FILED
United States Court of Appeals
UNITED STATES COURT OF APPEALS Tenth Circuit
FOR THE TENTH CIRCUIT July 16, 2013
Elisabeth A. Shumaker
Clerk of Court
STATE OF OKLAHOMA, ex rel.,
JOHN DOAK, Insurance Commissioner,
as receiver for Imperial Casualty and
Indemnity Company,
Plaintiff-Appellant,
v. No. 12-6179
(D.C. No. 5:11-CV-00863-C)
ACRISURE BUSINESS (W.D. Okla.)
OUTSOURCING SERVICES, LLC;
ACRISURE, LLC; CAMPBELL
MANAGEMENT GROUP, INC.,
Defendants-Appellees,
and
PATRICK MONTGOMERY;
EMPLOYMENT TRADITIONS, INC.;
PEOPLE ESSENTIALS, INC.; E.T. 2,
INC.; E.T. 4, INC.; E.T. 6, INC.; E.T. 10,
INC.; CFC I/ET, INC.; CFC II/ET, INC.;
MONTGOMERY, INC.,
Defendants.
________________________________
STATE OF OKLAHOMA, ex rel.,
JOHN DOAK, Insurance Commissioner,
as receiver for Park Avenue Property and
Casualty Insurance Company,
Plaintiff-Appellant,
v. No. 12-6180
(D.C. No. 5:11-CV-00864-C)
ACRISURE BUSINESS (W.D. Okla.)
OUTSOURCING SERVICES, LLC;
ACRISURE, LLC; CAMPBELL
MANAGEMENT GROUP, INC.,
Defendants-Appellees,
and
PATRICK MONTGOMERY;
EMPLOYMENT TRADITIONS, INC.;
PEOPLE ESSENTIALS, INC.; E.T. 2,
INC.; E.T. 4, INC.; E.T. 6, INC.; E.T. 10,
INC.; CFC I/ET, INC.; CFC II/ET, INC.;
MONTGOMERY, INC.,
Defendants.
ORDER AND JUDGMENT*
Before BRISCOE, Chief Judge, McKAY and O’BRIEN, Circuit Judges.
Plaintiff, the State of Oklahoma, on behalf of John Doak, its Insurance
Commissioner and the receiver for Imperial Casualty and Indemnity Company and
Park Avenue Property and Casualty Insurance Company (collectively the Insurers),
appeals from the district court’s orders granting summary judgment in favor of
defendants Acrisure Business Outsourcing Services, LLC (Acrisure Services),
*
After examining the briefs and appellate record, this panel has determined
unanimously that oral argument would not materially assist the determination of this
appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The case is therefore
ordered submitted without oral argument. This order and judgment is not binding
precedent, except under the doctrines of law of the case, res judicata, and collateral
estoppel. It may be cited, however, for its persuasive value consistent with
Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.
-2-
Acrisure, LLC (Acrisure), and Campbell Management Group, Inc. (Campbell)
(collectively the ABOS defendants). Mr. Doak also appeals the orders that denied his
motions to: (1) amend the scheduling order and reconsider that order; (2) conduct
additional discovery to respond on summary judgment; and (3) remand the case to
state court under the Burford abstention doctrine. Exercising jurisdiction under
28 U.S.C. § 1291, we affirm the orders.
I. BACKGROUND
Employment Traditions, Inc. (Traditions), a professional employer
organization, provided employee services to its customers in return for a fee.
Patrick Montgomery was the president and sole shareholder of Traditions. As part of
its services, Traditions purchased high-deductible worker’s compensation insurance
from the Insurers for the benefit of its customers’ employees. Under the
high-deductible policies the Insurers covered catastrophic losses and Traditions was
self-insured for minor injuries. The Insurers were responsible for administering all of
the benefits for worker’s compensation claims, including the payment of claims for
non-catastrophic injuries. In addition to paying premiums and administrative
expenses, Traditions was obligated to reimburse the Insurers for all of the
non-insured claims paid by the Insurers to its customers’ employees. Beginning in
2005, Traditions fell behind in its payments to the Insurers.
In late 2008, Traditions began negotiations to sell some of its assets to
Campbell, a Michigan corporation that operated a commercial insurance agency.
-3-
Campbell conducted the due diligence for the transaction. The parties eventually
agreed on a deal that covered 126 customer accounts, or 51.6% of Traditions’ assets.
