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Judge Gross Denies Motion to Dismiss Adversary Proceeding, Finding the Pleaded Facts are Sufficient to Plausibly Establish Claims

By Charlene D. Davis

On August 31, 2015, Judge Kevin Gross of the United States Bankruptcy Court for the District of Delaware (the “Court”) entered an order and opinion denying a motion to dismiss an adversary proceeding brought by Alan Halperin, as Trustee of GFES Liquidation Trust (the “Trustee”) against Michael B. Moreno (“Mr. Moreno”) and related entities (together with Mr. Moreno, the “Moreno Defendants”).   Alan Halperin, as Trustee of the GFES Liquidation Trust v. Michael B. Moreno et al., Adv. Proc. 15-50262(KG).  The Moreno Defendants had sought dismissal of a 55 page, 329 paragraph, 31 count complaint asserting claims for fraudulent and preferential transfers, breaches of fiduciary duties and breach of contract as well as a series of objections to claims.

The Court first summarized the standards to guide its analysis of a complaint subject to a motion to dismiss.  It noted that Rule 12(b)(6), which provides for dismissal for failure to state a claim upon which relief can be granted, is inextricably linked to Rule 8(a)(2) which provides that a pleading that states a claim for relief must contain a short and plain statement of the claim showing that the pleader is entitled to relief.  The Court described the U.S. Supreme Court decision in Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (23007) as establishing a notice pleading standard of plausibility, not probability, and applied a two-step analysis articulated by the United States Court of Appeals  for the Third Circuit in Fowler v. UMPC Shadyside, 578 F.3d 203, 210-211 (3d Cri. 2009).  The two-step process requires a court to 1) separate the factual and legal elements of the claim; and 2) determine if the facts alleged in the complaint are sufficient to show that the plaintiff has a plausible claim for relief.

Applying this approach, the Court easily found that the Trustee had pleaded facts sufficient to plausibly establish all of the claims in the complaint based on the conduct of the Moreno Defendants with respect to PowerGen technology/ business opportunity owned by the Debtor Green Filed Energy Services prior to its chapter 11 filing.

A copy of the Court’s opinion is available here.

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