United States District Court, E.D. Michigan, Southern Division
K. JIN LIM as TRUSTEE OF MP LIQUIDATING CO. LLC, Plaintiff,
MILLER PARKING CO., JAMES N. MILLER REVOCABLE TRUST UTA, NATHAN L. MILLER TRUST, ALISON J. MILLER TRUST, DAVID M. MILLER TRUST, and JAMES N. MILLER, Defendants.
OPINION AND ORDER DENYING DEFENDANTS' MOTIONS FOR SETOFF AND FOR PARTIAL SUMMARY JUDGMENT, AND GRANTING IN PART AND DENYING IN PART PLAINTIFF'S AND DEFENDANTS' MOTIONS TO STRIKE OR LIMIT EXPERT TESTIMONY
DAVID M. LAWSON, District Judge.
Plaintiff K. Jin Lim, the bankruptcy trustee of the estate of MP Liquidating Co. LLC, formerly known as Miller Parking Company, LLC (Miller Detroit), has filed a turnover action based on various theories against the current and former defendants. She alleges that Miller Detroit funneled many of its assets to a company in Illinois called Miller Parking Company (Miller Chicago), that Miller Chicago is the alter ego of Miller Detroit, and that both companies made fraudulent transfers to the detriment of the bankruptcy estate that should be set aside. Lim settled with the former defendants; the remaining defendants are Miller Chicago, James Miller, and Miller's children's trusts. Those defendants have filed a motion for setoff and a second motion styled in the alternative as a motion in limine or for partial summary judgment, both intended to limit the defendants' exposure to damages. The parties also have filed motions to exclude or limit the testimony of the other side's expert witnesses. The Court heard oral argument on January 8, 2015. The Court finds no merit in the defendants' motions seeking to limit damages and will deny them for reasons explained below. There is merit to each side's motions to preclude the other's expert witnesses from giving legal opinions, and therefore the Court will grant those motions in part.
The events giving rise to this case began in 2004, when Alan Ackerman and his company CH Holding sued Ackerman's business partner Bruce Miller and his company, Miller Detroit, in the Oakland County, Michigan circuit court, following a breakdown in the business relationship between the partners and their respective companies. Defendant James N. Miller (Bruce Miller's son) was then the president of Miller Detroit and a principal shareholder and officer of another Miller family business, Miller Chicago. In February 2009, while the Oakland County case was pending, a third party that held a long-term lease on Miller Chicago's major capital asset, the Bismark parking deck in Chicago, exercised an option in the lease to buy the deck. That left Miller Chicago with no ongoing operations or major assets other than cash from the sale. On June 30, 2009, Ackerman won a judgment in the Oakland County case against Miller Detroit for approximately $3, 000, 000. In September 2009, James Miller distributed $7, 000, 000 in cash held by Miller Chicago to its shareholders. Not long after, James Miller dissolved the Chicago company. On October 7, 2009, Miller Detroit filed for bankruptcy.
On October 7, 2011, Lim (the bankruptcy trustee for Miller Detroit) filed her complaint in this case against James Miller, Miller Chicago, and its former shareholders, which included Bruce Miller's children and grandchildren (Andrew Stein, Janet Stein, Matthew Stein, Amy M. Weinstein, Benjamin Weinstein, and Emily Weinstein). Lim alleged that James and Bruce Miller commingled the affairs of their two companies and carried out a fraudulent scheme to funnel assets from Miller Detroit to Miller Chicago, in order to evade creditor claims against Miller Detroit.
On January 11, 2013, after the Court granted Lim's motion to amend, Lim filed a nine-count amended complaint. In count I of her amended complaint, the trustee alleges that "[t]he payments by [Miller Detroit] to [Miller Chicago] made within the twelve (12) months prior to the bankruptcy filing date are voidable [under] 11 U.S.C. §547(b)." Am. Compl. ¶ 28. In counts II and III, she contends that "[t]he payments and other transfers made by Debtor to Defendants during the two years prior to the filing date of this case are voidable as fraudulent transfers [under] 11 U.S.C. § 548, " id. ¶ 29, and "[t]he payments and other transfers made by Debtor to Defendants since the date when the claims of creditors Ackerman and CH Holding Company arose are voidable as fraudulent transfers. 11 U.S.C. § 544(b)(1), MCL § 566.34-36, " id. ¶ 30. In count IV, the trustee alleges that "[t]he distributions by [Miller Chicago] to its defendant shareholders are voidable by Plaintiff to the extent of Plaintiff's claims against Defendant MPC." Id. ¶ 31. In counts V and VI the trustee seeks substantive consolidation of Miller Chicago and Miller Detroit and a judicial determination that Miller Detroit was the alter ego or a mere instrumentality of Miller Chicago for the purposes of the bankruptcy proceedings. In count VII, the trustee seeks damages for alleged breaches of fiduciary duty by defendant James N. Miller in his capacity as president of Miller Detroit. In count VIII, the trustee alleges a breach of contract on the premise that "[Miller Detroit] is entitled to compensation from [Miller Chicago] of not less than $4.6 million according to a spreadsheet provided by Defendant James N. Miller." Id. ¶ 50. Finally, in count IX, the trustee seeks an accounting of all transactions involving the Detroit and Chicago entities, alleging that the defendants have failed or refused to provide any accurate disclosure of the consideration received in exchange for certain promissory notes issued by Miller Detroit to Miller Chicago or the various payments made under those notes and other arrangements between the companies.