To that end, on December 31, 2008, Campbell sold all of its assets, including
Acrisure Services, a Michigan limited liability company, to Acrisure, a Michigan
limited liability company that was formed expressly for the purpose of acquiring
Campbell. Later that same day, Acrisure Services purchased approximately 51% of
Traditions’ accounts for $4.5 million. Acrisure guaranteed the promissory notes used
to fund part of the purchase of Traditions. At or about the time of the transaction,
Traditions’ employees began to tell its customers, vendors, and creditors that its
name would change to Acrisure Services effective January 1, 2009. Following the
closing, Acrisure Services hired 33 of Traditions’ 38 employees, including
Mr. Montgomery.
Not long after the transaction closed, the Insurers went into liquidation.
Mr. Doak eventually filed two separate state court suits in which he alleged more
than $9 million in damages on behalf of each Insurer for: (1) breach of contract
against Traditions; (2) negligence and breach of fiduciary duty against
Mr. Montgomery; (3) constructive fraudulent transfer against Traditions,
Mr. Montgomery, and the ABOS defendants; (4) successor liability against the
-4-
ABOS defendants; and (5) a corporate-veil-piercing claim against Traditions and
Mr. Montgomery. The defendants removed the cases to federal court.1
II. PROCEDURAL ORDERS
A. The Scheduling Order
The scheduling order was entered on September 1, 2011. March 1, 2012, was
designated as the deadline for completion of discovery and other matters such as
dispositive motions. In October 2011, Acrisure and Campbell moved for judgment
on the pleadings on the grounds that they were not parties to the purchase agreement
and therefore could not be liable as a matter of law. Mr. Doak filed an unopposed
motion for extension of time to respond. In his response filed on December 2,
Mr. Doak argued for more time to conduct discovery to determine whether Acrisure
and/or Campbell were the alter-egos of Acrisure Services or had received some of
Traditions’ assets. The district court denied the motion for judgment on the
pleadings on January 30, 2012.
In the meantime, on November 11, 2011, the ABOS defendants served written
discovery, and in early February 2012, they served a notice to depose Mr. Doak.
Although Mr. Doak eventually responded to the requests for admissions, he never
1
The district court certified its summary judgment orders as final under
Fed. R. Civ. P. 54(b). As part of the certification order, the court acknowledged the
entry of a consent judgment in favor of Mr. Doak on his claims against defendants
Employment Traditions, Inc., People Essentials, Inc., E.T. 2, Inc., E.T. 4, Inc., E.T. 6,
Inc., E.T. 10, Inc., CFC I/ET, Inc., CFC II/ET, Inc., and Montgomery, Inc. The court
also entered a judgment that dismissed Mr. Doak’s remaining claims against
Mr. Montgomery without prejudice pursuant to a stipulation.
-5-
responded to the interrogatories or requests for production of documents nor did he
appear for deposition.
On February 15, 2012, just two weeks before the discovery deadline, Mr. Doak
moved to amend the scheduling order to extend all of the deadlines by sixty days.
The motion was filed nearly six weeks after Mr. Doak’s expert witness list and
reports were due and the same day that his witness and exhibit lists were due.
As grounds, Mr. Doak cited the “pendency of Acrisure and Campbell’s
Motion for Judgment on the Pleadings,” Aplt. App. at 162, as well as the
administrative and litigation demands placed on the “small firm retained by
[Mr. Doak] to act as assistant receiver,” id. at 161. According to Mr. Doak, his
lawyers needed additional time to confer with the assistant receiver to not only
respond to the past-due discovery, but to “coordinat[e] with the assistant receiver
regarding the preparation of discovery to Defendants.” Id. at 162. Although he did
not say so Mr. Doak suggested that his counsel intended to serve discovery before the
end of January 2012, but were unable to do so because of the unexpected death on
January 24 of a lawyer’s relative. He stated that he did not move for an extension on
January 24 because opposing counsel led his lawyers to believe that they would agree
to an extension.
The ABOS defendants objected on the grounds that Mr. Doak “has failed to
cooperate in discovery or comply with the Court’s scheduling Order and the actions
of his counsel indicate [he] does not intend to comply.” Id. at 195. They disavowed
-6-
having agreed to an extension and insisted that they were willing only to discuss an
extension of time for Mr. Doak to respond to the past-due discovery. On March 1,
2012, while Mr. Doak’s motion was pending, the ABOS defendants filed for
summary judgment. On March 2, the district court denied Mr. Doak’s motion to
extend the deadlines.
