Martin Sheehan v. Allen Saoud

UNPUBLISHED

UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT

No. 15-1338

MARTIN P. SHEEHAN, Trustee of the Bankruptcy Estate of AGS,
Inc.,

Plaintiff - Appellant,

v.

ALLEN G. SAOUD,

Defendant - Appellee,

and

GEORGIA D. DANIEL; FRED D. SCOTT; WEST VIRGINIA DERMATOLOGY
ASSOCIATES, INC.; ROBERT R. FRASER; CENTRAL WEST VIRGINIA
DERMATOLOGY ASSOCIATES, INC.,

Defendants,

UNITED STATES OF AMERICA,

Intervenor/Defendant.

Appeal from the United States District Court for the Northern
District of West Virginia, at Clarksburg. Irene M. Keeley,
District Judge. (1:11-cv-00163-IMK-JSK)

Argued: March 24, 2016 Decided: May 24, 2016

Before WILKINSON and NIEMEYER, Circuit Judges, and David C.
NORTON, United States District Judge for the District of South
Carolina, sitting by designation.
Affirmed by unpublished opinion. Judge Norton wrote the
opinion, in which Judge Wilkinson and Judge Niemeyer joined.

ARGUED: Martin Patrick Sheehan, SHEEHAN & NUGENT, P.L.L.C.,
Wheeling, West Virginia, for Appellant. Paul J. Harris, HARRIS
LAW OFFICES, Wheeling, West Virginia, for Appellee. ON BRIEF:
Patrick S. Cassidy, CASSIDY, COGAN, SHAPELL & VOEGELIN, L.C.,
Wheeling, West Virginia, for Appellant.

Unpublished opinions are not binding precedent in this circuit.

2
NORTON, District Judge:

This case is on appeal from a post-trial judgment awarded

by the Honorable Irene M. Keeley, United States District Judge

for the Northern District of West Virginia. For the reasons set

forth below, we affirm the district court’s ruling.

I.

Appellant Martin P. Sheehan (“Sheehan”) is the trustee of

the bankruptcy estate of AGS, Inc. (“AGS”). Appellee Allen G.

Saoud (“Saoud”) was a licensed doctor of Osteopathic Medicine,

specializing in dermatology, who owned and operated AGS as a

medical corporation in West Virginia. On January 25, 2005, the

United States filed charges against Saoud, alleging that between

May 1998 and June 2004, Saoud submitted unsupported medical

billing claims to Medicare and Medicaid. Saoud entered into a

settlement agreement with the United States under which he was

required to pay $310,800.58 in penalties, but he was not

required to admit liability. The settlement agreement also

excluded Saoud from participating in Medicare, Medicaid, and all

other federal health programs, for ten years. Thereafter, on

March 31, 2006, Saoud sold AGS to Georgia G. Daniel (“Daniel”),

a nurse practitioner who previously worked in Saoud’s

dermatology practice, for $1,000,000.00. Under the terms of the

contract between Daniel and Saoud, Daniel would not be

3
personally liable for AGS’s liabilities. Daniel also would not

be personally liable to Saoud for the purchase price.

After Saoud sold AGS to Daniel, various transfers were made

from AGS to Saoud and Daniel. Relevant to this appeal, AGS paid

Saoud $50,000.00 in 2008. 1 Additionally, a certified copy of a

deed recorded in Harrison County, West Virginia shows that real

estate titled to AGS was sold to MedStar Real Estate Development

on March 23, 2005 for $460,000.00. The proceeds of the sale

were not paid to AGS but rather to AGS Development Company,

another entity controlled by Saoud. Further, Daniel received a

combined $418,675.00 from AGS in 2006, 2007, and 2008.

On May 9, 2009, AGS filed for Chapter 7 bankruptcy relief.

The Bankruptcy Court appointed Sheehan to serve as Trustee.

Saoud signed the original petition for bankruptcy relief, in

which he identified himself as the President and Owner of AGS.

However, during a meeting of creditors held on June 18, 2009,

Saoud subsequently indicated that he had sold his stock in AGS

to Daniel. Saoud confirmed that he was not an owner or officer

of AGS during a continued meeting of creditors held on August

18, 2009. On May 12, 2010, Saoud claimed that Daniel signed a

1 In the underlying action, Sheehan originally sought
$250,000.00 from Saoud, representative of the total value of all
transfers AGS made to Saoud after the sale to Danial. See J.A.
54–55. However, the only transfer subject to this appeal is the
2008 transfer of $50,000.00 from AGS to Saoud.
4
corporate resolution authorizing Saoud to file a bankruptcy

petition on behalf of AGS. On August 23, 2010, Daniel testified

that she did not authorize Saoud to seek bankruptcy relief on

behalf of AGS and denied that the signature on the corporate

resolution was in fact hers. Saoud filed a motion to dismiss

the bankruptcy petition, and Sheehan opposed the motion. On

November 11, 2010, the Bankruptcy Court for the Northern

District of West Virginia denied the motion to dismiss.

In December 2012, a federal grand jury returned a twenty-

three count indictment charging Saoud with health care fraud,

concealing a material fact in a health care matter, corruptly

endeavoring to obstruct and impede the due administration of the

internal revenue laws, making a false oath or account in

relation to a bankruptcy case, and making a false statement to a

federal agent. In May 2013, the grand jury returned a

superseding indictment containing no additional charges.

