All Texas Electrical Contractors, Inc. v. NSPS Metals LLC

January 18, 2022

IN THE UNITED STATES BANKRUPTCY COURT Nathan Ochsner, Clerk

FOR THE SOUTHERN DISTRICT OF TEXAS

HOUSTON DIVISION

IN RE: §

§ CASE NO: 20-34656

ALL TEXAS ELECTRICAL CONTRAC- §

TORS, INC., § CHAPTER 11

§

Debtor. §

§

ALL TEXAS ELECTRICAL CONTRAC- §

TORS, INC., §

§

Plaintiff, §

§

VS. § ADVERSARY NO. 21-3287

§

NSPS METALS LLC §

and §

AMERICAN COMMERCIAL CONTRAC- §

TORS, LLC §

and §

JAMES ROZMAN §

and §

DENHAM-BLYTHE COMPANY, INC. §

and §

SUSAN ROZMAN, §

§

Defendants. §

MEMORANDUM OPINION

NSPS Metals, LLC seeks dismissal of All Texas Electrical Contractors, Inc.’s amended

complaint for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6). On

January 4, 2022, the Court held a hearing and took the matter under advisement. For the reasons

stated herein, the Court grants NSPS Metals, LLC’s Motion to Dismiss. All Texas Electrical Con-

tractors, Inc.’s claims for: (B) 11 U.S.C. § 542 turnover; (D) 11 U.S.C. §§ 548(a)(1)(B) and 550

constructive fraudulent transfer; (E) TUFTA constructive fraudulent transfer; (F) quantum meruit;

(G) unjust enrichment; and (O) civil conspiracy as against NSPS Metals, LLC, are dismissed.

Additionally, All Texas Electrical Contractors, Inc.’s claims for: (A) negligent hiring and supervi-

sion and (L) breach of fiduciary duty, are dismissed with prejudice.

I. BACKGROUND

The instant dispute arises out of the construction of a multimillion-dollar steel processing

facility in Houston, Texas organized by NSPS Metals, LLC (“NSPS” or “Defendant”).1 Denham-

Blythe Company (“Denham-Blythe”) was hired by NSPS to serve as project manager on this con-

struction.2 While searching for a location to construct the facility, NSPS entered into negotiations

for 14.297 acres of real property in Harris County, Texas.3 As a condition of the real property sale,

NSPS was required to hire American Commercial Contractors, LLC (“ACC”) as its general con-

tractor.4 Prior to engaging ACC, Denham-Blythe advised NSPS against hiring ACC due to its

previous history of, inter alia, not paying its subcontractors.5 Nonetheless, on or about February

15, 2019, the parties reached an agreement and a general warranty deed was conveyed to NSPS.6

All Texas Electrical Contractors, Inc., (“Plaintiff or ATE”), is an electrical construction

contractor organized as a Texas corporation.7 On or about June 3, 2019, Plaintiff entered into a

lump sum subcontractor agreement (“Subcontract”) with ACC in the amount of $915,405.00 to

provide labor and materials, including but not limited to exterior lighting, interior lighting, pole

lights, general electrical, electrical service, fire alarm and design services (“Project”).8 Plaintiff

pled that it timely performed its obligations pursuant to the Subcontract and timely submitted its

1 ECF No. 56 at 4, ¶ 3.

2 Id.

3 Id. at 5, ¶ 5.

4 Id. at 5, ¶ 6.

5 Id. at 5, ¶ 7.

6 Id. at 5, ¶ 5.

7 Id. at 3, ¶ 3, at 6, ¶ 10.

8 Id. at 6, ¶ 11.

pay applications to ACC.9 Plaintiff further pled that ACC “slow-paid” Plaintiff’s invoices before

ceasing payment altogether.10 As of the date of the filing of the bankruptcy petition, Plaintiff

maintains that it was still owed $586,496.15 from ACC. 11

On September 25, 2020, Plaintiff filed a voluntary petition under chapter 11 subchapter V

of the Bankruptcy Code.12 On April 29, 2021, Plaintiff initiated an adversary proceeding by filing

a complaint (“Initial Complaint”) against NSPS, Denham-Blythe, ACC, and James Rozman.13

Defendant NSPS filed a motion to dismiss (“First Motion to Dismiss”) the Initial Complaint on

June 7, 2021.14 Plaintiff then filed an amended complaint (“Amended Complaint”) on June 22,

2021 against the same parties.15 Defendant filed the pending motion to dismiss (“Motion to Dis-

miss”) on September 24, 202116 and Plaintiff filed its response to the motion to dismiss (“Re-

sponse”) on November 19, 2021.17 On December 10, 2021, Defendant filed a reply in support of

the motion to dismiss (“Reply”).18 On January 4, 2022, the Court held a hearing on the Motion To

dismiss.19

II. JURISDICTION AND VENUE

This Court holds jurisdiction pursuant to 28 U.S.C. § 1334, which provides “the district

courts shall have original and exclusive jurisdiction of all cases under title 11 or arising in or related

to cases under title 11.” An adversary proceeding falls within the Court’s “related to” jurisdiction

if the “outcome of that proceeding could conceivably have any effect on the estate being

9 Id. at 6, ¶ 13.

10 Id. at 7, ¶ 15, 17.

11 Id. at 7, ¶ 17.

12 Bankr. ECF No. 1.

13 ECF No. 1.

14 ECF No. 32.

15 ECF No. 56.

16 ECF No. 125.

17 ECF No. 181.

18 ECF No. 195.

19 ECF No. 199.

administered in bankruptcy.”20 Section 157 allows a district court to “refer” all bankruptcy and

related cases to the bankruptcy court, wherein the latter court will appropriately preside over the

matter.21 This Court determines that pursuant to 28 U.S.C. § 157(b)(2)(A) and (H) this adversary

proceeding involves primarily core matters as it “concern[s] the administration of the estate and

proceedings to avoid and recover preferences and fraudulent conveyances.”22

Furthermore, this Court may only hear a case in which venue is proper.23 Pursuant to 28

U.S.C. § 1409(a), “a proceeding arising under title 11 or arising in or related to a case under title

11 may be commenced in the district court in which such case is pending.” Debtor ATE’s main

chapter 11 case is presently pending in this Court and therefore, venue of this adversary proceeding

is proper.

III. ANALYSIS

A. Standard of Review for Motions to Dismiss Under Federal Rules of Civil Procedure

12(b)(6)

To survive a motion to dismiss under Rule 12(b)(6), a plaintiff’s complaint must clear two

hurdles. First, the complaint must describe the claim in enough detail to give fair notice of the

claim and the grounds for it.24 “[A] formulaic recitation of the elements of a cause of action will

not do.”25 Specifics are unnecessary, but some facts must support each element.26 Second, the

complaint must state a claim “plausible on its face,”27 meaning the plaintiff’s right to relief must

20 In re Trevino, 535 B.R. 110, 125 (Bankr. S.D. Tex. 2015) (quoting Wood v. Wood (In re Wood), 825 F.2d 90, 93

(5th Cir. 1987)).

21 28 U.S.C. § 157(a); see also In re Order of Reference to Bankruptcy Judges, Gen. Order 2012-6 (S.D. Tex. May 24,

2012).