“A schedule may be modified only for good cause and with the judge’s
consent.” Fed. R. Civ. P. 16(b)(4). “[T]he court may modify the schedule on a
showing of good cause if it cannot reasonably be met despite the diligence of the
party seeking the extension.” Fed. R. Civ. P. 16 advisory committee’s note (1983
Amendment Discussion).
“We review a court’s refusal to enter a new scheduling order for abuse of
discretion.” Rimbert v. Eli Lilly & Co., 647 F.3d 1247, 1254 (10th Cir. 2011). “An
abuse of discretion occurs when the district court’s decision is arbitrary, capricious or
whimsical, or results in a manifestly unreasonable judgment.” Moothart v. Bell,
21 F.3d 1499, 1504-05 (10th Cir. 1994) (internal quotation marks omitted). See also
Bylin v. Billings, 568 F.3d 1224, 1231 (10th Cir. 2009) (recognizing that “appellate
courts that have applied Rule 16 have afforded wide discretion to district courts’
applications of that rule”).
There was no abuse of discretion. As the district court explained in its order,
Mr. Doak “has not shown good cause for extension: In addition to continuously
-7-
missing deadlines and failing to respond to discovery requests, [Mr. Doak]
misrepresents the pendency of a motion as a basis for extension.” Aplt. App. at 330.
On appeal, Mr. Doak argues that his lawyers were overwhelmed by having to
respond to the motion for judgment on the pleadings and the discovery requests. But
the motion for judgment on the pleadings was not filed until October 21, 2011, nearly
two months after entry of the scheduling order and Mr. Doak’s response stated that
he needed to conduct discovery to prepare a response. There was ample time before
the motion was filed and after Mr. Doak responded to have conducted discovery.
Nor are we swayed by the argument that the burden of responding to discovery
requests that were served in mid-November prevented counsel from conducting their
own discovery. Indeed, it appears that the responses were being managed by the
assistant receiver’s office and thus Mr. Doak’s lawyers could have pursued their own
discovery. In any event, these “complications” should have been evident long before
February 2012, when Mr. Doak filed his motion to extend the deadlines. Like the
district court, we are sympathetic to events such as the unexpected death of a family
member; however, Mr. Doak was already in the eleventh hour and has never
explained why a different lawyer did not prepare any discovery. In short, there was
no abuse of discretion.
-8-
B. The Motion to Reconsider and Rule 56(d) Motion
On March 22, 2012, Mr. Doak filed two motions; the first to reconsider the
denial of his motion to extend the deadlines and the second under Fed. R. Civ. P.
56(d) to delay consideration of summary judgment.
As to the motion to reconsider, Mr. Doak argued that the district court
misunderstood his original motion to mean that the defendants’ motion for judgment
on the pleadings was still pending, when what he really meant is that his discovery
efforts were delayed while the motion was pending from late October 2011 through
late January 2012, when the court denied it. He stated that it was always his
counsel’s intention to conduct discovery and explained for the first time that without
the information, he “may be unable to advance [his] claims.” Aplt. App. at 338. He
also repeated his previous arguments concerning the alleged burdensome discovery,
the press of other business, and the relative’s death. According to Mr. Doak, the
order “should be reconsidered to prevent the manifest injustice that would result.”
Id. at 334. Attached to the motion to reconsider were Mr. Doak’s proposed
interrogatories and request for production of documents.
The district court applied the standard in Fed. R. Civ. P. 59(e) in its analysis
and denied the motion. “Grounds warranting a motion to reconsider include (1) an
intervening change in the controlling law, (2) new evidence previously unavailable,
and (3) the need to correct clear error or prevent manifest injustice.” Servants of
Paraclete v. Does, 204 F.3d 1005, 1012 (10th Cir. 2000). A motion for
-9-
reconsideration “is not appropriate to revisit issues already addressed or advance
arguments that could have been raised in prior briefing.” Id.
The denial of a Rule 59(e) motion is reviewed for an abuse of discretion.
ClearOne Commc’ns, Inc. v. Biamp Sys., 653 F.3d 1163, 1178 (10th Cir. 2011). “A
district court abuses its discretion if it made a clear error of judgment or exceeded the
bounds of permissible choice in the circumstances.” Id. (internal quotation marks
omitted).
Again, there was no abuse of discretion. All of the arguments, with one
exception, could have been raised or were raised and considered by the district court.