Subsequently, on June 4, 2013, the grand jury returned a third

superseding indictment, which added new charges of health care

fraud and aggravated identity theft. On June 25, 2013, Saoud

was convicted after a jury trial of thirteen counts of health

care fraud, one count of aggravated identity theft, one count of

concealing a material fact in a health care matter, one count of

corruptly endeavoring to obstruct and impede the due

5
administration of the internal revenue laws, five counts of

making a false oath or account in relation to a bankruptcy case,

and one count of making a false statement to a federal agent.

Saoud was sentenced to ninety-nine months’ imprisonment on March

25, 2014, and received a fine of $2,630,000.00. The Fourth

Circuit affirmed his convictions and sentence in December 2014.

United States v. Saoud, No. 14-4288, 2014 WL 7210734, at *1 (4th

Cir. Dec. 19, 2014).

Sheehan, in his capacity as trustee of AGS, filed a

complaint on October 13, 2011, in the United States District

Court for the Northern District of West Virginia. Sheehan

subsequently filed an amended complaint on October 6, 2014,

against Appellee Saoud, Daniel, Fred D. Scott (“Scott”), 2 Robert

R. Fraser (“Fraser”), 3 and Central West Virginia Dermatology

Associates, Inc. (“CWVDA”), asserting the following six causes

of action: Count I alleged that CWVDA failed to complete

payments to AGS and remains indebted to AGS for $634,159.00;

Count II alleged that the agreements between Saoud, Daniel, and

Scott were voidable as fraudulent transfers pursuant to 11

U.S.C. § 547, because the agreements constituted a scheme to

2
Scott practiced dermatology with Saoud at AGS, served as
director of CWVDA, and was involved in some of the transactions
at issue.
3 Fraser is an accountant who prepared tax returns for
Daniel and CWVDA.
6
defraud AGS’s creditors by transferring AGS’s assets for less

than reasonably equivalent value, causing AGS to become

insolvent; Count III alleged that the transfers were voidable by

a trustee in bankruptcy pursuant to the powers established under

11 U.S.C. § 544 and under the West Virginia Uniform Fraudulent

Transfer Act (“WVUFTA”), W. Va. Code §§ 41-1A-1 et seq.; Count

IV alleged that the actions outlined above constitute a civil

conspiracy to violate the WVUFTA and are actionable as a civil

conspiracy; Count V alleged that Fraser aided and abetted the

scheme to defraud AGS’s creditors under the WVUFTA; and Count VI

alleged that Saoud committed bankruptcy fraud and used the

United States mails to effectuate his scheme to defraud.

Sheehan sought to recoup the $50,000.00 that AGS paid to Saoud

in 2008, the $418,000.00 paid to Daniel after the sale, and the

$460,000.00 from the sale of certain real estate AGS owned.

Daniel and Fraser settled with Sheehan and were dismissed

as defendants on May 15, 2012. The district court therefore

dismissed Count V, against Fraser only, as moot. On October 20,

2014, Sheehan filed a motion for summary judgment against Saoud,

and Scott filed a motion for summary judgment against Sheehan’s

claims and Saoud’s cross claims. On January 28, 2015, the court

granted in part and denied in part Scott’s motion for summary

judgment and denied Sheehan’s motion for summary judgment. J.A.

7
111–161. The court granted Scott’s motion for summary judgment

as to Count IV, holding that a claim under the WVUFTA was based

in contract and not tort and therefore could not support a civil

conspiracy action. J.A. 133, 158–59. The court further found

that even if Sheehan had pleaded a tort, the factual allegations

contained in his amended complaint were “wholly inadequate” to

support a civil conspiracy claim. J.A. 133–34. Sheehan

thereafter abandoned Counts I, II, and VI and pursued only

Counts III and IV. J.A. 160, 187. Sheehan sought to recoup

the $50,000.00 that AGS paid to Saoud in 2008 and the

$460,000.00 from the sale of certain real estate AGS owned.

J.A. 314–315. However, in light of the court’s ruling on the

statute of limitations issues relating to the money transfers,

as fully set forth below, the only question submitted to the

jury involved the real estate transfer. J.A. 340.

A jury trial was held on March 2–3, 2015. The jury

returned a verdict on March 3, 2015. The jury found that

Sheehan did not “file suit within one year after he knew, or

reasonably could have discovered, the real estate transfer from

AGS to MedStar Real Estate and Development, LLC, for

$460,000.00 . . . .” J.A. 230. The jury unanimously found in

favor of Saoud. The district court affirmed the verdict, J.A.

8
233, and Sheehan filed a notice of appeal on April 1, 2015.

J.A. 236.

II.

We review the denial of summary judgment de novo, applying

the same standards as the district court. See Henson v. Liggett

Group, Inc., 61 F.3d 270, 274 (4th Cir.1995). In reviewing a

denial of summary judgment, we view all facts and reasonable

inferences drawn therefrom in the light most favorable to the

nonmoving party. PBM Prods., LLC v. Mead Johnson & Co., 639

F.3d 111, 119–20 (4th Cir. 2011). Summary judgment is

appropriate if there is no genuine issue of material fact and

the movant is entitled to judgment as matter of law. Fed. R.

Civ. P. 56(a); Glynn v. EDO Corp., 710 F.3d 209, 213 (4th Cir.

