United States District Court, E.D. Virginia, Alexandria Division
JOHN S. BENNETT, Plaintiff,
JAMES GARNER, et al., Defendants.
M. HILTON UNITED STATES DISTRICT JUDGE.
MATTER comes before the Court on Plaintiff's Motion for
Partial Summary Judgment and Defendants' Motion for
John Bennett is the holder of a $262, 500 outstanding
judgment against Defendant Virtus Consulting, LLC
("Virtus") arising from an arbitration award for
breach of a contract (the "Bennett Agreement")
entered between him, Virtus, and Defendant Jim Garner, the
sole member of Virtus. Under this agreement, Bennett, a
former employee of Virtus, had agreed to assist in the sale
of virtually all of Virtus's assets to the Solomon
Edwards Group ("SEG") in return for a share of the
profits from the sale (the "SEG Asset Purchase").
Bennett performed under the Bennett Agreement, but only
received partial payment, leading to arbitration in which
Bennett sought judgment against both Virtus and Garner. The
arbitration resulted in a $387, 500 award for Bennett against
Virtus, of which Garner was jointly and severally liable for
$125, 000. Garner subsequently paid $125, 000 to Bennett, but
no collection was ever made against Virtus, leaving $262, 500
alleges that during post-judgment discovery, he learned that
Garner had fraudulently structured the SEG Asset Purchase in
such a way as to divert all consideration to him and leave
Virtus without any assets with which to satisfy its
obligations to Bennett. Bennett asserts four claims against
Garner: breach of contract, on the theory that Garner used
Virtus as his alter ego and instrumentality to avoid
liability to Bennett; fraud in the inducement; fraudulent
transfer under Virginia Code § 55-80; and void voluntary
transfer under Virginia Code § 55-81.
filed a Motion for Partial Summary Judgment on February 6,
2018, arguing that Counts III and IV should be decided in his
favor as a matter of law. Defendants also filed a Motion for
Summary Judgment on February 6, 2018. Both motions were
argued on February 23, 2018. This Court is of the opinion
that Defendants are entitled to Summary Judgment on all
Federal Rule of Civil Procedure 56, a court should grant
summary judgment if the pleadings and evidence show that
there is no genuine dispute as to any material fact and that
the moving party is entitled to judgment as a natter of law.
Fed.R.Civ.P. 56(c); see Celotex Corp. v. Catrett,
477 U.S. 317, 322 (1986). In reviewing a motion for summary
judgment, the court views the facts in the light most
favorable to the non-moving party. See Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 255 (1986), Once a
motion for summary judgment is properly made, the opposing
party has the burden to show that a genuine dispute of
material fact exists. See Matsushita Elec. Indus. Co. v.
Zenith Radio Corp., 475 U.S. 574, 586-87 (1986). The
Court finds there is no genuine dispute of material fact and
this case is ripe for summary judgment.
1:6 of the Rules of the Supreme Court of Virginia provides
the standard for res judicata under Virginia law.
The rule bars any claim for relief arising from the
"same conduct, transaction or occurrence" as a
prior claim that was decided on the merits by a final
judgment. Under this rule, a Defendant must show that: (1)
there was a prior claim for relief decided on the merits by
valid and final judgment; (2) the parties in each suit are
identical or in privity with each other; and (3) the claim
made in the later suit arises from the same conduct,
transaction, or occurrence as the claim in the first suit.
See Lee v. Spoden, 290 Va. 235, 245 (2015). Rule 1:6
bars not only claims that were in fact brought in the earlier
suit, but also those claims that could have been litigated.
Va. S.Ct. R. l:6(a); see also Martin-Banqura v. Virginia
Dept. of Mental Health, 640 F.Supp.2d 729, 738 (E.D. Va.
2009). Furthermore, under Virginia law, res judicata
applies to claims decided in arbitration. See Waterfront
Marine Constr. V. N. End 4934s Sandbridge Bulkhead
Grps, 251 Va. 417, 430 (1996).
argue that the entire dispute underlying this case is based
on Bennett's desire to be paid under the Bennett
Agreement, and therefore all of the claims arise from the
facts and circumstances surrounding that contract. They argue
that because the Bennett Agreement was intrinsically related
to the SEG Asset Purchase, the circumstances and structure of
the SEG Asset Purchase are also part of the same conduct,
transaction, and occurrence giving rise to the original
breach of contract claim. The fact that Bennett did not in
raise the current claims against Bennett in the original
arbitration does not save them from being barred by res
judicata, since Bennett could have brought the same
claims during arbitration.
Court holds that Bennett's claims are barred by res
judicata. The conduct, transaction, and occurrence underlying
all of Bennett's claims relates to the Bennett Agreement,
the structure and execution of the SEG Asset Purchase
Agreement, and the facts and circumstances surrounding the
execution and performance (or nonperformance) of those
agreements. This is the same conduct, transaction, and
occurrence underlying the original arbitration. Bennett could
have brought any of the claims he now brings against Garner
in the arbitration.
further argue that Bennett's claim for fraud in the
inducement is barred by the applicable statute of
limitations. Under Virginia law, a two-year statute of
limitations applies to "every action for damages
resulting from fraud." Va. Code § 8.01-243(A).
Since fraud in the inducement is a species of fraud, this
two-year statute of limitations applies to Plaintiff's
filed this suit on May 19, 2017. The Bennett Agreement was
signed on September 22, 2012. The first missed payment under
the Bennett Agreement was due on March 31, 2013, and Bennett
demanded arbitration on or about April 9, 2013. During the
ensuing arbitration, copies of the documents outlining the
structure of the SEG Asset Purchase were provided to Bennett,
on or about October 24, 2013. Thus, Bennett was aware of the
circumstances surrounding the SEG Asset Purchase at the time
of the arbitration. Since his present claim for fraud in the
inducement is based on the structuring of and the
circumstances surrounding the SEG Asset Purchase, Bennett was
on notice of his potential fraud claim at least as early as
October 2013. Accordingly, the fraud in the inducement claim
was brought a year and a half too late, and is thus barred.
foregoing reasons, this Court finds that summary judgment
should be granted in favor of the ...