22 11 U.S.C. § 157(b)(2); see also In re Southmark Corp., 163 F.3d 925, 930 (5th Cir. 1999) (“[A] proceeding is core

under section 157 if it invokes a substantive right provided by title 11 or if it is a proceeding that, by its nature, could

arise only in the context of a bankruptcy case.”).

23 28 U.S.C. § 1408.

24 See FED. R. CIV. P. 8(a) (made applicable by FED. R. BANKR. P. 7008).

25 Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007).

26 Ashcroft v. Iqbal, 556 U.S. 662 (2009).

27 Twombly, 550 U.S. at 570.

rise above a “speculative level.”28 Rule 8(a)(2) requires a plaintiff to plead “a short and plain

statement of the claim showing that the pleader is entitled to relief.”29 In Ashcroft v. Iqbal, the

Supreme Court held that Rule 8(a)(2) requires that “the well-pleaded facts . . . permit the court to

infer more than the mere possibility of misconduct.”30 “A claim has facial plausibility when the

plaintiff pleads factual content that allows the court to draw the reasonable inference that the de-

fendant is liable for the misconduct alleged.”31 “The plausibility standard is not akin to a ‘proba-

bility requirement,’ but it asks for more than a sheer possibility that a defendant has acted unlaw-

fully.”32

Motions to dismiss are disfavored and thus, rarely granted.33 This Court reviews motions

under Rule 12(b)(6) by “accepting all well-pleaded facts as true and viewing those facts in the light

most favorable to the Plaintiff.”34 When considering a motion to dismiss under Rule 12(b)(6), the

Court must assess the legal feasibility of the complaint, not weigh the evidence that might be of-

fered in its support.35 The Court’s consideration “is limited to facts stated on the face of the com-

plaint and in the documents appended to the complaint or incorporated in the complaint by refer-

ence, as well as to matters of which judicial notice may be taken.”36 And although this Court “will

not strain to find inferences favorable to the plaintiff[],”37 the facts need only be sufficient “for an

28 Id. at 555.

29 FED. R. CIV. P. 8(a).

30 556 U.S. at 679 (quoting Rule 8(a)(2)).

31 Id. at 678.

32 Id. (quoting Twombly, 550 U.S. at 556); see also Lormand v. US Unwired, Inc., 565 F.3d 228, 232 (5th Cir. 2009)

(“A complaint does not need detailed factual allegations, but must provide the plaintiff’s grounds for entitlement to

relief – including factual allegations that when assumed to be true raise a right to relief above the speculative level.”)

(citations omitted).

33 Test Masters Educ. Servs., Inc. v. Singh, 428 F.3d 559, 570 (5th Cir. 2005).

34 Stokes v. Gann, 498 F. 3d 483, 484 (5th Cir. 2007) (per curiam).

35 Koppel v. 4987 Corp., 167 F.3d 125, 133 (2d Cir. 1999).

36 Hertz Corp. v. City of New York, 1 F.3d 121, 125 (2d Cir. 1993).

37 Southland Sec. Corp. v. INSpire Ins. Solutions Inc., 365 F.3d 353, 361 (5th Cir. 2004) (internal quotations omitted).

inference to be drawn that the elements of the claim exist.”38 To defeat a motion to dismiss pur-

suant to Rule 12(b)(6), a plaintiff must meet Rule 8(a)(2)’s pleading requirements.

B. Defendant’s Motion to Dismiss

In its Complaint, Plaintiff brings fifteen causes of action against ACC, NSPS, Denham-

Blythe Company, and James Rozman. Against Defendant NSPS specifically, Plaintiff asserts the

following ten claims: (1) Claim A — negligent hiring and supervision; (2) Claim B — Bankruptcy

Code Turnover § 542; (3) Claim D — Bankruptcy Code §§ 548(a)(1)(B) and 550 - Constructive

Fraudulent Transfer; (4) Claim E — TUFTA Constructive Fraudulent Transfer; (5) Claim F —

Quantum Meruit; (6) Claim G — Unjust Enrichment; (7) Claim H — Foreclosure of Liens; (8)

Claim I — Funds Trapping - Texas Property Code § 53.083; (9) Claim L — Breach of Fiduciary

Duty; and (10) Claim O — Civil Conspiracy. Defendant seeks dismissal of eight of the ten claims:

(A); (B); (D); (E); (F); (G); (L); and (O). Plaintiff’s claims (H) and (I) are not raised in Defendant’s

Motion to Dismiss, and thus will proceed to discovery. The Court will discuss the remaining eight

claims in turn.

1. Claim A - negligent hiring and supervision

Plaintiff asserts Claim A against NSPS for “Negligent Hiring and Supervision.”39 To estab-

lish a claim for negligent hiring, Plaintiff must prove the following elements: (1) a duty to hire com-

petent employees; (2) an employer’s breach of the duty; and (3) the employer’s breach of the duty

proximately caused the damages sued for.40 For this claim, the basis of responsibility is the em-

ployer’s negligence in hiring an incompetent employee who the employer knew or, in the exercise

38 See Harris v. Fidelity Nat’l Info. Serv (In re Harris), Nos. 03-44826, 08-3014, 2008 Bankr. LEXIS 1072, at *11

(Bankr. S.D. Tex. Apr. 4, 2008) (citing to Walker v. South Cent. Bell Tel. Co., 904 F2d 275, 277 (5th Cir. 1990)).

39 ECF No. 56 at 8.

40 Chevron Thail. Expl. & Prod., Ltd. v. Taylor, No. 14-18-00540-CV, 2019 Tex. App. LEXIS 10426, at *9 (Tex.

App.—Houston [14th Dist.] Dec. 3, 2019).

of ordinary care, should have known was incompetent or unfit, and thereby created an unreasonable

risk of harm to others.41 Similarly, to prevail on a claim for negligent supervision, Plaintiff must

prove (1) Defendant owed Plaintiff a legal duty to supervise its employees; (2) Defendant breached

the duty; and (3) the breach proximately caused the Plaintiff's injuries.42

Here, Plaintiff contends that Defendant had “an implied duty not to harm ATE” that was

“independent of any contractual obligations.”43 Additionally, Plaintiff asserts that Defendant had

a duty to “protect the public, including subcontractors such as ATE . . . .”44 Plaintiff argues that

Defendant breached that duty by: (1) failing to “heed the warning of Denham against engaging

ACC;” (2) failing to “adequately inquire into the competence and qualifications of ACC before

engaging it as general contractor;” (3) “engag[ing] ACC as its general contractor when [NSPS]

knew or should have known that ACC lacked the professional and financial competency to

properly [sic] perform;” (4) “failing to require that ACC post payment or performance bonds, or

other security, to protect unpaid subcontractors” after engaging ACC; (5) failing to “exercise rea-

sonable care to supervise ACC in its role as general contractor on the NSPS Project to assure itself

that ACC was paying its subcontractors and not mishandling construction trust funds;” (6) failing

to “replace ACC as general contractor once [it] knew or should have known that ACC was mis-

handling construction payments from NSPS and/or defaulting on payments to subcontractors;” (7)

“pay[ing] ACC even when NSPS knew ACC was not paying its subcontractors.”45

41 Law Firm of Donald Wochna, LLC v. Am. Frontier Mgmt., LLC, No. 03-17-00489-CV, 2018 Tex. App. LEXIS

2371, at *16 (Tex. App.—Austin Apr. 4, 2018); Ogg v. Dillard's Inc., 239 S.W.3d 409, 420 (Tex. App.—Dallas

2007, pet. denied).