2013).

We review the denial of a motion for judgment as a matter

of law de novo, viewing the evidence in the light most favorable

to the nonmovant, and “draw[ing] all reasonable inferences in

her favor without weighing the evidence or assessing the

witnesses’ credibility.” Ocheltree v. Scollon Prod., Inc., 335

F.3d 325, 331 (4th Cir. 2003) (quoting Anderson v. G.D.C., Inc.,

281 F.3d 452, 457 (4th Cir. 2002)). Judgment as a matter of law

is proper only if “there can be but one reasonable conclusion as

9
to the verdict.” Id. (quoting Anderson v. Liberty Lobby, Inc.,

477 U.S. 242, 250 (1986)).

III.

Sheehan raises the following issues on appeal: “(1)

whether the district court erred when it concluded that the

doctrine of adverse domination did not toll the statute of

limitations/repose under the West Virginia Uniform Fraudulent

Transfer Act; (2) whether the district court erred in applying

the statute of limitations/repose to find that evidence of a

transfer in 2008 was outside the statute of limitations/repose

because it was a payment due under what purported to be a

contract signed in 2005; (3) whether the district court erred in

concluding that a cause of action for civil conspiracy under

West Virginia law could not be based on a violation of the West

Virginia Uniform Fraudulent Transfer Act even where plaintiff

attempted to prove a subjective violation of the statute with

‘actual intent to hinder, delay, or defraud.’” Appellant’s Br.

1.

A.

We turn first to Sheehan’s contention that the district

court erred when it concluded that the doctrine of adverse

domination did not toll the statute of limitations or repose

under the WVUFTA.

10
 As a threshold matter, Sheehan failed to properly preserve

this issue for appeal. During the Rule 50 hearing on March 2,

2015, Sheehan’s attorney had the following exchange with Judge

Keeley:

Court: [M]y finding is that that is the transfer or
that is the obligation and that those later payments
are not the transfer and it certainly was, not only
could, but was reasonably discovered by the Trustee,
as pled in paragraph 18 of document 51 of the
bankruptcy proceedings on 9/9/10, discovered at least
at that point in time and therefore I am going to
grant the motion under Rule 50 and dismiss that part
of the claim and it will not carry to the jury. So—
and I’m ruling on that as a matter of law. So I think
that what’s left and what goes to the jury is the real
estate transaction, which is four hundred and sixty
thousand dollars. It goes to the jury. Is there
anything left? . . . Now in light of that, is the
question of adverse domination still in the case?

Mr. Cassidy: We don’t need it. We don’t need it now.

The Court: Okay. So there’s no adverse domination.

J.A. 340–41. Based on the aforementioned passage from the

hearing and the court’s entire discussion regarding adverse

domination with Mr. Cassidy, Sheehan’s trial counsel, it is

clear that Sheehan abandoned his adverse domination arguments

prior to the trial, and the court never made a ruling in that

regard. See J.A. 315–40. Therefore, Sheehan failed to properly

preserve this issue for appeal. See In re Under Seal, 749 F.3d

276, 285–86 (4th Cir. 2014) (discussing the consequences of

failing to preserve a claim for appeal); see also Corti v.

11
Storage Tech. Corp., 304 F.3d 336, 343 (4th Cir. 2002)

(Niemeyer, J., concurring) (“[I]t remains the law of this

circuit that when a party to a civil action fails to raise a

point at trial, that party waives review of the issue unless

there are exceptional or extraordinary circumstances justifying

review.”).

However, even if Sheehan had properly preserved the issue

for appeal, the statute of repose would still have expired one

month prior to Sheehan filing suit, regardless of the

application of adverse domination. A creditor must bring suit

to enforce the provisions of the WVUFTA, W. Va. Code § 40–1A–

4(a)(1)–(2), within “four years after the transfer was made or

the obligation incurred, or, if later, within one year after the

transfer or obligation was or could reasonably have been

discovered by the claimant.” W. Va. Code § 40-1A-9 (emphasis

added). Because Sheehan filed suit on October 13, 2011, October

13, 2007 is the latest date on which the alleged fraudulent

transfers could have occurred such that he may obtain relief,

unless Sheehan establishes that he could not reasonably have

discovered the alleged fraudulent transfer or obligation more

than one year before filing suit. Sheehan argues that the

statute of limitations should be tolled by the doctrine of

12
adverse domination, giving him four years from the date on which

he was appointed to bring suit.

“Adverse domination is an equitable doctrine that tolls

statutes of limitations for claims by corporations against its

officers, directors, lawyers and accountants for so long as the

corporation is controlled by those acting against its

interests.” Clark v. Milam, 452 S.E.2d 714, 718 (W. Va. 1994)

(citing Int’l Rys. of Central Am. v. United Fruit Co., 373 F.2d

408, 412 (2d Cir. 1967)). The adverse domination doctrine tolls

the statute “so long as there is no one who knows of and is able

and willing to redress the misconduct of those who are

committing the torts against the corporate plaintiff.” Clark v.

Allen, 139 F.3d 888 (4th Cir. 1998) (quoting Milam, 452 S.E.2d

at 719). “[T]he defendants have the burden of showing that

there was someone who had the knowledge, ability and motivation

to bring suit during the period in which defendants controlled

the corporation.” Id. (quoting Hecht v. Resolution Trust Corp.,

635 A.2d 394, 408 (Md. 1994)) (internal quotation marks

omitted).

