Suzanne Ron v. Avishai Ron ( 2020 )

Case: 20-40248 Document: 00515626059 Page: 1 Date Filed: 11/04/2020
United States Court of Appeals
for the Fifth Circuit United States Court of Appeals
Fifth Circuit
FILED
November 4, 2020
No. 20-40248
Lyle W. Cayce
Clerk
Suzanne S. Ron,
Plaintiff—Appellant,
versus
Avishai Ron, Individually and as Trustee of the Suzanne and Avi
Ron 201 Children's Trust; Gary Stein,
Defendants—Appellees.
Appeal from the United States District Court
for the Southern District of Texas
USDC No. 3:19-CV-211
Before Stewart, Duncan, and Wilson, Circuit Judges.
Per Curiam:*
This appeal involves a dispute between ex-spouses over the alleged
fraudulent transfer of community property funds to a trust established for the
couple’s three children. Here, we review the district court’s judgment
compelling arbitration of Plaintiff-Appellant’s claims against her former
*
Pursuant to 5th Circuit Rule 47.5, the court has determined that this
opinion should not be published and is not precedent except under the limited
circumstances set forth in 5th Circuit Rule 47.5.4.
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No. 20-40248
husband and dismissing her remaining claims against a second named
defendant in the suit. For the following reasons, we AFFIRM.
I. Facts & Procedural History
Suzanne S. Ron and Avishai Ron were married in 1994 and had three
children. The couple enjoyed substantial success in the real estate business
during their twenty-year marriage. In 2012, they established reciprocal trusts
to benefit from the federal gift tax exemption available that year. The trust at
the heart of this dispute was created by Suzanne and was titled the Suzanne
and Avi Ron 2012 Children’s Trust (“Children’s Trust”). According to the
original terms of the Children’s Trust, Suzanne was the settlor, Avi was the
Trustee, the couple’s three children—Daniel, Alexander, and Adam—were
the beneficiaries, and Gary Stein was named “Trust Protector.” As the Trust
Protector, Stein had the authority to add and remove trustees and
beneficiaries and he was also insulated from liability for certain actions
pertaining to the trust.
Suzanne filed for divorce from Avi in 2014 and the divorce was
finalized in April 2017. The final divorce decree dividing the marital estate
awarded Suzanne a $19 million equalization judgment. Avi appealed the
decree and in October 2017, the two mediated their dispute before Alan
Levin. When the mediation ended, they executed a Confidential Mediated
Settlement Agreement (“MSA”). By the terms of the MSA, Suzanne
accepted a reduced equalization judgment with a payment schedule and Avi
agreed to no longer appeal the final divorce decree. The MSA also contained
an arbitration clause pertaining to any future disputes.
In 2018, Suzanne and Avi began to dispute their obligations under the
MSA and Avi obtained an order compelling arbitration before Levin. Then
in June 2019, Suzanne filed suit in federal district court. In her complaint, she
named Avi as a defendant, both individually and as the trustee of the
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Children’s Trust. She alleged that “Avi caused assets in which Suzanne and
Avi held community interests to be transferred to the Trust.” She claimed
that the value of the fraudulent transfer totaled approximately $1.3 million.
She also named Stein as a defendant alleging that, as the Trust Protector, he
assisted Avi in completing the fraudulent transfers by appointing him as a
beneficiary of the Children’s Trust. In total, Suzanne brought two claims
against Avi: (1) conversion; and (2) violations of the Texas Uniform
Fraudulent Transfer Act (“TUFTA”) 1; and three claims against Stein: (1)
civil conspiracy based on conversion; (2) civil conspiracy to violate TUFTA;
and (3) breach of fiduciary duty. She sought a money judgment, imposition
of a constructive trust, damages, injunctive relief, a declaratory judgment,
appointment of a receiver, TUFTA equitable remedies, attorneys’ fees and
expenses, and costs.
Stein moved to dismiss Suzanne’s claims against him pursuant to
Federal Rule of Procedure 12(b)(6) and Avi moved to compel arbitration of
Suzanne’s remaining claims. The magistrate judge issued a memorandum
opinion recommending that Stein’s motion to dismiss be granted. The
following day, it issued a second memorandum opinion recommending that
the district court grant Avi’s motion to compel arbitration. The district court
agreed, adopted the magistrate judge’s memorandum opinions and
recommendations, and granted both motions. Suzanne filed this appeal.
II. Discussion
On appeal, Suzanne argues that the district court erred in granting
Stein’s Rule 12(b)(6) motion to dismiss. She further contends that because
1
Tex. Bus. & Comm. Code § 24.001, et seq.
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there was no valid arbitration agreement in place, the district court erred in
granting Avi’s motion to compel arbitration. We disagree on both counts.
A. Motion to Dismiss
We review the district court’s grant of a motion to dismiss de novo.
