditor(s), the individual ‘may be held liable for the fraudulent conveyance.’ Firstar Bank, N.A. v. Faul, No. 00-C-4061, 2001 U.S. Dist. LEXIS 21294, at *17-21 (N.D. Ill. Dec. 19, 2001).”
However, the appeals court agreed with the second argument as to the amount of damage.
“We agree with Bertram that if the collateral he caused Distributive to surrender pursuant to the Agreement had a value of less than $1,883,230.70, WSI was entitled to a judgment in only that lesser amount. We conclude that the appropriate course is to remand to the trial court to conduct such further proceedings as may be necessary to make a finding as to the value of the collateral that Distributive surrendered to ArX, and, if the court finds that the value was less than $1,883,230.70, to reduce the amount of the judgment accordingly.”
Kevin D. Bertram v. WFI Stadium, Inc., D.C. Ct. App.; No. 11-CV-0396, 2012 D.C. App. LEXIS 153; 4/26/12
Attorneys of Record: (for appellant) George R. Pitts and Jeffrey Rhodes. (for appellee) Geoffrey S. Gavett.