Sheehan cites several cases from the Tenth Circuit in

support of his appeal and relies on two unpublished Tenth

Circuit opinions as “particularly legally similar.” Appellant’s

Br. 15–16 (citing Wing v. Buchanan, 533 F. App’x 807 (10th Cir.

13
2013); Wing v. Dockstader, 482 F. App’x 361 (10th Cir. 2012)).

Both unpublished opinions involved a series of cases that

stemmed from the collapse of VesCor Capital and the receiver’s

subsequent attempts to recover VesCor’s alleged fraudulent

transfers to investors. Buchanan, 533 F. App’x at 809.

Analyzing statute of limitations issues in Buchanan, the court

recognized that under Utah’s Fraudulent Transfer Act, 4 a

plaintiff seeking to recoup transfers based on allegations of

actual fraud must file his complaint “within four years after

the transfer was made or the obligation was incurred or, if

later, within one year after the transfer or obligation was or

could reasonably have been discovered by the claimant.” Id. at

810. At issue was when the discovery period began to run. Id.

The court applied the doctrine of adverse domination to hold

that the discovery period would not begin to run until the bad

actors controlling the entity were removed. Id. The court held

that, based on the record, it could not determine how to apply

the discovery rule to the alleged fraudulent transfers. Id. at

811. The court remanded the case back to the district court “to

determine which of the alleged fraudulent transfers ‘could

4
The Utah Uniform Fraudulent Transfer Act and the WVUFTA
have the same statute of limitations and repose provisions.
14
reasonably have been discovered’ by the bankruptcy trustee—thus

triggering the one-year statute of limitations.” Id.

In Dockstader, applying the statute of repose discussed

above, the court held that the receiver could not reasonably

have discovered any fraudulent transfer prior to his

appointment. 482 F. App’x at 364. The court recognized the

adverse domination doctrine and found that “[b]ecause the

[r]eceiver was appointed on May 5, 2008 and filed this action

just over five months later,” the receiver’s claims were timely.

Id. The Tenth Circuit’s holdings in Buchanan and Dockstader do

not support Sheehan’s position because even after recognizing

the doctrine of adverse domination, the court applied the one-

year statute of repose under Utah’s Fraudulent Transfer Act—the

same one-year statute of repose under the WVUFTA.

Applying the same reasoning as the Tenth Circuit in

Buchanan and Dockstader, Sheehan’s claims are barred. On

September 9, 2010, Sheehan filed an opposition to Saoud’s motion

to withdraw the bankruptcy petition in which he stated:

The Trustee has identified several valuable causes of
action to recover assets for the bankruptcy estate of
AGS, Inc. These include actions to recover fraudulent
and preferential transfers to Allen G. Saoud and
Georgia Daniel.

J.A. 337. The district court held that the statute of

limitations could only be tolled until this date because Sheehan

15
clearly had knowledge of the fraudulent transfers by that time.

The district court then applied the one-year statute of repose

outlined above. It is clear that not only could Sheehan

reasonably have discovered the fraudulent transfers by September

9, 2010, but that he did in fact discover the alleged fraudulent

transfers as of that date. Unlike the bankruptcy trustees in

Buchanan and Dockstader, Sheehan had knowledge of the alleged

fraudulent transfers more than a year before he filed suit.

Thus, even if the doctrine of adverse domination were to apply,

the statute of repose expired one year after Sheehan’s September

9, 2010 filing in the Bankruptcy Court and one month before

Sheehan filed suit on October 13, 2011.

Accordingly, even if Sheehan had properly preserved the

adverse domination issue for appeal, he would not be entitled to

the relief requested.

B.

Sheehan next argues that the district court erred by

concluding that his action to recover the $50,000.00 payment

from AGS to Saoud in 2008 was barred by the four-year statute of

limitations because the payment was made in connection with the

2006 sale to Daniel. Appellant’s Br. 17. 5

5 Although Sheehan states in his brief that the transfer at
issue occurred in 2005, it is clear from the entirety of
Sheehan’s brief that he is referring to the March 31, 2006 sale
16
 To enforce the provisions of the WVUFTA, the creditor must

bring suit “within four years after the transfer was made or the

obligation was incurred or, if later, within one year after the

transfer or obligation was or could reasonably have been

discovered by the claimant.” W. Va. Code Ann. § 40-1A-9. West

Virginia Code section 40-1A-6(d) provides that:

A transfer is not made until the debtor has acquired
rights in the asset transferred and an obligation is
incurred. If the obligation is oral, a transfer is
made when the obligation becomes effective. If the
obligation is evidenced by a writing, the obligation
becomes effective when the writing is delivered to or
for the benefit of the obligee.

W. Va. Code Ann. § 40-1A-6(d) (emphasis added). The district

court found that the 2008 payment was made pursuant to AGS’s

obligation incurred on the 2006 sale instrument. Therefore, the

“transfer”—as defined under the WVUFTA—occurred in 2006,

beginning the running of the statute of limitations at that

time. The district court found that even if the discovery rule

as outlined in the statute of repose applies, the clock stopped

running on September 9, 2010. Once again, Sheehan’s knowledge

of the alleged fraudulent transfers by September 9, 2010, at the

latest, is evidenced by his filing with the bankruptcy court.

of AGS to Daniel, and therefore the 2008 payment of $50,000.00
to Saoud. See Appellant’s Br. 17–19. Further, during oral
argument, the parties clarified that the transfer in dispute is
indeed the $50,000.00 transfer from AGS to Saoud.
17
See J.A. 337. Therefore, because Sheehan did not file suit

until October 13, 2011, more than a month after the statute of

repose expired, the district court held that Sheehan’s WVUFTA

claims relating to the 2008 transfer were barred by the statute

of repose.