As to the alleged misunderstanding, the court concluded that “[e]ven if [it] had
misconstrued the sentence referring to the pendency of the motion in its prior Order,
that misconstruction would do nothing to alter [its] prior Order because [Mr. Doak’s]
failure to conduct discovery remains constant, which was the basis for denying the
extension.” Aplt. App. at 451. Nor can we say that there was manifest injustice.
The simple fact is that Mr. Doak’s lawyers never propounded a single interrogatory,
request for admission, or document request from September 1, 2011 through the
discovery cutoff, which was March 1, 2012. Nor did they notice a single deposition.
In support of his Rule 56(d) motion, Mr. Doak incorporated the arguments set
forth in the motion to reconsider, and attached the affidavit of a lawyer who repeated
the reasons why discovery had not been conducted, and the affidavit of the assistant
receiver who stated what evidence was needed to respond on summary judgment.
- 10 -
For all intents and purposes, when the district court denied the motion to
reconsider, the Rule 56(d) motion became moot because there was not going to be
any discovery. Mr. Doak acknowledges as much when he concedes that “[d]enial of
the first motion naturally leads to the denial of the second.” Aplt. Opening Br. at 31.
He nonetheless presses forward and argues generically that the scheduling order
simply did not give him enough time to conduct discovery.
“The general principle of Rule 56([d])2 is that summary judgment should be
refused where the nonmoving party has not had the opportunity to discover
information that is essential to his opposition.” Price ex rel. Price v. W. Res., Inc.,
232 F.3d 779, 783 (10th Cir. 2000) (brackets and internal quotation marks omitted)
(footnote added). Rule 56(d) requires the party opposing summary judgment to file
an affidavit “specifi[ying] [the] reasons [why] it cannot present facts essential to
justify its opposition.” “This includes identifying (1) the probable facts not
available, (2) why those facts cannot be presented currently, (3) what steps have been
taken to obtain these facts, and (4) how additional time will enable the party to obtain
those facts and rebut the motion for summary judgment.” Valley Forge Ins. Co. v.
Health Care Mgmt. Partners Ltd., 616 F.3d 1086, 1096 (10th Cir. 2010) (brackets
and internal quotation marks omitted).
2
The language that appeared in subsection (f) was moved to subdivision (d)
“without substantial change.” Fed. R. Civ. P. 56 advisory committee’s notes
(2010 Amendments).
- 11 -
“We review a district court’s decision denying a Rule 56([d]) discovery
request for abuse of discretion.” Id. “[T]he abuse of discretion standard implies a
degree of discretion invested in judges to render a decision based upon what is fair in
the circumstances and guided by the rules and principles of law.” Id. (brackets and
internal quotation marks omitted).
Like the affidavit in Valley Forge, the affidavits in this case “fall[] short
against this yardstick,” id., because they do not describe why the facts could not have
been presented or what steps were taken to obtain the facts. As the district court
explained, Mr. Doak had procedures available to him to obtain the information but
never conducted any discovery. Thus, the court did not abuse its discretion.
III. SUMMARY JUDGMENT
A. Standard of Review
Mr. Doak appeals from the grant of summary judgment in favor of the ABOS
defendants on his claims for successor liability and fraudulent transfer. “In diversity
cases, the laws of the forum state govern our analysis of the underlying claims, while
federal law determines the propriety of the district court’s summary judgment.”
Morris v. Travelers Indem. Co. of Am., 518 F.3d 755, 758 (10th Cir. 2008). “In
making choice of law determinations, a federal court sitting in diversity must apply
the choice of law provisions of the forum state in which it is sitting.” Shearson
Lehman Bros., Inc. v. M & L Invs., 10 F.3d 1510, 1514 (10th Cir. 1993). “We review
the district court’s determinations of state law de novo.” Ayala v. United States,
- 12 -
49 F.3d 607, 611 (10th Cir. 1995). The district court applied Michigan law to the
claim for successor liability without objection from either side and the parties
continue to argue that Michigan law applies to this claim on appeal. We agree that
Michigan law applies. As to the claim for fraudulent transfer, the court did not
decide whether Michigan or Oklahoma law applied because the law is virtually the
same in both states and the claim failed regardless of which state law applied. Again,
we agree with this approach.
