# Bordeaux Capital Inc. v. United States Methanol Corporation

> District Court, S.D. West Virginia · May 10, 2019

URL: https://www.frixlaw.com/law-library/cases/10728289

## Case

- **Court:** District Court, S.D. West Virginia
- **Decided:** May 10, 2019
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/10728289

## How later opinions describe it (automated extraction)

- stating that this requirement 3 exists “to give the defendant fair notice of what the . . . claim is and the grounds upon which it rests” (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007))
- recognizing that “a number of courts have held that Rule 9(b)’s particularity requirements are less formulaic with fraud claims based on omissions of material fact.”
- stating “that when the allegation of fraud relates to an omission rather than an affirmative misrepresentation, less particularity is required.”
- recognizing that “[t]he Act was designed to protect unsecured creditors against debtors who make transfers out of, or make obligations against, the debtor’s estate in a manner adverse to the creditors’ rights.”
- noting that “an omission ‘cannot be described in terms of the time, place, and contents of the misrepresentation’” (quoting Shaw v. Brown & Williamson Tobacco Corp., 973 F.Supp. 539, 552 (D. Md. 1997))

## Opinion text

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF WEST VIRGINIA

CHARLESTON DIVISION

BORDEAUX CAPITAL INC.,

Plaintiff,

v. CIVIL ACTION NO. 2:18-cv-01262

UNITED STATES METHANOL CORPORATION, et al.,

Defendants.

MEMORANDUM OPINION AND ORDER

Plaintiff Bordeaux Capital, Inc. (“BCI”) brings this action against Defendants United States
Methanol Corporation (“USM Corp.”), U.S. Methanol, LLC (“USM LLC”), and Petrochemical
Holdings Corporation (“PHC”) (collectively, “Defendants”). Before the Court is USM LLC’s
Motion to Dismiss Counts IV and V of the Complaint. (ECF No. 9.) For the reasons discussed
herein, the Court DENIES the motion.
I. BACKGROUND
The following facts are drawn from the Complaint and, for purposes of resolving the
pending motion, are presumed to be true. In November of 2015, USM Corp. retained BCI to
perform investment banking services in connection with USM Corp.’s acquisition, relocation, and
operation of methanol plants from Brazil and Slovenia to West Virginia (the “Project”). (ECF
No. 1 at 3 ¶ 12.) On January 13, 2016, USM Corp. executed a formal engagement letter (the
“Engagement Letter”) with BCI, obligating “USM Corp. and its successors” to compensate BCI
for its “services in connection with the Project.” (Id. ¶ 13.)
As a result of BCI’s work under the Engagement Letter, KKCG made “an equity
investment in, and a capital commitment to, USM Corp. . . . or a company related to or affiliated
with” USM Corp. (Id. at 5 ¶ 18.) On February 6, 2016, USM Corp. and KKCG entered into an
equity term sheet “that contemplated USM Corp. and KKCG forming a ‘special purpose entity’”

to fulfill the Project. (Id. ¶ 19.) KKCG is believed to have closed on its equity investment on or
about February 26, 2016. (Id. ¶ 20.)
Thereafter, USM LLC registered in the State of Delaware as a limited liability corporation
and, later, in West Virginia as a foreign corporation, also doing business as “US Methanol.” (Id.
¶ 21.) On the same day, KKCG registered with the West Virginia Secretary of State’s Office as
the manager of USM LLC and listed the same business address as USM LLC. (Id. ¶ 22.)
“KKCG instructed BCI to use ‘a new entity, US Methanol LLC (Delaware)’” as a “prospective
contracting party” but, otherwise, “did not explain the relationship between USM LLC and USM
Corp.” (Id. at 7 ¶ 32.) Despite the apparent creation of a new entity, no distinction was drawn
between USM Corp. and USM LLC. (Id. at 8 ¶ 35.)

On March 11, 2016, BCI issued an invoice to USM Corp. for its services. (Id. at 5 ¶ 23.)
USM Corp. made partial payments on the invoice. (Id. at 8 ¶¶ 37, 39.) However, the CEO of
both USM Corp. and USM LLC continued to use BCI’s services under the Engagement Letter,
and, accordingly, BCI performed its obligations entitling it to additional payment under the
agreement. (Id. at 7 ¶ 31.) On September 6, 2017, KKCG and/or USM LLC notified BCI that
they no longer required its services and terminated the Engagement Letter. Nonetheless, they did
not dispute the March 2016 invoice and additional fees and assured that outstanding amounts owed
would be paid. (Id. at 9 ¶ 41.) Later, when BCI inquired into the outstanding payments, USM

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LLC instructed BCI “that [its] only recourse was against USM Corp., which by that time was
nothing more than a shell company.” (Id. at 2 ¶ 9.)
Based on these alleged facts, BSI contends that “USM Corp. and USM LLC secretly and
intentionally conspired to, and did, arrange their affairs so that all or substantially all of USM