The district court based its ruling on LaRosa v. LaRosa,

482 F. App’x 750 (4th Cir. 2012), an unpublished Fourth Circuit

opinion. In LaRosa, two brothers loaned their cousin and his

wife (“the debtors”) $800,000.00. Id. at 751. The cousin was

the sole shareholder of a company called Cheyenne. Id. In

2001, Cheyenne entered into a loan agreement with a bank that

permitted Cheyenne to borrow up to $950,000.00 on a line of

credit. Id. at 753. The cousin pledged a series of securities

to secure the line of credit. Id. In 2003, the cousin’s son

drew down $700,000.00 on the line of credit with the bank, and

Cheyenne purchased over a million dollars in annuities with the

money. Id. The annuities were owned and controlled by Cheyenne

but the accounts were used to transfer money to the cousin’s son

according to a sham land renewal lease. Id. The district court

found the scheme fraudulent under the WVUFTA and awarded the

creditors $700,000.00. Id.

On appeal of the judgment, this Court addressed whether the

plaintiffs’ WVUFTA claim “based on a corporation’s drawdown on

18
its line of credit and purchase of annuities was time-barred.”

Id. at 751. This Court held that the “transfer” in question was

not the 2003 drawdown but rather the original establishment of

the line of credit in 2001. Id. at 755. Therefore, the Court

held that because the creditors did not file their claim within

four years of the establishment of the line of credit, their

claim was barred by the WVUFTA statute of repose. Id. at 753

(“Because the language and history of the statute of repose make

clear that it runs from the date of the security pledge, we

reverse the district court and hold that the Creditors’ WVUFTA

claim on the line of credit was time-barred.”). Judge Keeley

relied on this Court’s reasoning in LaRosa to hold that the 2008

transfer was an obligation incurred under the 2006 sales

contract. J.A. 152; 339–40. Therefore, because Sheehan did not

file suit until October 13, 2011, his claim was barred by the

four year statute of limitations. Id.

A dissenting opinion in LaRosa interpreted the term

“transfer” under the WVUFTA differently than the majority.

LaRosa, 482 F. App’x at 758–59. Analyzing the statute of

limitations provisions of the WVUFTA, the dissent stated the

following:

By employing the definite article, the last clause,
“within four years after the transfer was made,”
refers back to the opening clause—“[a] cause of action
with respect to a fraudulent transfer.” West
19
 Virginia’s statute, therefore, does not extinguish
fraudulent transfer suits by reference to related, but
nonfraudulent, transfers. Instead, like any sensible
statute of repose, the provision only bars causes of
action for fraudulent transfers that have accrued.

LaRosa, 482 F. App’x at 759 (quoting W. Va. Code Ann. § 40-1A-

9). Because there was no suggestion in the record that there

was any fraudulent intent or purpose in creating the line of

credit, the dissent found that the actionable fraudulent

transfer occurred in 2003 when the $700,000.00 drawdown took

place. Id. Therefore, the creditors properly brought their

claim within the four-year statute of limitations. Id.

Sheehan argues that LaRosa is easily distinguishable

because the sale of AGS to Daniel in 2006 was “of dubious

legality” because an “osteopath cannot transfer a medical

practice to a non-osteopath under West Virginia law.”

Appellant’s Br. 20. However, the district court never deemed

the sale illegal or voidable. Further, there is no indication

that the district court’s application of the holding in LaRosa

would be altered if the transfer was “illegal.” All fraudulent

transfers are “illegal”; thus, just because a transfer is made

pursuant to an illegal contract does not change the statute of

limitations analysis under the WVUFTA.

On March 31, 2006, Daniel and Saoud executed a document in

which Daniel agreed to purchase AGS from Saoud for

20
$1,000,000.00. J.A. 62. Under the purchase agreements, the

name, corporate standing, disposable medical supplies, and

goodwill were included; however, the cash in the account,

accounts receivable, equipment, and software were all excluded

from the sale. Id. Further, Daniel was not liable under the

agreement for “any liabilities that have been incurred by

[Saoud] while he has been President of [AGS] or any liabilities

that [AGS] currently has.” Id. A second document, also signed

by Saoud and Daniel on March 31, 2006, recognizes Daniel’s

purchase of AGS and states: “Daniel is also not responsible

personally for payback of the purchase price.” J.A. 63.

Under the plain language of section 40A-1A-6, the statute

of limitations began to run in 2006. As stated above, “[a]

transfer is not made until the debtor has acquired rights in the

asset transferred and an obligation is incurred.” W. Va. Code §

40-1A-6(d). If the obligation is evidenced by a writing, the

obligation becomes effective when the writing is delivered to or

for the benefit of the obligee. Id. Saoud and Daniel signed

documents transferring ownership in AGS to Daniel on March 31,

2006. Under the March 31, 2006 sale documents, Daniel acquired

rights in AGS and AGS incurred an obligation to pay Saoud the

purchase price. Sheehan does not dispute that the 2008 money

transfer was made pursuant to the March 31, 2006 sale documents.