“We review a district court’s grant of summary judgment de novo, applying
the same standard as the district court.” Helm v. Kansas, 656 F.3d 1277, 1284
(10th Cir. 2011). Summary judgment is appropriate “if the movant shows that there
is no genuine dispute as to any material fact and the movant is entitled to judgment as
a matter of law.” Fed. R. Civ. P. 56(a). “In determining whether summary judgment
is proper, we view the evidence in the light most favorable to the non-moving party.”
Helm, 656 F.3d at 1284.
B. Successor Liability
Under Michigan law,
where the purchase is accomplished by an exchange of cash for assets,
the successor is not liable for its predecessor’s liabilities unless one of
five narrow exceptions applies. . . . (1) where there is an express or
implied assumption of liability; (2) where the transaction amounts to a
consolidation or merger; (3) where the transaction was fraudulent;
(4) where some of the elements of a purchase in good faith were
lacking . . . ; or (5) where the transferee corporation was a mere
continuation or reincarnation of the old corporation.
- 13 -
Foster v. Cone-Blanchard Mach. Co., 597 N.W.2d 506, 509-10 (Mich. 1999)
(internal quotation marks omitted).
1. First Exception – Assumption of Liability
We agree with the ABOS defendants that there are no facts in the record to
indicate an express or implied assumption of liability and Mr. Doak appears to
concede the issue. Therefore, the first exception does not apply.
2. Second Exception – De Facto Merger
As to the second exception, Mr. Doak argues that there was sufficient evidence
from which a jury might find a de facto merger. Michigan law recognizes a de facto
merger in instances where:
(1) There is a continuation of the enterprise of the seller
corporation, so that there is a continuity of management, personnel,
physical location, assets, and general business operations.
(2) There is a continuity of shareholders which results from the
[p]urchasing corporation paying for the acquired assets with shares of
its own stock, this stock ultimately coming to be held by the
shareholders of the seller corporation so that they become a constituent
part of the purchasing corporation.
(3) The seller corporation ceases its ordinary business
operations, liquidates, and dissolves as soon as legally and practically
possible.
(4) The purchasing corporation assumes those liabilities and
obligations of the seller ordinarily necessary for the uninterrupted
continuation of normal business operations of the seller corporation.
Turner v. Bituminous Cas. Co., 244 N.W.2d 873, 879 (Mich. 1976) (emphasis and
internal quotation marks omitted).
Mr. Doak argues there can be a de facto merger in the context of a cash
transaction. On the other hand, the ABOS defendants argue that the requirement
- 14 -
of shareholder continuity has been excused only in product liability cases. We need
not decide the issue because there is no evidence of two of the other three Turner
factors.
As to the first Turner requirement, it is correct that 33 of Traditions’
38 employees, including Mr. Montgomery, went to work for Acrisure Services.
Setting aside the fact that there were several employees who were not hired,
Mr. Doak presented no evidence to rebut the affidavit of Acrisure Services’
secretary/treasurer that the company had its own managers who had never been
affiliated with Traditions, as well as its own offices, equipment, and business
operations.
As to the third Turner requirement for a de facto merger, the district court
found that a letter from Traditions’ lawyer stating the company ceased operations on
December 31, 2008, weighed in Mr. Doak’s favor. But as the court found, “[t]he
remaining factor[], however, do[es] not.” Aplt. App. at 731. There was no evidence
that Acrisure Services assumed any of the liabilities or obligations of Traditions. To
the contrary, rather than assuming the obligations and liabilities of Traditions’
contracts, the undisputed evidence was that within two weeks of the closing, Acrisure
Services executed its own, new contracts with all of Traditions’ customer accounts
that were part of the sale.
According to Mr. Doak, the district court erred by adopting an all-or-nothing
approach to its determination of whether there was a de facto merger. His apparent
- 15 -
argument is that it is not necessary to meet all four Turner requirements to have a
de facto merger. Even if we accept Mr. Doak’s argument that a stock purchase is not
required, he has not cited any authority that only some, but not all, of the remaining
requirements need to be met. For example, taken to its logical conclusion this
argument would mean that a de facto merger occurred simply in the face of a seller
corporation ceasing its ordinary business operations shortly after the sale. Michigan
law requires more. See Turner, 244 N.W.2d at 879.
3. Third & Fourth Exceptions – Fraudulent Transaction or Lack of Good
The third and fourth exceptions are where the transaction is fraudulent or some
of the elements of a purchase in good faith are lacking. The district court found that
there was no evidence to substantiate Mr. Doak’s arguments that the ABOS
defendants should have known that Traditions’ liabilities significantly outweighed its
assets or that Traditions was prohibited from transferring its accounts unless its
payments were current.
