UNITED STATES BANKRUPTCY COURT 

EASTERN DISTRICT OF VIRGINIA 

Richmond Division 

In re: Rescue Rangers, LLC, Case No. 16-32930-KLP 

 Debtor. Chapter 7 

Bruce H. Matson, 

 Plaintiff, 

v. Adv. Pro. No. 17-03652-KLP 

Rescue Rangers, LLC, Delaware, 

Office Dispatch, LLC, 

Jeffery D. Katz, 

Christopher L. Young, 

JDKatz, P.C., and 

George Dante Suero, 

 Defendants. 

MEMORANDUM OPINION 

 This matter is before the Court on the motion of Jeffrey D. Katz 

(“Katz”), Christopher L. Young (“Young”) and JDKatz, P.C. (“JDKatz”) 

(collectively, the “Katz Defendants”), to compel arbitration or to dismiss 

Counts IX, X, XI and XII of the second amended complaint (the “Second 

Amended Complaint”) filed by chapter 7 trustee Bruce H. Matson (the 

“Trustee”).1 Also before the Court is the motion of Defendant George Dante 

Suero (“Suero”) to dismiss him as a defendant and to dismiss Counts IX and 

XI of the Second Amended Complaint. For the reasons set forth herein, 

 

1 On February 21, 2018, Bruce H. Matson resigned as trustee, and Lynn L. 

Tavenner was appointed trustee in the Debtor’s case. Unless otherwise noted, all 

references to “the Trustee” in this Memorandum Opinion are to Matson in his role as 

trustee, as all of the relevant events took place during his tenure as trustee. 

Case 17-03652-KLP Doc 88 Filed 03/22/18 Entered 03/22/18 16:38:58 Desc Main

 Document Page 1 of 28
2 

Suero’s motion to dismiss will be denied, and the Katz Defendants’ motion 

will be granted in part and deferred in part. 

BACKGROUND 

 On June 10, 2016, Rescue Rangers, LLC, (the “Debtor”) filed a 

voluntary petition for relief under Chapter 7 of the Bankruptcy Code.2 Suero 

acted as the Debtor’s designee and testified on its behalf at the Debtor’s § 341 

meeting of creditors. Plaintiff Bruce Matson was appointed as trustee in the 

Debtor’s case. 

 On May 19, 2017, the Trustee filed a complaint (the “Complaint”) 

against the Katz Defendants, Rescue Rangers, LLC, Delaware (“Rescue 

Rangers Delaware”), and Office Dispatch, LLC (“Office Dispatch”), seeking to 

avoid and recover transfers pursuant to §§ 544, 548, and 550 of the 

Bankruptcy Code, seeking turnover of property of the estate, seeking a 

declaration that Rescue Rangers Delaware and Office Dispatch are the 

successors to the Debtor, seeking a declaration that Office Dispatch is the 

alter ego of the Debtor, and seeking to hold the Katz Defendants liable for 

aiding and abetting the fraudulent transfer of the Debtor’s assets to Rescue 

Rangers Delaware (the “Transfer”) and for conspiring to fraudulently transfer 

the Debtor’s assets. 

The Katz Defendants moved to dismiss Counts IX and X of the 

Complaint (the “Motion to Dismiss”) for failure to state a claim upon which 

relief can be granted, asserting that as a matter of law they could not be 

 

2 All references to the Bankruptcy Code are to 11 U.S.C. §§ 101-1532. 

Case 17-03652-KLP Doc 88 Filed 03/22/18 Entered 03/22/18 16:38:58 Desc Main

 Document Page 2 of 28
3 

liable for aiding, abetting, or conspiring to make the Transfer because they 

were neither transferors nor transferees in the Transfer. In Count IX of the 

Complaint, the Trustee had alleged that the Katz Defendants aided and 

abetted the fraudulent transfers by counseling and assisting the Debtor in 

fraudulently transferring the assets and operations of the Debtor to Rescue 

Rangers Delaware. In Count X of the Complaint, the Trustee had alleged 

that the Katz Defendants conspired with the Debtor’s principal and Rescue 

Rangers Delaware to commit a fraud by agreeing to a scheme to transfer the 

Debtor’s assets to Rescue Rangers Delaware for no consideration. 