42 Brown v. ECCL 4:12, LLC, No. 01-19-00504-CV, 2021 Tex. App. LEXIS 6026, at *20 (Tex. App.—Houston [1st

Dist.] July 29, 2021).

43 ECF No. 56 at 9, ¶ 31.

44 Id. at 9, ¶ 32.

45 Id. at 10–11, ¶ 33.

In its Motion to Dismiss, Defendant asserts two arguments: (1) that the economic loss rule

bars Plaintiff’s negligent hiring and supervision claim; and (2) that “the Amended Complaint fails

to establish a plausible claim that a breach of a duty owed to [Plaintiff] caused [Plaintiff’s] eco-

nomic losses.”46 For the first argument, the economic-loss rule “generally precludes recovery in tort

for economic losses resulting from the failure of a party to perform under a contract.”47 “In opera-

tion, the rule restricts contracting parties to contractual remedies for those economic losses associ-

ated with the relationship, even when the breach might reasonably be viewed as a consequence of a

contracting party’s negligence.”48 “In determining whether a tort claim is merely a repackaged

breach of contract claim, a court must consider: 1) whether the claim is for breach of duty created

by contract, as opposed to a duty imposed by law; and 2) whether the injury is only the economic

loss to the subject of the contract itself.”49 Finally, the economic loss rule may still preclude recovery

in cases where the parties have not directly contracted with each other.50

In a Motion to Dismiss previously filed by Defendant Denham-Blythe, this Court ruled that

the economic loss rule precluded recovery by Plaintiff for negligent hiring and supervision as it per-

tained to Denham-Blythe.51 The facts, as they pertain to Defendant NSPS are very similar. Like

Denham-Blythe, Defendant did not contract with Plaintiff directly. Instead, Defendant hired ACC

as general contractor.52 ACC then engaged Plaintiff in a $915,405.00 subcontract for the provision

46 ECF No. 126 at 5-6.

47 Lamar Homes, Inc. v. Mid–Continent Cas. Co., 242 S.W.3d 1, 12 (Tex. 2007).

48 Id. at 12–13 (citing Jim Walter Homes, Inc. v. Reed, 711 S.W.2d 617, 618 (Tex. 1986)).

49 Stanley Indus. of S. Fla. v. J.C. Penney Corp., Inc., No. 3:05-cv-2499-L, 2006 U.S. Dist. LEXIS 63109, 2006 WL

2432309, at *5 (N.D. Tex. Aug. 18, 2006) (citing Formosa Plastics Corp. USA v. Presidio Eng'rs and Contractors,

Inc., 960 S.W.2d 41, 45-47 (Tex. 1998)).

50 See LAN/STV v. Martin K. Eby Constr. Co., 435 S.W.3d 234, 248 (Tex. 2014) (holding that the economic loss rule

can still be applicable in the absence of direct contract between parties); see also Trebuchet Siege Corp. v. Pavecon

Commer. Concrete, Ltd., No. 05-12-00945-CV, 2014 Tex. App. LEXIS 9149, at *17 (Tex. App.—Dallas Aug. 19,

2014) (“The economic loss rule not only applies to bar claims against those in a direct contractual relationship but

also applies to preclude tort claims between parties who are not in privity.”).

51 ECF No. 132 at 6–9.

52 ECF No. 56 at 5, ¶ 6.

of electrical services.53 The Texas Supreme Court has clarified that the lack of a contractual ar-

rangement between Plaintiff and Defendant will not bar application of the economic loss rule.54

In fact, in LAN/STV v. Martin K. Eby Construction Company, the court specifically referenced

construction disputes as an ideal situation to apply the economic loss rule between non-contracting

parties due to the ability to allocate risk in related agreements.55 Therefore, the third-party rela-

tionship between Plaintiff and Defendant alone is not sufficient to bar application of the economic

loss rule.

Next, the duties of negligent hiring and supervision are not independent of Defendant’s

contractual obligation. In the Amended Complaint, Plaintiff flatly asserts that “[Defendant] . . .

assumed an implied duty not to harm [Plaintiff] . . . .” and that “[s]uch assumed duty is independent

of any contractual obligations they have to one another, or with ACC.”56 However, Plaintiff fails

to expand on this proposition in the Amended Complaint or cite any case law to support it. Plain-

tiff’s argument seemingly relies on the premise that the claim is independent of contractual obli-

gations simply because negligent hiring and supervision is an assumed duty of law. However,

courts have repeatedly noted that claims for a breach of duty imposed by law, including negligent

hiring claims, may still be subject to the economic loss rule if the injury is only the economic loss

to the subject of the contract itself.57 Therefore, the key inquiry is whether the economic loss was

subject to the contract.

53 Id. at 6, ¶ 11.

54 LAN/STV, 435 S.W.3d at 248.

55 See id. (“[C]onstruction disputes . . . are good candidates for precluding recovery under the ‘economic loss’ rule,

because the parties are in a position to protect themselves through bargaining.”).

56 ECF No. 56 at 9, ¶ 31.

57 See Clark v. PFPP Ltd. P’ship, 455 S.W.3d 283, 290 (Tex. App.—Dallas 2015) (holding that a negligent hiring

and supervision claim was barred because the only loss was subject to the contract); Escalona v. MC Charter, LLC,

No. 14-17-01008-CV, 2019 Tex. App. LEXIS 6633, at *11 (Tex. App.—Houston [14th Dist.] Aug. 1, 2019) (find-

ing that the economic loss rule prevented recovery of damages under a negligent hiring claim).

Here, the damages sought by Plaintiff rest solely on the economic harm Plaintiff suffered

when ACC breached the subcontract with Plaintiff. The factual basis of Plaintiff’s claims against

ACC was that ACC failed to pay Plaintiff on-time, or at all, in violation of the terms of the contract

between them. Plaintiff’s claim against Defendant was premised on Defendant allegedly negli-

gently hiring and supervising a general contractor who both did not pay and failed to timely pay

Plaintiff. Obviously, this economic harm is rooted in breach of contract.

Furthermore, Plaintiff’s attempt to classify the loss of materials purchased for use on the

Project as “property damage” rather than economic harm58 has no merit. Plaintiff specifically pled

that the Subcontract provided for the cost of materials in addition to labor.59 Therefore, as with

Defendant Denham-Blythe in its previous motion to dismiss, here, the economic loss rule bars

Plaintiff from recovering this loss from Defendant NSPS and the Court need not address Defend-

ant’s second argument for dismissal as to Claim A.