21
Because the obligation was evidenced by a writing, AGS’s

obligation became effective that day. Therefore, the alleged

fraudulent “transfer”—as defined under the WVUFTA—took place on

March 31, 2006. The statute of limitations expired on March 31,

2010, and the statute of repose expired on September 9, 2011,

one month before Sheehan filed suit.

Notably, if applied to this case, the dissent’s reasoning

in LaRosa would also not alter the outcome, because Sheehan

alleged that Saoud’s 2006 sale of AGS to Daniel was fraudulent

in and of itself. See Appellant’s Br. 18. Therefore, unlike

the underlying facts in LaRosa, Sheehan alleges that both the

2008 money transfer and the 2006 sale were fraudulent. Thus,

the statute of limitations expired under the analysis of both

the majority and dissent in LaRosa. For these reasons, we

affirm the district court’s ruling that Sheehan’s WVUFTA claims

are barred by the statute of repose.

C.

Lastly, Sheehan argues that the district court erred in

holding that a cause of action for civil conspiracy could not be

based on a violation of the WVUFTA. Appellant’s Br. 21.

Sheehan argues that the statute makes actionable a transfer made

with “actual intent to hinder delay or defraud creditors” and is

therefore a tort. Id. (citing W. Va. Code § 40-1A-4(a)(1)).

22
 First and foremost, because the district court had a valid

independent basis to support its ruling beyond holding that a

WVUFTA violation cannot support a civil conspiracy claim, it is

not necessary for the Court to decide this issue. In addition

to finding that the WVUFTA did not provide a basis for a civil

conspiracy claim, the district court alternatively held that

Sheehan failed to adequately plead fraud. In its order on

Scott’s and Sheehan’s motions for summary judgment, the district

court stated the following when it addressed Sheehan’s civil

conspiracy claim under Count IV:

Following a careful weighing of the matter, the Court
agrees with Scott that a violation of the WVUFTA
sounds in contract; thus, Sheehan, by having relief on
the WVUFTA, has failed to plead a tort. Moreover,
even if he had pleaded a tort by alleging a violation
of the WVUFTA, Sheehan’s factual allegations are
wholly inadequate regarding how and when the
defendants engaged in civil conspiracy.

J.A. 133–34 (emphasis added). 6 Addressing the same claim against

Saoud, the court stated as follows:

[A] violation of the WVUFTA does not sound in tort as
is required to establish a civil conspiracy claim
under West Virginia law. Therefore, Sheehan has
failed to plead adequately the claim of civil

6 Scott is not a party to this appeal. Although this quote
comes from the portion of the court’s order addressing Scott’s
motion for summary judgment, the court subsequently recognized
its prior discussion of the civil conspiracy claim and applied
the reasoning to its disposition of Sheehan’s motion for summary
judgment on Count IV. J.A. 158–59.
23
 conspiracy alleged in Count IV of the amended
complaint.

J.A. 158–59. Further, during the final pretrial conference on

February 18, 2015, the court again addressed the civil

conspiracy claim in Count IV, stating the following:

Mr. Sheehan never pled a civil conspiracy and to the
extent that you’re arguing here today that he did, I
think you need to go take a look at the amended
complaint and if you think he pled a plain vanilla
fraud tort civil conspiracy, you ought to look at your
facts there because under Rule 9 I would have kicked
it out had anybody moved. . . . Had it been pled, it
is woefully inadequate. It’s never been fixed. It’s
not a claim that could ever go to trial.

J.A. 273–74. Notably, in his brief, Sheehan states in a

footnote: “The District Court also found a procedural default

to be applicable. That default is an independent basis for

decision [sic] and is not contested in this appeal.”

Appellant’s Br. 21 (emphasis added). Sheehan does argue, on the

other hand, that the district court’s ruling with respect to the

adequacy of the pleadings was an exercise in judicial activism

because Saoud never moved to dismiss the complaint. However,

the court is not required to ignore an obvious failure to allege

facts setting forth a plausible claim for relief. Weller v.

Dep’t of Soc. Servs., 901 F.2d 387, 391 (4th Cir. 1990). In

such a circumstance, the court is authorized to dismiss a claim

sua sponte under Federal Rule of Civil Procedure 12(b)(6), as

long as there is notice and an opportunity to be heard. See
24
United Auto Workers v. Gaston Festivals, Inc., 43 F.3d 902, 905–

06 (4th Cir. 1995) (affirming the district court’s sua sponte

dismissal of plaintiff’s claims); see also Saifullah v. Johnson,

1991 WL 240479 (4th Cir. Nov. 20, 1991) (unpublished) (“A court

may, on its own initiative, dismiss a civil complaint for

failing to state a claim.”). Therefore, the district court’s

alternative holding that Sheehan failed to adequately plead his

civil conspiracy claim, uncontested on appeal, was proper and

provides an independent basis for affirming the district court’s

ruling.

Notwithstanding the foregoing, the Court will address the

merits of Sheehan’s arguments. Sheehan argues that a violation

of the WVUFTA can support a civil conspiracy claim as sounding

in tort because the first prong deems fraudulent a transfer or

obligation incurred by a debtor “[w]ith actual intent to hinder,

delay or defraud any creditor of the debtor.” W. Va. Code Ann.