 On August 1, 2017, after the Court had taken the Motion to Dismiss 

under advisement, the Trustee amended the Complaint (the “Amended 

Complaint”) by adding two additional counts pursuant to §§ 548 and 550, 

seeking to avoid and recover payments made to JDKatz in the two years 

preceding the debtor’s bankruptcy filing.3 Counts IX and X of the Complaint 

were not affected by the amendment. On August 9, in response to the 

Amended Complaint, the Katz Defendants filed an amended motion to 

dismiss (the “Amended Motion”). 

The Court granted the Amended Motion, ruling that Counts IX and X 

of the Amended Complaint did not sufficiently state a cause of action under 

 

3 The Trustee moved for permission to amend the Complaint on July 20, 2017. 

There was no opposition to the motion, and the Court granted the motion by order 

entered July 31, 2017. 

Case 17-03652-KLP Doc 88 Filed 03/22/18 Entered 03/22/18 16:38:58 Desc Main

 Document Page 3 of 28
4 

Virginia law.4 However, the Court noted that it might be possible for the 

Trustee to withstand a motion to dismiss if given an opportunity to file an 

amended pleading. Therefore, the Court gave the Trustee thirty days within 

which to file an amended complaint. 

The Trustee timely filed the “Second Amended Complaint” on October 

30, 2017. The Second Amended Complaint essentially includes the same first 

eight counts as the Amended Complaint but adds Suero as a defendant in 

Count VII, the alter ego count.5 With respect to the remaining counts, the 

Second Amended Complaint differs from the Amended Complaint. The 

remaining counts are as follows: 

 

4 The Court’s ruling included the Amended Motion, finding that the filing of the 

Amended Complaint superseded the original Motion to Dismiss. 

5 In Counts I-VIII of the Complaint, Amended Complaint, and Second Amended 

Complaint the Trustee essentially pled as follows: 

Count I - the Debtor’s transfer of its assets and operations to Rescue 

Rangers Delaware (the “Transfer”) was made with the intent to delay 

hinder or defraud its creditors and are avoidable under 11 U.S.C. 

§§ 544(b)(1) and Va. Code Ann. § 55-80. 

Count II - the Transfer was not made for consideration deemed 

valuable in law and was made while the Debtor was insolvent (or 

rendered insolvent) and is thus avoidable pursuant to 11 US.C. 

§ 544(b)(1) and Va. Code Ann. § 55-81. 

Counts III and IV - the Transfer is avoidable pursuant to 11 U.S.C. 

§ 548(a)(1)(A) and (B). 

Count V - the Trustee seeks, upon avoidance, to recover the Transfer 

or its value pursuant to 11 U.S.C. § 550(a). 

Count VI - Office Dispatch and Rescue Rangers should be held liable 

for the Debtor’s obligations as the Debtor’s successors in interest. 

Count VII - Office Dispatch should be liable for the Debtor’s debts as 

the Debtor’s alter ego. 

Count VIII - Rescue Rangers Delaware must turn over all of the 

Debtor’s accounts receivable that it collected but which should have 

gone to the Debtor, including all accounts receivable collected 

postpetition. 

The Court notes that the numbering of the counts is slightly out of order in 

the Second Amended Complaint. 

Case 17-03652-KLP Doc 88 Filed 03/22/18 Entered 03/22/18 16:38:58 Desc Main

 Document Page 4 of 28
5 

Count IX – Conversion. The Trustee alleges that Suero 

and Rescue Rangers Delaware converted the Debtor’s assets and 

operations by transferring its assets and operations to Rescue 

Rangers Delaware and seeks an award of actual damages. 