Mr. Doak raises essentially the same arguments on appeal. First, he says that
it “is unlikely” that one or more of the ABOS defendants did not know about “the
contractual obligation [Traditions] had to the [Insurers] not to engage in the sale of
more than 50% of its assets without prior authorization.” Aplt. Opening Br. at 38. In
any event, he argues that the ABOS defendants “engaged in the Transaction with full
understanding of the abysmal financial condition of [Traditions] and its affiliates.”
Id. We agree with the district court’s reasoning that Mr. Doak “has no basis for
- 16 -
substantiating th[ese] claim[s]–he can only allege what he believes [the ABOS]
[d]efendants would have known. Nor does [Mr. Doak] explain how such a contract,
between a third-party and [Traditions] would implicate the [transaction] between
Traditions and [Acrisure Services], and exemplify . . . bad faith.” Aplt. App. at
734-35.
4. Fifth Exception – Continuation
The fifth and final exception announced in Foster – continuity of enterprise –
is largely the same as the second exception for a consolidation or merger, but has the
additional requirement that “the purchasing corporation holds itself out to the world
as the effective continuation of the seller corporation.” Foster, 597 N.W.2d at 510.
We have previously explained the lack of evidence sufficient to satisfy the second
Foster exception. We also agree with the district court that Mr. Doak did not come
forward with any evidence to meet the additional requirement. Although there was
evidence that Traditions’ employees began to disseminate information about a new
name and contact information, Traditions was the seller corporation, not the
purchasing corporation. The record is devoid of any evidence that any of the ABOS
defendants held themselves out as the effective continuation of Traditions; indeed,
the evidence was to the contrary.
- 17 -
C. Fraudulent Transfer
To establish a claim of constructive fraudulent transfer, Mr. Doak must show
that
[a] transfer made or obligation incurred by a debtor is fraudulent as to a
creditor whose claim arose before the transfer was made or the
obligation was incurred if the debtor made the transfer or incurred the
obligation without receiving a reasonably equivalent value in exchange
for the transfer or obligation and the debtor was insolvent at that time or
the debtor became insolvent as a result of the transfer or obligation.
Mich. Comp. Laws § 566.35(1); Okla. Stat. tit. 24, § 117.A. Thus, Mr. Doak was
required to come forward with evidence from which a reasonable trier of fact could
find that the $4.5 million received by Traditions was not “a reasonably equivalent
value” for slightly more than 50% of its accounts and that Traditions became
insolvent when the transaction closed or became insolvent as a result of the sale.
As the district court noted, “as the party challenging reasonably equivalent
value, [Mr. Doak] bears the burden of proof on this issue, but proffers nothing to
support his contention that [Acrisure Services] failed to pay reasonably equivalent
value.” Aplt. App. at 736. Instead, what Mr. Doak attempted to do was to launch a
Daubert challenge3 to the ABOS defendants’ expert opinion that the transfer was
made for at least, if not more, than reasonably equivalent value. As the court noted,
the Daubert challenge came well after the deadline and Mr. Doak “cannot do an end
3
Pursuant to Federal Rule of Evidence 702, a district court must assess
proffered expert testimony to ensure it is both relevant and reliable. Daubert v.
Merrell Dow Pharms., Inc., 509 U.S. 579, 589 (1993).
- 18 -
run on this deadline by masquerading a Daubert motion as a response to summary
judgment.” Id. More to the point, we agree with the court that the expert opinion is
irrelevant because Mr. Doak did not come forward with any evidence that Traditions
received less than reasonably equivalent value or that it was insolvent at the time of
the transfer, “the two elements [Mr. Doak] must establish to succeed on his
constructive fraudulent transfer claim.” Id.
On appeal, Mr. Doak devotes several pages of his brief to pressing the Daubert
issue. But as the district court explained, even if the expert’s opinion is ignored,
Mr. Doak failed in his burden to present any evidence that Traditions was insolvent
at the time of the transfer and that the price paid was not reasonably equivalent value.
The same flaw exists on appeal.
IV. BURFORD ABSTENTION
While the motion for summary judgment was pending, Mr. Doak filed a
motion to remand the case to state court under the Burford abstention doctrine, which
generally recognizes that it may be appropriate for a federal court to abstain in a case
where a decision from the federal court may frustrate the purpose of a complex state
administrative system. Burford v. Sun Oil Co., 319 U.S. 315, 332 (1943). The
district court granted the motion for summary judgment and then denied the motion
for remand.