§ 40-1A-4(a)(1). West Virginia recognizes a cause of action

for civil conspiracy. Kessel v. Leavitt, 511 S.E.2d 720, 753

(W. Va. 1998) (“The law of this State recognizes a cause of

action sounding in civil conspiracy.”). “[A] civil conspiracy

is a combination of two or more persons by concerted action to

accomplish an unlawful purpose or to accomplish some purpose,

not in itself unlawful, by unlawful means.” Dixon v. Am. Indus.

25
Leasing Co., 253 S.E.2d 150, 152 (W. Va. 1979). “The cause of

action is not created by the conspiracy but by the wrongful acts

done by the defendants to the injury of the plaintiff.” Id.

Therefore, civil conspiracy is not a stand-alone cause of

action, but is rather “a legal doctrine under which liability

for a tort may be imposed on people who did not actually commit

a tort themselves but who shared a common plan for its

commission with the actual perpetrator(s).” Dunn v. Rockwell,

689 S.E.2d 255, 269 (W. Va. 2009) (citing Kessel, 511 S.E.2d at

754). As such, courts in West Virginia dismiss civil conspiracy

claims when they are not supported by an underlying tort. See,

e.g., Long v. M & M Transp., LLC, 44 F. Supp. 3d 636, 652

(N.D.W. Va. 2014) (“[B]ecause the Court granted summary judgment

as to the deliberate intent and outrage claims, there is no

underlying tort to support the civil conspiracy claim.

Accordingly, this claim fails as a matter of law.”).

The district court recognized that “case law in West

Virginia is bereft of guidance as to whether [a conspiracy claim

for violation of the WVUFTA] sounds in contract or tort.” J.A.

132. However, the district court looked for guidance elsewhere

and noted cases from other jurisdictions that have adopted the

Uniform Fraudulent Transfer Act and whose courts have held that

a violation of the act is not a tort. J.A. 132–33 (citing

26
F.D.I.C. v. S. Prawer & Co., 829 F. Supp. 453, 455 (D. Me. 1993)

(“The Court is satisfied that violation of . . . Maine’s Uniform

Fraudulent Transfers Act . . . is not a tort.”)). After

carefully weighing the matter, the district court determined

that a violation of the WVUFTA sounds in contract, and therefore

does not support a civil conspiracy claim. J.A. 133.

The WVUFTA provides two separate prongs under which a

transfer made by a debtor may be deemed fraudulent as to the

creditor. The first prong provides that a transfer is

fraudulent if the debtor made the transfer or incurred the

obligation “[w]ith actual intent to hinder, delay or defraud any

creditor of the debtor.” W. Va. Code Ann. § 40-1A-4(a)(1). A

transfer may also be deemed fraudulent under the second prong 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: (i) Was engaged or was about to engage in a
business or a transaction for which the remaining
assets of the debtor were unreasonably small in
relation to the business or transaction; or (ii)
Intended to incur, or believed or reasonably should
have believed that he (or she) would incur, debts
beyond his (or her) ability to pay as they became due.

W. Va. Code Ann. § 40-1A-4(a)(2). Therefore, a plaintiff is

only required to demonstrate actual intent to establish a

fraudulent transfer under the first prong.

27
 Although the Fourth Circuit has not addressed the issue,

courts from varying jurisdictions have refused to recognize

violations of the Uniform Fraudulent Transfer Act as torts.

See, e.g., United States v. Neidorf, 522 F.2d 916, 917–18 (9th

Cir. 1975); Desmond v. Moffie, 375 F.2d 742, 743 (1st Cir. 1967)

(finding fraudulent conveyance claim under Massachusetts Uniform

Fraudulent Conveyance Act to be a contract rather than tort

action for purposes of applying appropriate statute of

limitations); S. Prawer, 829 F. Supp. at 456 (finding fraudulent

conveyance claim not to be a tort claim for purposes of the

Federal Tort Claims Act); Branch v. Fed. Deposit Ins. Corp., 825

F.Supp. 384 (D. Mass. 1993) (finding fraudulent conveyance claim

not to be a tort claim for purposes of the Federal Tort Claims

Act); Fed. Deposit Ins. Corp. v. Martinez Almodovar, 671 F.Supp.

851, 871 (D.P.R. 1987) (finding fraudulent conveyance claim not

to be a tort for purposes of choosing appropriate statute of

limitations); In re Fedders N. Am., Inc., 405 B.R. 527, 549

(Bankr. D. Del. 2009) (“Likewise, the authorities are also clear

that there is no such thing as liability for . . . conspiracy to

commit a fraudulent transfer as a matter of federal law under

the Code.”); Freeman v. First Union Nat’l Bank, 865 So.2d 1272,

1277 (Fla. 2004) (“We simply can see no language in FUFTA that

suggests an intent to create an independent tort for damages.”).