Count IXA6 – Breach of Fiduciary Duty. The Trustee 

alleges that Suero breached his fiduciary duty to the Debtor and 

seeks an award of actual and punitive damages. 

Count X – Aiding and Abetting Breach of Fiduciary Duty. 

The Trustee alleges that the Katz Defendants aided and abetted 

Suero’s breach of his fiduciary duty to the Debtor and seeks an 

award of actual and punitive damages. 

Count XI – Statutory Business Conspiracy. The Trustee 

alleges that Suero and the Katz Defendants conspired to injure 

the Debtor in its business in violation of Virginia Code §§ 18.2-

499 and 18.2-500 and seeks an award of treble damages and 

attorney’s fees. 

Count XII – Legal Malpractice. The Trustee alleges that 

the Katz Defendants breached their duties to the Debtor and 

breached their contract with the Debtor by advising and 

assisting Suero in transferring the Debtor’s assets to Rescue 

Rangers Delaware and seeks actual and punitive damages. 

 

6 There are two counts labeled IX in the Second Amended Complaint. For clarity, 

the Court has labeled the Fiduciary Duty count as Count IXA. 

Case 17-03652-KLP Doc 88 Filed 03/22/18 Entered 03/22/18 16:38:58 Desc Main

 Document Page 5 of 28
6 

 Count XIII – Avoidance of Fraudulent Transfers to JD 

Katz. The Trustee alleges that the payment of $43,776.25 in 

fees to JDKatz during the two years prior to the filing of the 

Debtor’s bankruptcy case were fraudulent transfers within the 

meaning of § 548(a)(1)(B) of the Bankruptcy Code and are 

avoidable. 

 Count XIV – Recovery of Fraudulent Conveyance. The 

Trustee seeks to recover, pursuant to 11 U.S.C. § 550(a), the fees 

paid to JDKatz by the Debtor, if those fees are avoided in Count 

XIII. 

The prayer in the Second Amended Complaint also asks for an award of 

“costs and disbursements incurred by the Trustee” in this adversary 

proceeding. 

 On November 13, 2017, the Katz Defendants filed a motion to dismiss 

Counts IXA (breach of fiduciary duty), X (aiding and abetting breach of 

fiduciary duty), XI (statutory business conspiracy), and XII (legal 

malpractice) of the Second Amended Complaint (the “Katz Motion”). On 

December 4, 2017, Suero filed a motion to dismiss Counts IX (conversion) and 

XI (statutory business conspiracy) (the “Suero Motion” and together with the 

Katz Motion, the “Motions.”) The Trustee has responded to the Motions, and 

the Katz Defendants have filed a supplemental response. A hearing on the 

Case 17-03652-KLP Doc 88 Filed 03/22/18 Entered 03/22/18 16:38:58 Desc Main

 Document Page 6 of 28
7 

Motions was held on December 20, 2017, after which the Court took the 

Motions under advisement. 

JURISDICTION 

 The Second Amended Complaint seeks an award of damages against 

Office Dispatch, Rescue Rangers Delaware, the Katz Defendants and Suero. 

The recovery of damages would affect the amount of property available for 

distribution to creditors, making the claims “related to” the Debtor’s 

bankruptcy estate. Therefore, pursuant to 28 U.S.C. §§ 157 and 1334(b) and 

the general order of reference for the U.S. District Court for the Eastern 

District of Virginia dated August 15, 1984, this Court has subject matter 

jurisdiction.7 Venue is proper pursuant to 28 U.S.C. §§ 1408 and 1409. 

STANDARD OF REVIEW AND FACTUAL ALLEGATIONS 

Under Rule 12(b)(6), all well-pleaded factual allegations in a complaint 

are taken as true, and all reasonable inferences are drawn in favor of the 

complaining party. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 556 (2007); 

Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). 