On appeal, Mr. Doak suggests that the district court failed to consider his
substantive arguments for abstention and decided instead that the motion was moot in
- 19 -
light of the grant of summary judgment. This argument mischaracterizes the court’s
order. Despite finding the motion was moot, the court nonetheless proceeded to
analyze the merits and found that abstention was unwarranted. We find no error.
The leading case in this circuit concerning Burford abstention is Grimes v.
Crown Life Insurance Company, 857 F.2d 699, 704-05 (10th Cir. 1988), in which we
held the following factors relevant to determine whether abstention is proper:
(1) whether the suit is based on a cause of action which is
exclusively federal . . . (2) whether the suit requires the court to
determine issues which are directly relevant to the liquidation
proceeding or state policy in the regulation of the insurance
industry . . . (3) whether state procedures indicate a desire to
create special state forums to regulate and adjudicate these
issues . . . and (4) whether difficult or unusual state laws are at
issue.
(citations omitted).
Since our decision in Grimes, the Supreme Court has narrowed application of
the Burford abstention doctrine. See Quackenbush v. Allstate Ins. Co., 517 U.S. 706,
728 (1996) (“Burford represents an extraordinary and narrow exception to the duty of
the District Court to adjudicate a controversy properly before it.” (internal quotation
marks omitted)); see also New Orleans Pub. Serv., Inc. v. Council of New Orleans,
491 U.S. 350, 361 (1989) (NOPSI) (Burford abstention is proper only “when there
are difficult questions of state law bearing on policy problems of substantial public
import whose importance transcends the result in the case . . . or [] where the
exercise of federal review of the question in a case and in similar cases would be
- 20 -
disruptive of state efforts to establish a coherent policy with respect to a matter of
substantial public concern.” (internal quotation marks omitted)).
But we need not decide whether the more narrow tests of Quackenbush and
NOPSI apply, because even applying the broader test in Grimes, which Mr. Doak
argues this court should do, the district court correctly denied the motion to remand.
Like the district court, we acknowledge that the first Grimes factor weighs in favor of
Mr. Doak because the suit is not based on any federal causes of action. We are less
convinced that the district court correctly found that the third Grimes factor favors
Mr. Doak. It does not matter, however, because the second and fourth factors are not
present.
The second Grimes factor does not apply because the case has nothing to do
with the liquidation of the Insurers. Further, as the ABOS defendants point out, they
have “not asserted a counterclaim against [Mr. Doak] and, thus, ha[ve] not subjected
[themselves] to the statutory regime of the insolvent [Insurers’] creditors.” Aplee.
Br. at 19.
Mr. Doak argues that a motion in limine to exclude a spreadsheet raises a
challenge by the ABOS defendants “related to the rights and liabilities of the
receiver . . . that implicated even the [r]eceiver’s standing to bring the action.”
Aplt. Opening Br. at 15. This is incorrect. As explained by the ABOS defendants,
this “evidentiary challenge[] did not substantively challenge the administrative
scheme of insurance in Oklahoma – it reiterated ABOS’ objection that [Mr. Doak]
- 21 -
should not, in fairness, be allowed to utilize evidence that was the focal point of
ABOS’ discovery requests to which [Mr. Doak] failed to respond.” Aplee. Br. at 17.
Further, the motion to exclude was based on its alleged unreliability and
trustworthiness of the spreadsheet. Both contentions are borne out by the record.
Aplt. App. at 586; Aplee. Supp. App. at 45. Thus, there is no merit to Mr. Doak’s
argument that the case has anything to do with Oklahoma state policy in the
regulation of the insurance industry.
The fourth Grimes factor, which requires the presence of difficult or unusual
questions of state law, is entirely lacking. The issues were neither complex nor
difficult. As the district court explained, “[d]espite the involvement of insolvent
insurers, this case entails breach of contract, negligence, and breach of fiduciary
claims–none of which present ‘difficult questions of state law bearing on policy
problems of substantial public import whose importance transcends the result’ or
raise ‘a hotly disputed question of state law.’” Aplt. App. at 718 (quoting NOPSI,
491 U.S. at 361).
V. CONCLUSION
The judgment of the district court is affirmed.
Entered for the Court
Mary Beck Briscoe
Chief Judge
- 22 -