Corp.’s assets, including its intellectual property, business plan, bids, rights, employees, prospects
and opportunities, including the Project, were transferred from USM Corp. (or PHC) to USM LLC
(the ‘Secret Agreement’) for less than fair value, with the intention of leaving USM Corp. (now
PHC) a shell company.” (Id. at 6 ¶ 24.) BCI asserts five causes of action against Defendants for
breach of contract, unjust enrichment, quantum meruit, intentional tort/fraud, and violation of the
West Virginia Uniform Voidable Transactions Act, W. Va. Code § 40–1A–1, et. seq.
(“WVUVTA”), (id. at 9–14 ¶¶ 43–62), for which it seeks compensatory and punitive damages,
pre- and post-judgment interest, attorney fees and costs, and any other relief justified, (id. at 15).
USM LLC filed its Motion to Dismiss on September 27, 2018, arguing that Counts IV and
V of the Complaint should be dismissed because Count IV fails to plead fraud with specificity and

Count V under the WVUVTA does not identify a transaction covered by the Act. (ECF No. 9.)
BCI responded to the motion on October 26, 2018. (ECF No. 14.) USM LLC did not file a reply
in support of their motion. As the time period for filing a reply has elapsed, the Motion to Dismiss
is ripe for adjudication.
II. LEGAL STANDARD
In general, a pleading must include “a short and plain statement of the claim showing that
the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2); see McCleary-Evans v. Md. Dep’t of
Transp., State Highway Admin., 780 F.3d 582, 585 (4th Cir. 2015) (stating that this requirement

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exists “to give the defendant fair notice of what the . . . claim is and the grounds upon which it
rests” (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007))). To withstand a motion to
dismiss made pursuant to Federal Rule of Civil Procedure 12(b)(6), a complaint must plead enough
facts “to state a claim to relief that is plausible on its face.” Wikimedia Found. v. Nat’l Sec.

Agency, 857 F.3d 193, 208 (4th Cir. 2017) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)).
“A claim has facial plausibility when the plaintiff pleads factual content that allows the court to
draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556
U.S. at 678. Stated another way, the factual allegations in the complaint “must be sufficient ‘to
raise a right to relief above the speculative level.’” Woods v. City of Greensboro, 855 F.3d 639,
647 (4th Cir. 2017) (quoting Twombly, 550 U.S. at 555). Well-pleaded factual allegations are
required; labels, conclusions, and a “formulaic recitation of the elements of a cause of action will
not do.” Twombly, 550 U.S. at 555; see also King v. Rubenstein, 825 F.3d 206, 214 (4th Cir.
2016) (“Bare legal conclusions ‘are not entitled to the assumption of truth’ and are insufficient to
state a claim.” (quoting Iqbal, 556 U.S. at 679)).

In evaluating the sufficiency of a complaint, the Court first “identif[ies] pleadings that,
because they are no more than conclusions, are not entitled to the assumption of truth.” Iqbal,
556 U.S. at 679. The Court then “assume[s] the[] veracity” of the complaint’s “well-pleaded
factual allegations” and “determine[s] whether they plausibly give rise to an entitlement to relief.”
Id. Review of the complaint is “a context-specific task that requires [the Court] to draw on its
judicial experience and common sense.” Id. “[T]o satisfy the plausibility standard, a plaintiff is
not required to plead factual allegations in great detail, but the allegations must contain sufficient
factual heft to allow a court, drawing on judicial experience and common sense, to infer more than

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the mere possibility of that which is alleged.” Nanni v. Aberdeen Marketplace, Inc., 878 F.3d
447, 452 (4th Cir. 2017) (internal quotation marks omitted).
III. DISCUSSION
USM LLC challenges Counts IV and V of BCI’s Complaint. First, it argues that Count

IV, alleging fraud, must be dismissed because BCI’s claim is not alleged with specificity as to “the
time, place, and contents of the false representation, as well as the identity of the person making
the misrepresentation and what he obtained thereby.” (ECF No. 10 at 2 (citing McCauley v. Home
Loan Inv. Bank F. S.B., 710 F.3d 551, 559 (4th Cir. 2013) (internal quotation omitted)).) USM
LLC further argues that Count V, asserting a violation of the WVUVTA cannot survive Rule
12(b)(6) scrutiny because the Complaint does not identify a transaction covered under the Act.
A. Count IV: Fraud
Rule 9(b) of the Federal Rules of Civil Procedure imposes a heightened pleading standard
for claims grounded in fraud. See United States ex rel. Nathan v. Takeda Pharm. N. Am., Inc.,
707 F.3d 451, 455–56 (4th Cir. 2013). To satisfy Rule 9(b), allegations of fraud “must state with

