By: Scott B. Riddle, Esq.

In Kipperman (as Trustee for Magnatrax Litigation Trust) v. Onex Corp., et al, Civ. Action No. 1:05-CV-1242-JOF, 2007 U.S. Dist. LEXIS 71551 (N.D. Ga. September 26, 2007), the Trustee filed suit against several parties for fraudulent transfers under former Georgia statute O.C.G.A. §18-2-22, et seq. (since repealed and replaced by the Uniform Fraudulent Transfer Act, O.C.G.A. §8-2-70, et seq.).   The issue was whether Federal Rule of Civil Procedure 9(b) applied to claims under Georgia law –

No court has addressed whether the federal standard in Rule 9(b) applies to O.C.G.A. §§ 18-2-22, et seq. Having examined this statute, the court finds it to be sufficiently similar to O.C.G.A. §§ 18-2-70, et seq., to warrant treating the two statutes the same. See Alexander v. Caldwell (In re Terry Mfg. Co.), No. 03-32063, 2007 Bankr. LEXIS 2420 (M.D. Ala. May 29, 2007) (reaching the same result under both statutes). Thus, if Rule 9(b) applies to the later statute, this court will deem it to apply to the its predecessor statute as well and the requisite degree of particularity for pleading under both statutes will be the same.

For the reasons stated in the Prior Order, this court continues to hold that Rule 9(b) applies to all claims of intentional fraud, such as those under O.C.G.A. § 18-2-74(a)(1), but it does not apply to claims of constructive fraud such as those under O.C.G.A. § 18-2-74(a)(2). (Prior Order at 27-34). The question remains as to what Rule 9(b) requires of the parties here. The Eleventh Circuit has not yet directly addressed what Rule 9(b) requires when pleading fraudulent transfer claims. This court looked to other jurisdictions which have addressed this issue, in crafting its holding, but above all, this court sought to reach a resolution that would satisfy the goals of Rule 9(b) and provide the parties with the tools necessary to resolve the instant matter.  …

Although it arises in the context of federal joinder, this court agrees with the Seventh Circuit that Form 13 provides a good indication of what one must plead in a fraudulent conveyance claim under the Uniform Fraudulent Transfer Act to satisfy the purposes of Rule 9(b). Form 13 merely requires (1) an allegation of jurisdiction, (2) a statement of the date and the conditions of the indebtedness involved (often with the document itself attached), (3) the amount owed, (4) a statement that the defendant conveyed real and personal property of a given description to another for the purpose of defrauding plaintiff and hindering and delaying the collection of the indebtedness described prior, and (4) a demand for judgment.

However, the Court founds that the pleading requirements are somewhat relaxed for Bankruptcy trustees –

The court is not unsympathetic to Plaintiff’s concerns, however, and recognizes that Plaintiff is in a unique position as the trustee of a litigation trust seeking to bring suit based on a myriad of complicated financial transactions and involving an often indistinguishable and overlapping set of parties. As such, this court is inclined to find a way for Plaintiff to be able to move forward with his claims. Courts generally take a liberal approach when reviewing allegations of fraud pled by a trustee in bankruptcy because, as an outside party to the transactions in issue, the trustee must plead the claim of fraud for the benefit of the estate and its creditors based upon secondhand knowledge. In re: Reliance Fin. & Inv. Group, Inc., No. 04-80625, 2006 U.S. Dist. LEXIS 82945, *13 (S.D. Fla. Nov. 14, 2006) ("[W]hen the trustee of a bankruptcy estate brings [a] fraud claim . . . the Trustee will inevitably lack knowledge regarding acts of fraud previously committed by or against a third party debtor."); Profilet v. Cambridge Fin. Corp., 231 B.R. 373, 379 (S.D. Fla. 1999) ([T]he Trustee argues–and the Court agrees–that courts should relax the specificity requirements where the plaintiff is a trustee in bankruptcy); White Metal Rolling, 222 B.R. at 428 ("Since a bankruptcy trustee rarely has personal knowledge of the events preceding his appointment, he can plead fraud based upon information and belief provided he pleads the basis of his belief.").

Here, the trustee’s " "lack of personal knowledge is compounded with complicated issues and transactions which extend over lengthy periods of time," which require that this court grant him even greater latitude. Securities Investor Protection Corp. v. Stratton Oakmont, Inc., 234 B.R. 293, 310 (Bankr. S.D.N.Y. 1999). As such, this court will not dismiss Plaintiff’s transfer allegations that do not allege a specific date, amount, and description. Plaintiff has specifically identified the transfers the Trust would like voided by type and often with an approximate time frame or amount.  This court believes that these are sufficient indicia of reliability for Defendants to move forward in mounting  their defense. These allegations are not, however, enough for a disposition of these claims.