28
 However, a handful of courts from other jurisdictions have

recognized violations of the Uniform Fraudulent Transfer Act as

torts. See, e.g., Alliant Tax Credit Fund 31-A, Ltd. v. Murphy,

2011 WL 3156339, at *8 (N.D. Ga. July 26, 2011) (“Although

Plaintiffs’ claim for civil conspiracy does not furnish an

independent cause of action on which to hold Defendants liable,

it can be used to establish some of Defendants’ liability for

fraudulent transfers under the UFTA.”); Valvanis v. Milgroom,

529 F. Supp. 2d 1190, 1203 (D. Haw. 2007) (“[T]he underlying

actionable tort for the conspiracy claim is the fraudulent

transfer of the Hawaii Property [under the HUFTA].”); Gutierrez

v. Givens, 1 F. Supp. 2d 1077, 1087 (S.D. Cal. 1998) (“The Court

finds that a triable issue of fact exists as to whether Colonial

may be found liable for a civil conspiracy to violate the

UFTA.”); In re Advanced Telecomm. Network, Inc., 2013 WL 414654,

at *3 (Bankr. M.D. Fla. Feb. 4, 2013) (“The Amended Complaint

properly pleads civil conspiracy against the Defendants to the

extent it alleges they knowingly agreed and aided the Allens in

violating the UFTA’s constructive fraudulent transfer

provisions.”); In re Penn Packing Co., 42 B.R. 502, 505 (Bankr.

E.D. Pa. 1984) (Pennsylvania’s fraudulent conveyance act claim a

tort for purposes of choosing Pennsylvania statute of

limitations); Banco Popular N. Am. v. Gandi, 876 A.2d 253, 263

29
(N.J. 2005) (recognizing a claim for civil conspiracy for aiding

and abetting a fraudulent transfer under the UFTA); Double Oak

Const., LLC v. Cornerstone Dev. Int’l, LLC, 97 P.3d 140, 146

(Colo. App. 2003) (“[W]e conclude that a transfer in violation

of CUFTA is a legal wrong which will support a conspiracy

claim.”); McElhanon v. Hing, 728 P.2d 256, 263 (Ariz. Ct. App.

1985) aff’d in part, vacated in part, 728 P.2d 273 (Ariz. 1986)

(“[U]pon passage of the Uniform Fraudulent Conveyances Act, a

conveyance to defraud a general creditor became a legal wrong,

properly the subject of a suit for civil conspiracy.”).

Further, while very few have addressed the issue, some

circuit courts have recognized a cause of action for civil

conspiracy based on a violation of the Uniform Fraudulent

Transfer Act. See, e.g., CNH Capital Am. LLC v. Hunt Tractor,

Inc., 568 F. App’x 461, 473 (6th Cir. 2014), as amended (July 2,

2014) (recognizing that Kentucky law allows recovery from a

transferee or transferor for civil conspiracy to commit a

fraudulent conveyance, but denying relief because defendant was

neither the transferee nor the transferor); Chepstow Ltd. v.

Hunt, 381 F.3d 1077, 1090 (11th Cir. 2004) (recognizing a cause

of action for civil conspiracy based on the UFTA under Georgia

law against non-transferee defendants); Forum Ins. Co. v.

Comparet, 62 F. App’x 151, 153 (9th Cir. 2003) (“California

30
allows for a cause of action for conspiracy to commit fraudulent

transfers, and allows a plaintiff to recover legal damages on

such a cause of action.”). However, in these cases, the circuit

courts applied the law as already decided by state courts

recognizing such civil conspiracy claims.

As outlined above, there are two prongs of the WVUFTA, only

one of which requires proof of fraudulent intent. Conceivably,

a plaintiff could adequately plead a violation of the WVUFTA

under the first prong with actual intent to hinder, delay, or

defraud, sufficient to support a civil conspiracy claim.

However, a violation of the second prong would not be sufficient

to support a civil conspiracy claim. Therefore, the Court

cannot hold, as a matter of law, that a violation of the WVUFTA

can support a claim for civil conspiracy in all circumstances.

Further, the Court is reticent to expand the bounds of West

Virginia policy by recognizing a civil conspiracy claim for

violation of the WVUFTA for the first time. “Absent a strong

countervailing federal interest, the federal court . . . should

not elbow its way into this controversy to render what may be an

uncertain and ephemeral interpretation of state law.” Time

Warner Entm’t–Advance/Newhouse P'ship v. Carteret-Craven Elec.

Membership Corp., 506 F.3d 304, 314 (4th Cir. 2007) (quoting

Mitcheson v. Harris, 955 F.2d 235, 238 (4th Cir. 1992)).

31
Therefore, the Court declines to make such a policy

determination to recognize that a violation of the WVUFTA sounds

in tort.

Regardless, even if the court were to recognize that a

violation of the WVUFTA sounds in tort, Sheehan’s civil

conspiracy claim would be barred by the statute of repose as

fully set forth above. In West Virginia, “the statute of

limitation for a civil conspiracy claim is determined by the

nature of the underlying conduct on which the claim of

conspiracy is based.” Dunn v. Rockwell, 689 S.E.2d 255, 269 (W.

Va. 2009). Therefore, because the statute of limitations for

Sheehan’s WVUFTA claim expired, it necessarily must follow that

the statute of limitations for Sheehan’s civil conspiracy claim

has also expired. Thus, the Court affirms the district court’s

dismissal of Sheehan’s claims for violation of the WVUFTA.

IV.

For the reasons set forth above, we conclude that Sheehan’s

WVUFTA and civil conspiracy claims are barred by the applicable

statute of limitations. We therefore affirm the district

court’s dismissal of Sheehan’s claims.

AFFIRMED

32