In granting Defendant Denham-Blythe’s previous motion to dismiss as to Plaintiff’s neg-

ligent hiring and supervision claims, the Court did so with prejudice.60 Here, the Court again

dismisses Plaintiff’s negligent hiring and supervision claims with prejudice – this time as to De-

fendant NSPS. The Court finds that any attempt to amend would be futile because the pleadings

clearly demonstrate circumstances triggering the economic loss rule. Further, Plaintiff has already

had one previous opportunity to amend61 and the period for amendment as a matter of course has

long since expired.62

58 ECF No. 181 at 3–4.

59 ECF No. 56 at 6, ¶ 11 (“On or about June 3, 2019, ATE entered into lump sum subcontractor agreement (“Sub-

contract”) with ACC in the amount of $915,405.00 to provide to the NSPS Project labor and materials, including but

not limited to exterior lighting, interior lighting, pole lights, general electrical, electrical service, fire alarm and de-

sign services.”).

60 ECF No. 132.

61 ECF No. 56.

62 See FED. R. CIV. P. 15(a)(1).

Accordingly, Plaintiff’s Claim A for negligent hiring and supervision as to NSPS Metals,

LLC is dismissed with prejudice.

2. Claim B - § 542 turnover

Plaintiff asserts Claim B against Defendant for turnover.63 However, in its Amended Com-

plaint, Plaintiff fails to specify which subsection of § 542 Claim B is brought under. The only two

subsections that would arguably be applicable are § 542(a) and (b). Section 542(a) provides that

“an entity . . . in possession, custody, or control, during the case, of property that the trustee may

use, sell, or lease under section 363 of this title [11 USCS § 363], or that the debtor may exempt

under section 522 of this title [11 USCS § 522], shall deliver to the trustee . . . .”64 On the other

hand, § 542(b) provides that “an entity that owes a debt that is property of the estate and that is

matured, payable on demand, or payable on order, shall pay such debt to, or on the order of, the

trustee.”65 The key difference between the two subsections is that § 542(a) relates to an entity in

possession while § 542(b) relates to an entity that is not in possession but owes an undisputed debt.

The overall function of § 542 is to return possessory rights in property to the trustee.66 Notably,

however, § 542 is used to recover possession, not title.67 “It is settled law that the debtor cannot

use the turnover provisions to liquidate contract disputes or otherwise demand assets whose title

is in dispute.”68

In the Amended Complaint, Plaintiff contends that Defendant is “in possession of construc-

tion trust funds for which ATE is the beneficiary.”69 However, the only definition of trust funds

63 ECF No. 56 at 11, ¶ 37.

64 11 U.S.C. § 542(a).

65 11 U.S.C. § 542(b).

66 Tow v. HBK Main St. Invs., L.P. (In re ATP Oil & Gas Corp.), Nos. 12-36187, 14-03286, 14-03287, 2015 Bankr.

LEXIS 781, at *7 (Bankr. S.D. Tex. 2015); 5 Collier on Bankruptcy ¶ 542.01, p. 542-3 (16th ed. 2013).

67 U.S. v. Inslaw, Inc., 932 F2d 1467, 1472 (D.C. Cir. 1991).

68 Id.; see also Hirsch v. London S.S. Owners' Mut. Life Ins. Ass'n Ltd. (In re Seatrain Lines), Inc., 198 B.R. 45, 50

n.7 (S.D.N.Y. 1996) (Sotomayor, J.)

69 ECF No. 56 at 12, ¶ 43.

that Plaintiff provides in the Amended Complaint is “[p]ayments made to ACC (or to its officers

or agents) on the NSPS Project . . .”70 Under either a § 542(a) or § 542(b) theory, Plaintiff has not

sufficiently pled a plausible claim. First, under § 542(a), Defendant cannot be in possession of the

trust funds since Plaintiff defines these funds as those that have already been paid to ACC. There-

fore, Plaintiff has not met its pleading burden under § 542(a) to allege Defendant is in possession

of property that is rightfully in Plaintiff’s bankruptcy estate. Next, under § 542(b) Plaintiff’s claim

fails because it is merely a disputed breach of contract claim. As discussed above, Plaintiff seeks

to recover for unpaid materials and services subject to Plaintiff’s agreement with ACC in the Sub-

contract. In the Motion to Dismiss, Defendant clearly disputes that it is personally liable to Plain-

tiff for the damages sought in the First Amended Complaint.71 Thus, Plaintiff cannot bring this

turnover action to demand funds that are in dispute.

Accordingly, Plaintiff’s Claim B for § 542 turnover as to NSPS Metals, LLC is dismissed.

3. Claim D - §§ 548(a)(1)(B) and 550 constructive fraudulent transfer

Plaintiff brings Claim D under §§ 548(a)(1)(B) and 550 of the Bankruptcy Code. Section

548(a)(1)(B) allows the trustee or debtor-in-possession to avoid a constructively fraudulent trans-

fer. Under § 548(a)(1)(B), to state a claim for fraudulent transfer Plaintiff must demonstrate that:

(1) a transfer was made of the Debtor’s property; (2) the transfer was made within two years of the

Petition Date; (3) the Debtor received less than reasonably equivalent value in exchange for such

transfer; and (4) the Debtor was insolvent at the time of such transfer, or became insolvent as a

result of such transfer or obligation.72 If the trustee or debtor-in-possession successfully avoids a

70 Id. at 19, ¶ 93.

71 ECF No. 126 at 5 (“As a matter of law, these facts do not give rise to a plausible claim that any tort or fraudulent

transfer occurred, or that NSPS is liable for any of the non-lien causes of action asserted.”).

72 See 11 U.S.C. § 548(a)(1)(B)(i)–(ii).

transfer, § 550 sets forth liability of a transferee.73 Section 550 provides that to the extent that a

transfer is avoided under § 548, a trustee may recover, for the benefit of the estate, the property

transferred or its value to be paid by “(1) the initial transferee of such transfer or the entity for

whose benefit such transfer was made; or (2) any immediate or mediate transferee of such initial

transferee.”74

At the outset, the Court notes a significant misstatement in Plaintiff’s characterization of

the alleged transfer. In the Amended Complaint, Plaintiff asserts that “ATE’s performance of

services under the Subcontract—including without limitation, ATE’s acquisition and provision to

[NSPS and ACC] of equipment and building materials purchased by ATE from multiple job ven-

dors -- were transfers of ATE property (or property in which ATE had an interest) for which ATE

received less than a reasonably equivalent value in exchange for such transfers,”75 and that Plaintiff

is entitled to a judgment for avoidance and recovery of the transferred property. The problem with

this pleading is that Plaintiff treats the transfer of building materials and equipment as one singular

transfer when they were actually multiple transactions occurring over an extended period.

For guidance on how to treat this pleading, this Court looks to precedent. In cases seeking

avoidance actions where multiple payments were made to the same entity, the trustee is charged

with demonstrating that each individual payment meets the elements of the avoidance action.76

Frequently, cases arise where some, but not all of the payments were transferred outside of the

73 See 11 U.S.C. § 550.

74 11 U.S.C. §§ 550(a)(1)–(2).

75 ECF No. 56 at 13, ¶ 55.

76 See Bond v. Nat’l Fin. Servs. (In re United States Mortg. Corp.), 491 B.R. 642, 658 (Bankr. D.N.J. 2013) (analyz-

ing whether each § 548 claim occurred within the requisite statutory filing period); Emerald Capital Advisors Corp.

v. Bayerische Moteren Werke Aktiengesellschaft (In re Fah Liquidating Corp.), 572 B.R. 117, 126-27 (Bankr. D.