particularity the circumstances constituting fraud or mistake.” Fed. R. Civ. P. 9(b). This
heightened standard requires the complaint to describe at a minimum, “the time, place, and
contents of the false representations, as well as the identity of the person making the
misrepresentation and what he obtained thereby.” United States ex rel. Wilson v. Kellogg Brown
& Root, Inc., 525 F.3d 370, 379 (4th Cir. 2008) (quoting Harrison v. Westinghouse Savannah
River Co., 176 F.3d 776, 784 (4th Cir. 1999)) (internal quotations omitted). Even so, “[a] court
should hesitate to dismiss a complaint under Rule 9(b)” if the allegations of fraud are specific
enough to give the defendant notice “of the particular circumstances for which [it] will have to

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prepare a defense at trial” and the “plaintiff has substantial prediscovery evidence of those facts.”
Harrison, 176 F.3d at 784.
Courts have found that the specificity requirements of Rule 9(b) are relaxed in fraudulent
omission cases. See In Town Hotels Ltd. P’ship v. Marriott Intern., Inc., 246 F.Supp.2d 469, 487

(S.D. W. Va. 2003) (stating “that when the allegation of fraud relates to an omission rather than
an affirmative misrepresentation, less particularity is required.”); see also Fravel v. Ford Motor
Co., 973 F.Supp.2d 651, 656 (W.D. Va. 2013) (recognizing that “a number of courts have held
that Rule 9(b)’s particularity requirements are less formulaic with fraud claims based on omissions
of material fact.”). In such cases, “a plaintiff cannot be required to identify (or suffer dismissal)
the precise time, place, and content of an event that (by definition) did not occur[.]” Belville v.
Ford Motor Co., 60 F.Supp.3d 690, 697 (S.D. W. Va. 2014) (internal quotation omitted). See
also Ademiluyi v. PennyMac Mortg. Inv. Trust Holdings I, LLC, 929 F.Supp.2d 502, 533 (D. Md.
2013) (noting that “an omission ‘cannot be described in terms of the time, place, and contents of
the misrepresentation’” (quoting Shaw v. Brown & Williamson Tobacco Corp., 973 F.Supp. 539,

552 (D. Md. 1997))). Similarly, Rule 9(b) is applied more leniently when the facts underlying
the fraud-based claim are exclusively within the knowledge or control of the defendant. See
Wexner v. First Manhattan Co., 902 F.2d 169, 172 (2nd Cir. 1990); Michaels Bldg. Co. v.
Ameritrust Co., N.A., 848 F.2d 674, 680 (6th Cir. 1988).
In its fraud count, BCI alleges that Defendants fraudulently conveyed “assets, individuals,
and opportunities from USM Corp. to USM LLC” to evade their contractual obligations under the
Engagement Letter. (See ECF No. 1 at 11–12 ¶¶ 51–55.) USM LLC’s contention that BCI’s
allegations are conclusory and lack specificity likened to the “who, what, when, where, how of the

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alleged fraud” is unavailing. Wilson, 525 F.3d at 379. First, BCI explicitly pleads what was
concealed—the conveyance of “USM Corp.’s assets, including its intellectual property, business
plan, bids, rights, employees, prospects and opportunities” to USM LLC. (ECF No. 1 at 6, 11–
12 ¶ 24, 52.) BCI also alleges that this information was concealed to avoid payment owed to BCI

under the Engagement Letter, (id. at 11 ¶ 52), and that Defendants made this conveyance through
communications and meetings at times and places unknown to BCI, (id. ¶ 52(e)). The Complaint
goes on to state that Defendants never advised BCI of the transfer and did not draw any distinction
between the entities. (Id. at 8, 11 ¶¶ 35, 52(c)–(d).) The Complaint further details that these
entities shared one CEO, webpage, office space, email address domain, and targeted, acquired, and
operated the same methanol plants “knowing that they would mislead [BCI].” (Id. at 6–8 ¶¶ 25,
27, 28, 35.) The Court is satisfied that these circumstances are pled with enough specificity to
notify Defendants of the nature of the fraud-based claim. Accordingly, Count IV survives against
USM LLC.
B. Count V: Violation of West Virginia Uniform Voidable Transactions Act

BCI alleges that Defendants engaged in a scheme in violation of the WVUVTA. The
WVUVTA provides grounds upon which a transfer made or an obligation incurred by a debtor
may be deemed fraudulent as to the creditor. See Sheehan v. Saoud, 650 Fed. App’x 143, 153
(4th Cir. May 24, 2016). Specifically, West Virginia Code § 40–1A–4(a), provides the following:
(a) A transfer made or obligation incurred by a debtor is fraudulent as to a creditor,
whether the creditor’s claim arose before or after the transfer was made or the
obligation was incurred, if the debtor made the transfer or incurred the obligation:
(1) With actual intent to hinder, delay or defraud any creditor of the debtor; or (2)
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
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reasonably should have believed that he or she would incur, debts beyond his or her
ability to pay as they became due.