Budhathoki v. Nielsen, 898 F.3d 504, 507 (5th Cir. 2018).
Stein’s role, powers, and duties as the Trust Protector were defined
under the express terms of the Children’s Trust. Relevant to Suzanne’s
claims, Stein had the power to add and remove beneficiaries. Section 4.11(e)
of the Children’s Trust describes the Trust Protector’s powers as follows:
The Trust Protector may add as a beneficiary of
any trust established hereunder (i) any
descendant of my husband’s parents; (ii) any
spouse or surviving spouse of any such
descendant (other than [Suzanne]); and (iii) any
charity, subject to any limitations the Trust
Protector determine appropriate. The Trust
Protector may also remove any beneficiary who
was added under this subsection.
According to Suzanne, Stein took advantage of this provision and appointed
Avi as a beneficiary of the Children’s Trust so that Avi could complete the
alleged fraudulent transfer of community property to the trust. On these
grounds, she brought claims against Stein for civil conspiracy based on
conversion, civil conspiracy to violate TUFTA, and breach of fiduciary duty.
In its memorandum opinion, the magistrate judge determined that
Suzanne’s civil conspiracy claim failed under Chu v. Hong, 249 S.W.3d 441
(Tex. 2008). We agree. In that case, the Texas Supreme Court held that
because there is no independent tort for a spouse’s wrongful disposition of
community property, third parties similarly could not be held liable on
allegations of conspiring with the spouse. Id. at 447 (“Because [the plaintiff]
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has no tort claim against her former husband under Texas community-
property law, she has no conspiracy claim against [her former husband’s
attorney] for conspiring in such a tort.”). Here, because Suzanne could not
advance a claim in tort against Avi for the alleged fraudulent transfer of their
community assets to the Children’s Trust, she could not bring a claim against
Stein for conspiring with Avi to complete the transfer. Id.
Next, the magistrate judge addressed Suzanne’s claim that Stein
conspired with Avi to violate TUFTA. Citing our decision in Mack v. Newton,
737 F.2d 1343 (5th Cir. 1984), the magistrate judge held that her claim failed
because Stein did not benefit from or receive a property interest in the alleged
fraudulent transfer of community property. We agree with this reasoning. See
id. at 1361 (“[W]e are persuaded that the Texas statute . . . does not provide
for recovery other than recovery of the property transferred or its value from
one who is, directly or indirectly, a transferee or recipient thereof.”).
Moreover, as the magistrate judge observed, most other jurisdictions
similarly decline to permit claims based on derivative liability for fraudulent
transfers. See Mann v. GTCR Golder Rauner, L.L.C., 483 F. Supp. 2d 884,
918 (D. Ariz. 2007) (“[T]here is no independent cause of action for aiding
and abetting a fraudulent transfer under the [Arizona Uniform Fraudulent
Transfer Act].”); Freeman v. First Union Nat’l Bank, 865 So. 2d 1272, 1277
(Fla. 2004) (“[W]e conclude that [the Florida Uniform Fraudulent Transfer
Act] was not intended to serve as a vehicle by which a creditor may bring a
suit against a non-transferee party . . . for monetary damages arising from the
non-transferee party’s alleged aiding-abetting of a fraudulent money
transfer.”); Magten Asset Mgmt. Corp. v. Paul Hastings Janofsky & Walker
L.L.P., 2007 WL 129003, at *3 (D. Del. 2007) (recognizing that “[t]he
majority of courts interpreting state UFTA laws . . . have concluded that
liability cannot be imposed on non-transferees under aiding and abetting or
conspiracy theories”). In other words, TUFTA liability is generally
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restricted to parties to the transfer. As someone who was not a party to and
did not benefit from the alleged fraudulent transfer, Stein could not be held
personally liable under TUFTA.
Finally, the magistrate judge rejected Suzanne’s claim that, as Trust
Protector, Stein breached both formal and informal fiduciary duties owed to
her under the terms of the trust. The magistrate judge reasoned that the
express terms of the trust did not create a formal fiduciary duty between Stein
and Suzanne since she was neither a beneficiary nor an interested party to the
trust. We agree.
Fiduciary relationships can be formal or informal. “A formal fiduciary
relationship arises as a matter of law in certain relationships, such as attorney-
client, partnership, and trustee relationships.” Anglo-Dutch Petrol. Int’l, Inc.
v. Smith, 243 S.W.3d 776, 781 (Tex. App.-Houston [14th Dist.] 2007, pet.
denied) (citing Meyer v. Cathey, 167 S.W.3d 327, 330 (Tex. 2005)). Informal
fiduciary relationships “can arise from a moral, social, domestic or purely
personal relationship of trust and confidence, but to impose an informal
fiduciary duty in a business transaction, the special relationship of trust and
confidence must exist prior to and apart from the agreement made the basis
of the suit.” Id. (citing Meyer, 167 S.W.3d at 331). “Not every relationship
involving a high degree of trust and confidence rises to a fiduciary
relationship.” Id. at 781–82 (citing Meyer, 167 S.W.3d at 330).