Del. 2017) (finding that three transfers occurred within the statutory period and satisfied a necessary element under

§ 548(a)(1)(B), while other transfers were outside the period and thus required dismissal); Wisper II, LLC v. Aber-

nathy (In re Wisper, LLC), Nos. 13-10770, 14-5043, 2015 Bankr. LEXIS 4083, at *160 (Bankr. W.D. Tenn. 2015)

(separately analyzing monthly salary transfers and transfers directly to a bank account).

statutory look-back-period.77 Courts have not grouped these payments together but rather have

parsed out which payments qualify for avoidance and which do not.78 Similarly, where multiple

parcels of real property were transferred to the same entity, courts have not grouped the total real

property transfer as one but have placed a burden on trustees to prove each element of each real

property transfer.79 Thus, this Court finds that it must analyze not whether Plaintiff has met its

burden in pleading that the sum total of alleged service, building equipment, and material transfers

meet the elements of § 548(a)(1)(B), but rather whether each individual transfer meets the require-

ments.

The first element under § 548(a)(1)(B) is that there be a transfer of property and that the

debtor had an interest in that property. The Code broadly defines transfer in § 101(54) as every

“mode, direct or indirect, absolute or conditional, voluntary or involuntary, of disposing of or part-

ing with - (i) property, or (ii) with an interest in property.”80 Plaintiff pled that it transferred ser-

vices, building equipment, and materials to Defendant and ACC while performing under the Sub-

contract. In support, Plaintiff attaches a list of materials purchased in Exhibit B.

Services are not “property of the debtor.” Although the Bankruptcy Code does not define

property of the debtor, the Supreme Court has recognized that “property of the estate” under

§ 541(d) should be read as the post-petition analog to what constitutes property of a debtor under

avoidance powers.81 Under § 541, services are not classified as a form of property of the estate.

77 See Bond, 491 B.R. at 658; In re Fah Liquidating Corp., 572 B.R. at 126–27.

78 See Bond, 491 B.R. at 658; In re Fah Liquidating Corp., 572 B.R. at 126–27.

79 See Osherow v. Charles (In re Wolf), Nos. 15-31477-HCM, 16-03002-HCM, 16-03005-HCM, 2016 Bankr.

LEXIS 3397, at *154 (Bankr. W.D. Tex. 2016) (separately analyzing whether each of the eight properties alleged to

have been fraudulently conveyed met the elements of § 548); Slone v. Lassiter (In re Grove-Merritt), 406 B.R. 778,

786 (Bankr. S.D. Ohio 2009) (finding that an allegedly fraudulent transfer of property to defendant occurring in

April was not avoidable while an allegedly fraudulent transfer of property to defendant occurring in December was

avoidable).

80 11 U.S.C. § 101(54).

81 Begier v. IRS, 496 U.S. 53, 59 (1990).

Therefore, when Plaintiff performed building and construction services for ACC under the Sub-

contract, it was not transferring a property interest. The building equipment and materials, how-

ever, qualify as property of the estate under § 541 and thus constitute property that the Plaintiff

had an interest in. Because Plaintiff attached a list of each individual piece of building equipment

and material purchased in Exhibit B and pled that it transferred these items to ACC and Defendant,

Plaintiff has met its burden on the first element.

For the second element, Plaintiff must sufficiently plead that it made a transfer to Defend-

ant within two years before the petition filing date. “To adequately plead this element [Plaintiff]

needs to recite sufficient factual information, including the date of the transfer, the amount of the

transfer, the name of the transferor, and the name of the transferee.”82 Here, Plaintiff provides a

long list of vendors, transferred materials, and dates of purchase in Exhibit B. However, the prob-

lem with this list is that it demonstrates when these materials became property of the Plaintiff, not

necessarily when they were transferred to the Defendant. For example, Plaintiff may have pur-

chased a particular piece of equipment in June but kept it in its own possession until using it on

the Project in September. The key date from which the two-year period is analyzed is the latter

and the Amended Complaint does not contain the date of transfer but merely the date of acquisi-

tion. That being said, Plaintiff pled that all of these transfers occurred during its performance of

the Subcontract. The Amended Complaint also states that the Subcontract was executed on June

3, 2019. Since Plaintiff’s bankruptcy petition was filed on April 29, 2021, less than two years after

the Subcontract was executed, the Court finds that Plaintiff has satisfied its burden in pleading

sufficient factual context from which this Court ascertains that it is plausible the transfers occurred

within two years.

82 Sarachek v. Right Place Inc. (Agriprocessors, Inc.), Nos. 08-2751, 10-09123, 2011 Bankr. LEXIS 3671, at *15

(Bankr. N.D. Iowa 2011).

The third element requires Plaintiff to allege facts that plausibly show the debtor received

less than a reasonably equivalent value in exchange for such transfers. “[R]easonably equivalent

value is a fact intensive determination that typically requires testing through the discovery pro-

cess.” A complaint, however, must do more than just summarily state there was “less than a rea-

sonably equivalent value in exchange.”83 In the Amended Complaint, Plaintiff pled that “ACC’s

promises to pay were not equivalent value” for the materials provided. The pleading shows that

Plaintiff believes the value received was ACC’s promise to pay. However, Plaintiff also states in

other sections of its Amended Complaint that it received periodic payments from ACC.84 Since

each transfer of building equipment and material is treated individually, Plaintiff bears the burden

of pleading that it did not receive reasonably equivalent value for each transfer. If Plaintiff re-

ceived periodic payments from ACC, it likely received reasonably equivalent value on at least

some of the transfers. Whether this is true or not, it was Plaintiff’s burden to break down each

transfer and show that it did not receive reasonably equivalent value, and Plaintiff failed to do so.

Plaintiff has not satisfied the third element.

For the fourth element, Plaintiff offers little or no factual support. Plaintiff was required

to plead that it “was insolvent at the time of such transfer, or became insolvent as a result of such

transfer or obligation.” “Insolvent” is a defined term in the Bankruptcy Code. A corporate debtor

is insolvent when the “sum of its debts is greater than all of its property, at a fair valuation . . . .”85

Simply repeating the elements, Plaintiff pled generally that: (1) “ATE was insolvent on the date

that such transfer was made or became insolvent as a result of such transfer”; (2) “was engaged in

business or a transaction, or was about to engage in business or a transaction, for which any

83 Id.

84 ECF No. 56 at 7, ¶ 15 (“ACC ‘slow-paid’ ATE occasionally.”).

85 11 U.S.C. § 101(32)(A).

property remaining with ATE was an unreasonably small capital”; and (3) “ATE intended to incur,

or believed that ATE would incur, debts that would be beyond ATE ability to pay as such debts

matured.”86 Plaintiff provides no factual support for these assertions such as balance sheets or

additional financial information. Even the pleadings themselves are entirely open ended and non-

committal. Furthermore, Plaintiff was required to plead and provide factual context for each indi-

vidual transfer it sought to avoid. By failing to carry its burden, Plaintiff has not satisfied the

fourth element.