In early 2013, several of the parties negotiated a triangular settlement to resolve all of the claims as to some of the common defendants in this matter and in the related case of CH Holding v. Miller Parking, 12-10629. The parties to the settlement were the trustee, Ackerman, CH Holding, defendants Amy M. Weinstein, Emily Weinstein, Benjamin Weinstein, Matthew Stein, Andrew Stein, and Janet Stein (the children and grandchildren of Bruce Miller), and non-party Doris Miller (mother/grandmother of the Weinstein and Stein defendants). The settlement was conditioned on (1) the execution of a settlement agreement between the CH Holding plaintiffs and the Weinstein and Stein defendants that would result in the dismissal of all claims against those defendants in CH Holding, 12-10629; (2) payment by the Weinstein and Stein defendants of $250, 000 to the bankruptcy estate; and (3) Doris Miller conveying to the CH Holding plaintiffs her 10% interest in Center Parking Associates Limited Partnership, which derived income from certain parking facilities in Detroit. The parties to the settlement stipulated for the purposes of their agreement that the Center Parking interest would be valued at $1 million. The settlement agreement entered into between the trustee and the CH Holding plaintiffs provides in relevant part that:
Doris Miller shall enter into an Irrevocable Assignment and Agreement pursuant to which she shall assign to [the CH Holding plaintiffs], jointly, her limited partnership interest (the "Interest") in Center Parking Associates Limited Partnership (the "Garage"), which Interest constitutes ten percent (10%) of the issued and outstanding limited partnership interests in the Garage, pursuant to the terms of the CH/Weinstein/Stein Settlement.
The Interest, for purposes of this agreement and allocation of payment only, shall be valued at $1 Million (the "Valuation").
CH shall indemnify the [bankruptcy] Estate up to the amount of any distribution on account of any allowed claims of the James N. Miller Revocable Trust u/t/a dated 11/19/1998 (the "Trust"), as if the Interest had been liquidated by the Trustee in the amount of the Valuation and such proceeds had been distributed to unsecured creditors of the Estate. For purposes of such indemnification, the maximum amount of claims of the Trust shall be $2, 145, 648.69. In the event the claim of the Trust is allowed, CH shall forthwith remit to the Estate the total indemnity amount owed pursuant to this Agreement.
The Trustee will be entitled to a commission based on the Valuation as if [the] Interest had been liquidated as part of the Estate.
The Trustee may make an interim distribution (the "Interim Distribution") on account of Interim Distribution Claims (as defined herein) against the Estate based on the Valuation as if the Interest had been liquidated as part of the Estate.
Plf.'s Resp. [dkt. #126], Ex. A, Settlement Agreement & Mutual Release (re Trustee, Ackerman, and CH Holding) at 2 (Pg ID 1401). As a condition of the settlement, the CH Holding plaintiffs released the Trustee from "any and all post-petition liabilities, claims, causes of action, debts, alleged unpaid amounts, obligations, costs, or damages, " with the express exception of "any Proofs of Claim (or any claim(s) against the Estate asserted therein) filed or to be filed or amended by CH in the [Miller Detroit] bankruptcy." Id. at 4 (Pg ID 1403).
Under the terms of a separate, interlocking agreement, the trustee released the Weinstein and Stein defendants as well as Doris Miller from all past, present, or future claims that the trustee might have. In particular, the agreement stated that "[t]he Trustee expressly releases, acquits and discharges any and all claims that she could have [against Doris Miller] on behalf of any creditor in the [Miller Detroit] bankruptcy case." Plf.'s Resp. [dkt. #126], Ex. A, Settlement Agreement & Mutual Release (re Trustee, Weinstein Defs., and Stein Defs.) at 2-3 (Pg ID 1446-47). The CH Holding plaintiffs likewise executed a release of any and all claims they might have against either the Weinstein and Stein defendants or Doris Miller individually.
The bankruptcy court approved the settlement on October 22, 2013. Defendant James N. Miller and the various Miller family trust defendants appealed the approval decision to this Court, and the Court affirmed the bankruptcy court's order approving the settlement on May 14, 2014. Subsequently, on August 28, 2014, the Court entered a stipulated order dismissing all claims against the Weinstein and Stein defendants. The defendants that now remain are Miller Chicago, James N. Miller, and the various Miller family trusts for which James Miller acted as trustee.
Under the Court's scheduling order, discovery closed on October 20, 2014, and the deadline for dispositive motions and motions challenging experts was November 3, 2014. The parties filed their respective motions on that date. The jury trial will begin on February 10, 2015.
A. Defendants' motion for setoff
The Miller defendants argue that because the trustee asserted all of her claims in the complaint against the defendants generally, and because she then settled with some of the defendants to resolve the claims against those individuals only, the settlement proceeds received by the bankruptcy estate or the estate's creditors (i.e., CH Holding), necessarily must represent satisfaction in part of the same or related claims as those that remain pending against the Miller defendants. The Miller defendants do not elaborate on this argument in either their motion or reply, but contend only that "it is... axiomatic that the Miller defendants are entitled to a setoff for any amounts previously paid to the Trustee to avoid a double recovery." The Miller defendants further ask that they be allowed to present evidence to ...