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Universitas Education, LLC v. Nova Group, Inc.

United States District Court, W.D. Oklahoma

September 13, 2017

UNIVERSITAS EDUCATION, LLC, Plaintiff,
v.
NOVA GROUP, INC., Defendant.

          ORDER

          JOE HEATON CHIEF U.S. DISTRICT JUDGE.

         Plaintiff Universitas Education, LLC (“Universitas”) obtained a money judgment against various defendants in the United States District Court for the Southern District of New York. Universitas registered the judgment with this court and moved for an examination hearing of the judgment debtor, Avon Capital, LLC. A Writ of Execution and a Garnishment Summons were issued to SDM Holdings, LLC (“SDM”) regarding potential Avon Capital, LLC assets. One Avon Capital, LLC entity, a Wyoming LLC (Avon Wyoming), intervened in this action and sought a permanent injunction to prohibit Universitas from “attempting to enforce the New York Judgment against SDM or another [sic] other assets solely owned by Avon-Capital-WY.” Doc. 73, at 14.

         This case was referred to U.S. Magistrate Judge Suzanne Mitchell for proceedings consistent with 28 U.S.C. § 636(b)(3). Judge Mitchell has issued a Report and Recommendation, which concluded that Avon Wyoming has been rendered administratively defunct and no longer has standing to seek injunctive relief. Avon Wyoming has objected, triggering de novo review.

         Background

         Universitas was the sole beneficiary of several life insurance policies totaling $30 million in proceeds. Universitas Educ., LLC v. Nova Grp., Inc., 784 F.3d 99, 100-01 (2d Cir. 2015). When the death benefits came due, however, Universitas's claim to those benefits was denied. Id. Universitas participated in binding arbitration with the trustee of the benefit plan, and obtained a favorable award. Id. The plan trustee sought to vacate the award in the U.S. District Court for the Southern District of New York, but the award was confirmed and judgment was entered for $30, 181, 880.30. Id.

         Universitas encountered significant resistance in collecting on the judgment. The money was transferred to various other entities in connection with a money-laundering scheme. See Universitas Educ., LLC v. Nova Grp., Inc., 2014 WL 388371 (S.D.N.Y. Aug. 7, 2014); see also United States v. Daniel Carpenter, 190 F.Supp.3d 260 (D. Conn. Jun. 6, 2016). Upon finding these transfers to be fraudulent, the New York court entered judgment in Universitas's favor against the defendants in various amounts, including judgment against “Avon Capital, LLC, in the amount of $6, 710, 065.92.” Doc. #1-1.

         Universitas registered the judgment in this court and moved for a hearing to examine the judgment debtor, Avon Capital, LLC, pursuant to 12 Okla. Stat. § 842 and Fed.R.Civ.P. 64. The motion, and the order granting it, were served on Avon Wyoming, Avon Capital, LLC, a Connecticut LLC (“Avon Connecticut”), and Avon Capital, LLC, a Nevada LLC (“Avon Nevada”). SDM Holdings, LLC (“SDM”) was subpoenaed to appear at the hearing, as well as to produce documents related to Avon Capital, LLC. None of the Avon Capital, LLC entities nor SDM appeared at the hearing. Universitas filed a Motion for Contempt against Avon Capital, LLC and SDM Holdings, LLC, and a Show Cause Order was issued by Judge Mitchell.

         Shortly thereafter, a motion to intervene was filed by Avon Wyoming in which it asserted that it owns 100% membership interests in SDM, but that it is not the entity referenced in the registered judgment. Avon Wyoming argues that the judgment applies to Avon Connecticut or Avon Nevada. The unopposed motion to intervene was granted, and Avon Wyoming filed a motion for permanent injunction.

         Avon Wyoming has forfeited its articles of organization in Wyoming due to failure to file its annual report and pay its licensing fee. The Wyoming Secretary of State issued a delinquency notice on May 2, 2014, and Avon Wyoming was deemed defunct sixty days later. See Wyo. Stat. § 17-29-705(b). Avon Wyoming had two years to apply for reinstatement but did not do so. Its status was changed to “Archived” in July 2016. Avon Wyoming's motion for permanent injunction was not filed until October 6, 2016.

         Standing

         The parties do not dispute Avon Wyoming's status as a defunct limited liability company (“LLC”), but they disagree as to the consequences of that status. Universitas argues that injunctive relief in Avon Wyoming's favor would be moot because the entity has ceased to exist. Avon Wyoming contends it should be regarded as a dissolved LLC under Wyo. Stat. § 17-29-702, which would allow it to prosecute and defend civil actions in the course of winding up its business.

         Under Wyoming statutes, [1] LLCs which are rendered defunct are not explicitly labelled as “dissolved, ” and the enumerated events that cause dissolution do not include administrative default. See Wyo. Stat. § 17-29-701 (“A limited liability company is dissolved, and its activities must be wound up, upon the occurrence of any of the following . . . .”); see also § 17-29-705. Although it is logical to view § 17-29-701 as an exhaustive list, the consequence would put defunct LLCs in some undefined category of entity (or non-entity), with no statutory guidance as to what happens to its assets.[2]

         Further, treating a defunct LLC as a dissolved LLC under § 17-29-702 would be more consistent with Wyoming's treatment of corporations. In Ridgerunner, LLC v. Meisinger, the Wyoming Supreme Court states that Wyo. Stat § 17-16-1405(b)(v), which permits dissolved corporations to sue or be sued, “applies whether the dissolution is done voluntarily or administratively.” 297 P.3d 110, 116 (Wyo. 2013). And in RDG Oil & Gas, LLC v. Jayne Morton Living Trust, the Court referred to an authorized foreign LLC that “negligently forfeited all of its rights and privileges to conduct any business in Wyoming” as “administratively dissolved, ” rather than defunct. 331 P.3d 1199, 1204 (Wyo. 2014). The court concludes Avon Wyoming does not lack standing to seek injunctive relief.

         Permanent ...


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