Accordingly, Plaintiff’s Claim D under §§ 548(a)(1)(B) and 550 as to NSPS Metals, LLC

is dismissed.

4. Claim E - TUFTA constructive fraudulent transfer

Plaintiff brings Claim E under the Texas Uniform Fraudulent Transfer Act (“TUFTA”).87

However, Plaintiff fails to clarify under which of the TUFTA subsections it brings its claim. In

the Claim E section of the Amended Complaint, Plaintiff pled a series of factual allegations but

only referenced specific TUFTA subsections once. This occurs in the last line of the Claim E

section: “ATE is entitled to judgment against defendants NSPS and ACC for avoidance and re-

covery of the transferred property, or the value of such transfers. Tex. Bus. & Comm. Code

§§24.005, 24.006, 24.08, and 24.009; see also 11 U.S.C. § 550.” The reference is in the form of

an above-the-line-citation rather than a clear assertion of which subsections Plaintiff contends en-

titles it to relief.

The issue is more problematic than just a placement error though. Within section 24.005,

multiple theories of relief are possible. Section 24.005(a)(1) deals with an actual fraudulent

86 ECF No. 56 at 13, ¶ 57.

87 Id. at 13-15.

transfer while section 24.005(a)(2) pertains to a constructive fraudulent transfer.88 In the Amended

Complaint, Plaintiff does not specify which subsection of 24.005(a) it believes entitles it to relief.

Similarly, section 24.006 also contains multiple possibilities for relief since section 24.006(a) in-

volves a constructive fraudulent transfer while section 24.006(b) relates to a transfer to an insider.89

Again, Plaintiff fails to specify which subsection it asserts in connection with its factual pleadings.

Sections 24.008 and 24.009 are less problematic because they relate to recovery once a transfer

has been classified as fraudulent under section 24.005 or section 24.006.90 Nonetheless, although

the failure of Plaintiff to specify which subsections of TUFTA it asserts makes it more challenging

both for Defendants to respond and for the Court to analyze, the Court will discuss each in turn.

a. Section 24.005(a)(1)

First, Plaintiff has not sufficiently pled a claim for relief under section 24.005(a)(1). Under

section 24.005(a)(1), a transfer is fraudulent as to a creditor, whether the creditor’s claim arose

before or within a reasonable time after the transfer was made, if the debtor made it with actual

intent to hinder, delay, or defraud its creditors.91 To summarize, the elements of an actual fraudu-

lent transfer under TUFTA are: (1) a creditor; (2) a debtor; (3) the debtor transferred assets shortly

before or after the creditor’s claim arose; (4) with actual intent to hinder, delay or defraud any of

the debtor’s creditors. “Actual fraudulent intent is rarely susceptible to direct proof; therefore, the

88 TEX. BUS. & COM. CODE § 24.005; Spring St. Partners - IV, L.P. v. Lam, 730 F.3d 427, 436 (5th Cir. 2013) (“In

general, a determination of liability under TUFTA is a two-step process: first, a finding that a debtor committed an

actual, fraudulent transfer, TUFTA § 24.005(a)(1), or a constructive, fraudulent transfer, id. § 24.005(a)(2)); and,

second, recovery of that fraudulent transfer, or its value, from the transferees, id. §§ 24.008-24.009.”).

89 TEX. BUS. & COM. CODE § 24.006.

90 Id. §§ 24.005, 24.006.

91 Id. § 24.005.

requisite intent may be proved circumstantially by presenting evidence of certain ‘badges of fraud’

that may cumulatively give rise to an inference of intent to hinder, delay, or defraud.”92

Here, Plaintiff pled that its “performance of services under the Subcontract . . . were trans-

fers of ATE property . . . .”93 Since Plaintiff is the one who executed the transfer, to recover under

section 24.005(a)(1), Plaintiff must have pled that Plaintiff itself made the transfer with actual

intent to hinder, delay, or defraud. Nothing in the Amended Complaint indicates that Plaintiff

provided these materials and services to ACC and Defendant with intent to hinder, delay, or de-

fraud them. In fact, Plaintiff pled the opposite, suggesting that Defendant and ACC intended to

hinder, fraud, or delay Plaintiff.94

Furthermore, Plaintiff has failed to plead that Defendant was a creditor of Plaintiff. The

purpose of TUFTA is to prevent fraudulent transfers of property by a debtor who intends to defraud

creditors by placing assets beyond their reach.95 Under TUFTA, a “creditor” is defined broadly

as any person who has a “claim.”96 “Claim” is defined as “a right to payment or property, whether

or not the right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, un-

matured, disputed, legal, equitable, secured, or unsecured.”97 Nowhere in the Amended Com-

plaint, does Plaintiff allege that Defendant is a creditor of Plaintiff or that Defendant holds a claim.

Therefore, Plaintiff has not stated a claim under section 24.005(a)(1).

b. Section 24.005(a)(2)

92 Jones v. Dyna Drill Techs., LLC, No. 01-16-01008-CV, 2018 Tex. App. LEXIS 6689, at *14 (Tex. App.—Hou-

ston [1st Dist.] Aug. 23, 2018) (quoting ASARCO LLC v. Americas Mining Corp., 396 B.R. 278, 370 (S.D. Tex.

2008)).

93 ECF No. 56 at 14, ¶ 62 (“ATE’s performance of services under the Subcontract—including without limitation,

ATE’s acquisition and provision to defendants of equipment and building materials purchased by ATE from multi-

ple job vendors -- were transfers of ATE property (or property in which ATE had an interest) for which ATE re-

ceived less than a reasonably equivalent value in exchange for such transfers.”).

94 Id. at 14, ¶ 63 (“Defendants knew or should have known about the avoidability of the transfers.”).

95 Nwokedi v. Unlimited Restoration Specialists, Inc., 428 S.W.3d 191, 203 (Tex. App.—Houston [1st Dist.] 2014).

96 TEX. BUS. & COM. CODE § 24.002(4).

97 TEX. BUS. & COM. CODE § 24.002(3).

Second, to state a claim under section 24.005(a)(2), debtor must show that it made a trans-

fer to a creditor and did not receive reasonably equivalent value for the payments.98 Additionally,

debtor must show (A) that it 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 (B) intended to incur, or believed or reasonably should have believed that the debtor

would incur, debts beyond the debtor’s ability to pay as they became due.99 TUFTA defines “rea-

sonably equivalent value” as “includ[ing] without limitation, a transfer or obligation that is within

the range of values for which the transferor would have sold the assets in an arm’s length transac-

tion.”100

Here, Plaintiff again makes the mistake of not pleading that Defendant is a creditor of

Plaintiff. Although the Amended Compliant fails to state a claim for this reason alone, Plaintiff

has also failed to properly plead that it did not receive reasonably equivalent value for the transfers.

The Amended Complaint makes the same mistake in Claim E as it did in Claim D by grouping all

of the transfers of materials and services into a singular transfer.101 As discussed above, the plead-

ings reflect a series of transfers that took place over an extended time period. Thus, Plaintiff should

have broken down each instance in which materials were transferred to Defendant. Since Plaintiff

acknowledges that it did receive some payments from Defendant,102 it is possible that some trans-

fers were made for reasonably equivalent value. However, without pleading with the required

specificity, Plaintiff has not stated a claim under section 24.005(a)(2).