Section 4.01 of the Children’s Trust provides that “The purpose of a
Trust Protector is to direct [Suzanne’s] Trustee [i.e., Avi] in certain matters
concerning the trust, and to assist, if needed, in achieving [Suzanne’s]
objectives as expressed by the other provisions of [Suzanne’s] estate plan
hereunder.” Although, as Suzanne points out, the Trust Protector’s
authority is conferred in a fiduciary capacity, that does not equate to the
establishment of a fiduciary relationship between Stein and Suzanne. At
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most, by its plain terms, Stein’s obligations under the Children’s Trust are
to the trust itself and to the Trustee—Avi.
We further agree with the magistrate judge’s determination that no
informal fiduciary relationship existed between Stein and Suzanne because
Suzanne failed to point to the existence of a special relationship of trust and
confidence between herself and Stein that existed prior to, and apart from,
the establishment of the Children’s Trust. Id. at 781 (“[T]o impose an
informal fiduciary duty in a business transaction, the special relationship of
trust and confidence must exist prior to and apart from the agreement made
the basis of the suit.”). The district court did not err in granting Stein’s
motion to dismiss.
B. Motion to Compel Arbitration
We review the district court’s ruling on a motion to compel arbitration
de novo. Bowles v. OneMain Fin. Grp., L.L.C., 954 F.3d 722, 725 (5th Cir.
2020).
In ruling on a motion to compel arbitration, the court must first
determine whether the parties agreed to arbitrate the particular type of
dispute at issue. Carey v. 24 Hour Fitness, USA, Inc., 669 F.3d 202, 205 (5th
Cir. 2012). In answering this question, the court considers: “(1) whether
there is a valid agreement to arbitrate between the parties; and (2) whether
the dispute in question falls within the scope of that arbitration agreement.”
Id. The Federal Arbitration Act reflects a “liberal federal policy favoring
arbitration.” CompuCredit Corp. v. Greenwood, 565 U.S. 95, 98 (2012).
Suzanne brought claims against Avi alleging conversion and violations
of TUFTA. In analyzing Avi’s motion to compel arbitration, the magistrate
judge correctly determined that the MSA amounted to prima facie evidence
of a valid agreement to arbitrate. See Ridge Nat. Res. L.L.C. v. Double Eagle
Royalty, L.P., 564 S.W.3d 105, 120–21 (Tex. App.—El Paso 2018, no pet.)
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(“The signed container contract sets out the terms of the underlying
transaction, and the arbitration clause evinces a mutual intent to arbitrate. As
such, we find that there is prima facie evidence of formation[.]”); see also
Kmart Stores of Tex., L.L.C. v. Ramirez, 510 S.W.3d 559, 565 (Tex. App.—El
Paso 2016, pet. denied).
Suzanne argues that her claims under the Children’s Trust do not fall
within the scope of the MSA and thus, the arbitration clause does not apply
to those claims. We disagree. The record confirms that the MSA contains an
extremely broad arbitration clause requiring the parties to “submit any
dispute related to this agreement to Alan Levin for binding arbitration.” As
the magistrate judge explained, the allegations in Suzanne’s complaint
against Avi pertaining to the Children’s Trust repeatedly referenced the
MSA. For example, in her amended complaint under the Children’s Trust,
Suzanne specifically alleged that the MSA was the result of Avi’s fraud and
breach of fiduciary duties. She also claimed that, under the MSA, she was
Avi’s creditor and that the alleged $1.3 million fraudulent transfer was
executed to defraud her as a creditor under the MSA. For these reasons, we
conclude that Suzanne’s allegations against Avi involving the Children’s
Trust squarely implicate the terms of the MSA and thus, fall within the scope
of the valid arbitration agreement contained therein. The MSA’s release
clause further supports this conclusion since it provides that the parties
jointly released each other from “any and all claims” through the date of its
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execution. The district court did not err in granting Avi’s motion to compel
arbitration. 2
III. Conclusion
The district court’s judgment granting Stein’s motion to dismiss and
Avi’s motion to compel arbitration is AFFIRMED.
2
Suzanne also argues that the arbitration provision in the MSA is substantively
unconscionable because Levin’s service as the parties’ mediator disqualifies him from
serving as their arbitrator. We disagree. As the magistrate judge noted, Texas courts have
held that a mediator can serve as an arbitrator in the same matter. See In re Provine, 312
S.W.3d 824, 830 (Tex. App.—Houston [1st Dist.] 2009, no pet.) (“Our court has held that
a mediator can serve as an arbitrator in the same matter with the parties’ consent, because
the parties know that information disclosed to the mediator during mediation can be used
by the mediator in making an arbitration decision.”).
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