A “transfer” is defined, in relevant part, as “disposing of or parting with an asset or an interest in
an asset . . . .” W. Va. Code § 40–1A–1(p). An “asset” means “property of a debtor” with the
exclusion of certain property not relevant here. Id. at § 40–1A–1(b). Further, a “claim” under
the Act means “a right to payment, whether or not the right is reduced to judgment, liquidated,
unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable,
secured or unsecured.” Id. at § 40–1A–1(c).
USM LLC contends that BCI’s claims are not covered under the WVUVTA because it
does not identify a transaction in which USM LLC either made a fraudulent transfer or fraudulently
incurred an obligation. BCI’s Complaint alleges that BCI provided financial advisory services to
Defendants, pursuant to the Engagement Letter, for which it is entitled to compensation. (See
ECF No. 1 at ¶¶ 7, 12–19, 23, 36, 41.) Specifically, the Complaint alleges that BCI invoiced
USM Corp. $677,521.77 for work performed from November 2015 through February 2016. (Id.
at 5–6 ¶ 23.) Additionally, BCI seeks an equity fee of $1.2 million, pursuant to the Engagement
Letter, for KKCG’s investment commitment in “US Methanol.” (Id. at 8 ¶ 36.) BCI alleges that
USM LLC is a successor of USM Corp. and is liable for all of USM Corp.’s obligations under the
Engagement Letter. (Id. at 7 ¶ 30.) BCI further provides that these payments, which USM LLC
does not dispute, remain outstanding. (Id. at 9 ¶ 41.) Taken as a whole, these facts adequately

establish that BCI is a creditor entitled to payment from USM LLC for services rendered.
With regard to a transaction, the Complaint alleges that “all or substantially all of USM
Corp.’s assents, including its intellectual property, business plan, bids, rights, employees,
prospects and opportunities, including the Project were transferred from” USM Corp. to USM
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LLC. (Id. at 6 ¶ 24.) BCI thoroughly alleges that Defendants knowingly, intentionally,
deliberately, and fraudulently agreed to this transaction for little or no consideration, (id. at 13–14
¶ 59), and that the predominate purpose of this conveyance was to deprive BCI of compensation
under the Engagement Letter and thereby enrich Defendants, (id. at 14 ¶ 59(e)). Contrary to USM

LLC’s assertion, these alleged events are exactly what the WVUVTA was designed to address.
See Nicholas Loan & Mortg., Inc. v. W. Va. Coal Co-Op, Inc., 547 S.E.2d 234, 238 (W. Va. 2001)
(recognizing that “[t]he Act was designed to protect unsecured creditors against debtors who make
transfers out of, or make obligations against, the debtor’s estate in a manner adverse to the
creditors’ rights.”). BCI’s allegations offer far more than the “threadbare, formulaic recitation of
an element of a [WVUVTA claim]” that Defendants make them out to be. (See ECF No. 10 at
n.3.) Indeed, these allegations accepted as true more than sufficiently demonstrate a claim under
either subdivision of West Virginia Code § 40–1A–4(a).
USM LLC calls attention to several allegations under Count V contending that these
averments are unrelated to any covered transaction and do not state a claim for relief under the

WVUVTA. In particular, USM LLC cites BCI’s allegations that Defendants implemented the
plan to transfer assets, that Defendants concealed such transfer and the nature of their corporate
and financial structure, and that Defendants conspired to make the alleged transaction. (See ECF
No. 1 at 13 ¶¶ 59(a), (c)–(d).) While perhaps needlessly repeated in Count V, these allegations
directly relate to the alleged covered transaction—the transfer of assets, employees, and
opportunities from USM Corp. to USM LLC for little or no consideration with the intent to evade
payments owed to BCI. Regardless, a motion to dismiss merely tests the legal sufficiency of a
complaint. See Fed. R. Civ. P.12(b)(6). The Court has determined above that the challenged

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Complaint, construed in the light most favorable to BCI, sets forth a “plausible claim for relief”
under the WVUVTA. Iqbal, 556 U.S. at 678. Thus, the inclusion of these factual averments,
whether relevant or not to establishing BCI’s claim under the WVUVTA, is inconsequential here.
Count V therefore withstands Rule 12(b)(6) scrutiny.
IV. CONCLUSION
For the foregoing reasons, the Court DENIES the USM LLC’s Motion to Dismiss Counts
IV and V of the Complaint. (ECF No. 9.)
IT IS SO ORDERED.
The Court DIRECTS the Clerk to send a copy of this Order to counsel of record and any
unrepresented party.
ENTER: May 10, 2019

GE

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10728289. Public record. Not legal advice.