98 TEX. BUS. & COM. CODE § 24.005(a)(2).

99 Id.

100 Id. § 24.004(d).

101 ECF No. 56 at 14, ¶ 62 (“ATE’s performance of services under the Subcontract—including without limitation,

ATE’s acquisition and provision to defendants of equipment and building materials purchased by ATE from multi-

ple job vendors -- were transfers of ATE property (or property in which ATE had an interest) for which ATE re-

ceived less than a reasonably equivalent value in exchange for such transfers.”).

102 ECF No. 56 at 7, ¶ 15 (“ACC ‘slow-paid’ ATE occasionally.”).

c. Section 24.006(a)

Next, section 24.006(a) provides that a debtor’s transfer is fraudulent as to a creditor whose

claim arose before the transfer if the debtor did not receive a reasonably equivalent value in ex-

change for the transfer and the debtor was insolvent at that time or became insolvent as a result of

the transfer.103 Just as in section 24.005(a)(2) above, Plaintiff has not pled that Defendant was a

creditor of Plaintiff, and did not break down the transfers sufficiently so as to show that it did not

receive reasonably equivalent value for each transfer. Therefore, Plaintiff has not stated a claim

under section 24.006(a).

d. Section 24.006(b)

Finally, under section 24.006(b), “a transfer made by a debtor is fraudulent as to a creditor

whose claim arose before the transfer was made if the transfer was made to an insider . . . .”104 In

this scenario, since the debtor is a corporation,105 “insider” means: (i) a director of the debtor; (ii)

an officer of the debtor; (iii) a person in control of the debtor; (iv) a partnership in which the debtor

is a general partner; (v) a general partner in a partnership described in Subparagraph (iv) of this

paragraph; or (vi) a relative of a general partner, director, officer, or person in control of the

debtor.106 The only relationship between Plaintiff and ACC is that ACC hired Plaintiff under the

Subcontract. Similarly, Defendant’s only relation to Plaintiff was that it owned the project for

which the Subcontract was being executed. Clearly, nothing in the Amended Complaint demon-

strates ACC or Defendant as an “insider” of Plaintiff as defined in TUFTA. Furthermore, Plaintiff

103 TEX. BUS. & COM. CODE § 24.006(a).

104 Curtis v. Chapman Family Tr. (In re Chapman), 628 B.R. 512, 524 (Bankr. S.D. Tex. 2021).

105 ECF No. 56 at 3, ¶ 1. (“All Texas Electrical Contractors, Inc. (“ATE”) is a Texas corporation and chapter 11

debtor in the above-styled bankruptcy case.”).

106 TEX. BUS. & COM. CODE § 24.002(7)(b).

has again failed to allege that Defendant was a creditor of Plaintiff. Thus, Plaintiff has not stated

a claim under section 24.006(b).

Accordingly, having failed to state a claim under sections 24.005(a)(1), 24.005(a)(2),

24.006(a), and 24.006(b), Plaintiff’s Claim E under TUFTA as to NSPS Metals, LLC is dismissed.

5. Claim F - quantum meruit

Plaintiff brings Claim F against Defendant for quantum meruit.107 Quantum meruit is an

equitable remedy that exists independent of a contract.108 To recover under quantum meruit a

claimant must prove that: (1) valuable services were rendered or materials furnished; (2) for the

person sought to be charged; (3) which services and materials were accepted by the person sought

to be charged, used and enjoyed by him; and (4) under such circumstances as reasonably notified

the person sought to be charged that the plaintiff in performing such services was expecting to be

paid by the person sought to be charged.109 Quantum meruit is generally only available when there

is no contract governing the services rendered.110 However, the Texas Supreme Court has recog-

nized three exceptions to the general rule that an express contract bars recovery on a quantum

meruit theory: (1) where a plaintiff has partially performed an express contract but was prevented

from completing the contract because of the defendant’s breach; (2) where a plaintiff partially

performs a unilateral contract; and (3) where a breaching plaintiff in a construction contract par-

tially performed under the contract and the defendant accepts and retains benefits arising as a direct

result of the plaintiff’s partial performance.111

In its Motion to Dismiss, Defendant argues that Plaintiff should not be permitted to bring

107 ECF No. 56 at 15, ¶ 69.

108 Vortt Exploration Co. v. Chevron U.S.A., Inc., 787 S.W.2d 942, 944 (Tex.1990).

109 Id.

110 Id.

111 Viking Prospector, Inc. v. Xtreme Indus., L.L.C. (In re Viking Offshore (USA) Inc.), Nos. 08-31219-H3-11, 08-

3296, 2009 Bankr. LEXIS 2467, at *21 (Bankr. S.D. Tex. 2009).

this cause of action for quantum meruit since there was a contract governing the services Plaintiff

provided, and no exceptions apply.112 Here, Plaintiff and Defendant did not contract directly.

However, Defendant executed a contract with ACC who then entered into the Subcontract with

Plaintiff. Plaintiff seeks damages for unpaid services that were governed by the Subcontract. As

the Fifth Circuit clarified in Kane Enterprises, quantum meruit is not available in this scenario and

the proper remedy for Plaintiff is to pursue a breach of contract claim.113 It does not matter that

Plaintiff and Defendant did not contract directly as long as the services provided by Plaintiff were

subject to one.

Next, none of the exceptions will apply because Plaintiff alleges to have fully performed

under the Subcontract. Each of the exceptions enumerated by the Texas Supreme Court requires

partial performance of the contract. In the Amended Complaint, Plaintiff alleges that “ATE timely

performed its obligations pursuant to the Subcontract . . . .”114 Curiously, however, Plaintiff later

adds a final line to the Original Complaint in its Amended Complaint stating “[i]n addition, to the

extent that it is determined that ATE only partially performed, it is entitled to a quantum meruit

claim for the value of the services and material provided.”115 Clearly, these two statements do not

align. At the Rule 12(b)(6) stage, this Court relies on the pleadings of Plaintiff who has pled that

it timely performed under the Subcontract and has offered no additional pleadings to suggest that

it did not fully perform. The additional language referencing partial performance is meaningless

without an assertion that the Plaintiff did in fact only partially perform. Thus, none of the excep-

tions will apply and Plaintiff’s Claim F could be denied on this basis alone.

112 ECF No. 126 at 11-12.

113 See Kane Enters. v. MacGregor (USA) Inc., 322 F.3d 371, 376 (5th Cir. 2003) (finding that the proper remedy for

subcontracting party was to pursue a breach of contract claim rather than quantum meruit against the prime contrac-

tor).

114 ECF No. 56 at 6, ¶ 13.

115 Id. at 15, ¶ 72.

Even if the claim were not barred, however, Plaintiff’s Claim F must still be dismissed

because Plaintiff fails to plead a necessary element of quantum meruit. The fourth element of a

claim for quantum meruit requires a plaintiff to have “reasonably notified the person sought to be

charged that the plaintiff in performing such services was expecting to be paid by the person sought

to be charged.”116 In determining whether this element is satisfied, “the key consideration is the

timing of when the plaintiff informs the defendant that it expects to be paid directly by the defend-

ant.”117 As Defendant notes in its Motion to Dismiss, Plaintiff does not plead that Plaintiff in-

formed Defendant that it expected to be paid directly before beginning its work. Instead, Plaintiff

merely alleges that “Defendants knew that ATE expected compensation for its labor and materials

on the NSPS Project.” Since Plaintiff fails to plead that it informed Defendant before beginning

its work, Plaintiff has not met its burden in pleading an essential element of quantum meruit.

Accordingly, because Plaintiff is barred from bringing a quantum meruit claim and because

Plaintiff failed to plead an essential element, Plaintiff’s Claim F for quantum meruit as to NSPS

Metals, LLC is dismissed.

6. Claim G - unjust enrichment

ATE asserts Claim G against NSPS for unjust enrichment.118 Unjust enrichment occurs

when a party wrongfully or passively receives a benefit which would be unconscionable to re-

tain.119 To remedy the unjust benefit, a quasicontractual relationship is conferred in cases where

no contract exists between the parties.120 However, unjust enrichment does not apply when there

116 Vortt Exploration Co., 787 S.W.2d at 944.

117 Sys. One Holdings LLC v. Campbell, Civil Action No. B: 18-cv-54, 2018 U.S. Dist. LEXIS 153965, at *15 (S.D.

Tex. 2018).

118 ECF No. 56 at 16.

119 Tex. Integrated Conveyor Sys., Inc. v. Innovative Conveyor Concepts, Inc., 300 S.W.3d 348, 367 (Tex. App.—

Dallas 2009).

120 Lee v. Lee, 411 S.W.3d 95, 111 (Tex. App.—Houston [1st Dist] 2013).

is a valid, express contract covering the subject matter of the parties’ dispute.121 “This rule is

applicable not only when the plaintiff is seeking to recover in equity from the party with whom he

expressly contracted, but also when the plaintiff is seeking recovery from a third party foreign to

the original contract but who is alleged to have benefited from its performance.”122 “There are

three exceptions to the general rule: (1) when the validity or terms of the express contract are in

dispute; (2) when the defendant committed fraud; and (3) when the plaintiff overpaid.”123

As with its quantum meruit claim, Plaintiff’s Claim G for unjust enrichment fails because

of the existing agreement between Plaintiff and ACC in the Subcontract. Plaintiff is seeking dam-

ages for the services retained by Defendant when Plaintiff performed under the Subcontract.124

Since the services were subject to the Subcontract, unjust enrichment is only available if an excep-

tion applies. Here, Plaintiff does not allege that the terms of the Subcontract were ambiguous or

that Plaintiff was overpaid. Furthermore, Plaintiff has not plausibly alleged any claims of fraud in

the Amended Complaint which would trigger this exception.

Accordingly, Plaintiff’s Claim G for unjust enrichment as to NSPS Metals, LLC is dis-

missed.

121 Fortune Prod. Co. v. Conoco, Inc., 52 S.W.3d 671, 684 (Tex. 2000).

122 Protocol Techs., Inc. v. J.B. Grand Canyon Dairy, L.P., 406 S.W.3d 609, 614 (Tex. App.—Eastland 2013); see

also Hester v. Friedkin Cos., Inc., 132 S.W.3d 100, 106 (Tex. App.—Houston [14th Dist.] 2004, pet. denied); Iron

Mountain Bison Ranch, Inc. v. Easley Trailer Mfg., Inc., 42 S.W.3d 149, 160 (Tex. App.—Amarillo 2000, no pet.);

W & W Oil Co. v. Capps, 784 S.W.2d 536, 537 (Tex. App.—Tyler 1990, no writ).

123 Click v. General Motors LLC, No. 2:18-CV-455, 2020 U.S. Dist. LEXIS 104526, 2020 WL 3118577, at *9 (S.D.

Tex. 2020) (citing Fortune Prod. Co., 52 S.W.3d at 684).

124 ECF No. 56 at 16, ¶¶ 76–77.

7. Claim L - breach of fiduciary duty

Plaintiff asserts Claim L against Defendant for breach of a fiduciary duty.125 On December

6, 2021, ATE filed a proposed order stipulating to the dismissal of Claim L with prejudice as to

defendant NSPS.126

Accordingly, ATEs Claim L for breach of a fiduciary duty as to Defendant NSPS Metals,

LLC is dismissed with prejudice.

8. Claim O - civil conspiracy

ATE asserts Claim G against NSPS for civil conspiracy.127 Civil conspiracy involves a

combination by two or more persons to accomplish an unlawful purpose or to accomplish a lawful

purpose by unlawful means.128 The elements of a civil conspiracy are (i) two or more persons, (ii)

an object to be accomplished, (iii) a meeting of the minds on the object or course of action, (iv)

one or more overt unlawful acts, and (v) damages proximately resulting from those acts.129 Be-

cause the essence of a conspiracy is the secret intent of the conspirators, a plaintiff usually must

prove the agreement element of civil conspiracy by circumstantial evidence and by reasonable in-

ference.130 Once a civil conspiracy is found, each coconspirator is responsible for any action in

furtherance of the conspiracy performed by other conspirators. In other words, each action in

a civil conspiracy is imputed to each coconspirator regardless of who actually performed the

acts.131

125 Id. at 21.

126 ECF No. 189.

127 ECF No. 56 at 24.

128 Triplex Communications, Inc. v. Riley, 900 S.W.2d 716, 719–20 (Tex.1995). See also, Elliott v. Tilton, 89 F.3d

260, 264 (5th Cir.1996).

129 Massey v. Armco Steel Co., 652 S.W.2d 932, 934 (Tex.1983).

130 Garcia v. Jordan, Inc., 881 S.W.2d 155, 158 (Tex. App.—El Paso 1994, no writ).

131 Akin v. Dahl, 661 S.W.2d 917, 921–22 (Tex.1983), cert. den'd 466 U.S. 938 (1984), rehearing den'd 467 U.S. 1231

(1984).

The full extent of Plaintiff's pleading is that ACC, James Rozman, Susan Rozman, and

Defendant “shared the object of completing the Project” and “had a meeting of the minds on such

object or course of actions toward the object of completing the Project, one or more unlawful,

overt [sic] acts occurred, including fraud, negligent misrepresentations, breach of fiduciary duty,

misapplication of Constructions Trust Funds and fraudulent transfers; and as a proximate cause of

the actions of such defendants, ATE suffered damages.”'*? This allegation, once again, is clearly

just a formulaic recitation of the elements. Plaintiff offers no factual or circumstantial evidence of

civil conspiracy and thus Plaintiff has failed to meet its burden to state a plausible claim.

Accordingly, ATEs Claim O for civil conspiracy as to Defendant NSPS Metals, LLC is

dismissed.

IV. CONCLUSION

An order consistent with this Memorandum Opinion will be entered on the docket simul-

taneously herewith.

SIGNED January 18, 2022

Eduardo Me ce

United States Bankruptcy Judge

'32 ECF No. 56 at 24-25, § 142.