To survive a motion to dismiss, a complaint must contain 

sufficient factual matter, accepted as true, to “state a claim to 

relief that is plausible on its face.” A claim has facial 

plausibility when the plaintiff pleads factual content that 

 

7 The Katz Defendants deny that Counts IXA, X, XI, and XII are core proceedings 

and have not consented to entry of a final order by the bankruptcy court. To the 

extent that these counts neither arise “under” title 11 nor arise “in” a case under 

title 11, 28 U.S.C. § 157(b)(1) but are only “related to” the Debtor’s case (a “non-core” 

proceeding), or the Court otherwise lacks jurisdiction to enter a final order, the 

Court submits these findings and conclusions to the district court as its proposed 

findings of facts and conclusions of law. 28 U.S.C. § 157(c)(1). 

Case 17-03652-KLP Doc 88 Filed 03/22/18 Entered 03/22/18 16:38:58 Desc Main

 Document Page 7 of 28
8 

allows the court to draw the reasonable inference that the 

defendant is liable for the misconduct alleged. 

Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 570) (citation omitted). 

“[L]egal conclusions, elements of a cause of action, and bare assertions devoid 

of further factual enhancement” are insufficient and will not withstand a 

motion to dismiss. Nemet Chevrolet, Ltd. v. Consumeraffairs.com, Inc., 591 

F.3d 250, 255 (4th Cir. 2009). 

The following are the facts as pled in the Second Amended Complaint. 

 In 2008, the Debtor started a business providing roadside assistance to 

customers of various insurance companies and auto clubs. The Debtor’s 

dispatchers would receive calls from customers needing services such as 

jump-starting car batteries, unlocking vehicles, delivering fuel and changing 

flat tires and would send employees of the Debtor to perform these services. 

The insurance companies and motor clubs would pay the Debtor a flat rate, 

and the Debtor would pay a portion of this amount to its roadside assistance 

employee who performed the service. The Debtor’s gross receipts grew 

steadily and peaked at $4,300,000 in 2014. 

 In 2012, the Debtor’s dispatch employees were transferred to Office 

Dispatch, a Virginia limited liability company with its principal place of 

business in Fredericksburg, Virginia. The Debtor and Office Dispatch were 

treated as the same entity, with the Debtor paying substantially all of Office 

Dispatch’s expenses. In addition to paying the expenses of Office Dispatch, 

Case 17-03652-KLP Doc 88 Filed 03/22/18 Entered 03/22/18 16:38:58 Desc Main

 Document Page 8 of 28
9 

the Debtor paid a significant portion of the personal expenses of its sole 

owner, George Dante Suero (“Suero”). 

 On November 2, 2015, a collective action suit was filed against the 

Debtor and Suero in the U.S. District Court for the Eastern District of 

Virginia (the “Collective Action”) seeking damages for unpaid overtime wages 

owed to the Debtor’s employees performing roadside assistance. On 

November 17, 2015, the Debtor wrote a check in the amount of $12,000 to 

JDKatz for “Attorney Retainer.” 

 In 2016, the Debtor transferred its operations to Rescue Rangers 

Delaware, a Delaware limited liability company with its principal place of 

business in Fredericksburg, Virginia. As part of the transfer, Rescue Rangers 

Delaware signed new contracts with the auto clubs that previously were 

parties to assistance contracts with the Debtor. The Debtor directed the 

insurance companies and auto clubs to make future requests for roadside 

assistance to Rescue Rangers Delaware and to deposit future payments for 

services into new bank accounts in the name of Rescue Rangers Delaware. In 

addition, all of the Debtor’s roadside assistance technicians were required to 

sign new employment agreements with Rescue Rangers Delaware. Rescue 

Rangers Delaware took over use of all of the Debtor’s intellectual property, 

including its name and logo. 

 In December, 2016, Young advised the Debtor’s insurance carriers that 

JDKatz was corporate counsel to “Rescue Rangers,” that Rescue Rangers, 

Case 17-03652-KLP Doc 88 Filed 03/22/18 Entered 03/22/18 16:38:58 Desc Main

 Document Page 9 of 28
10 

LLC, had reorganized and was in the process of winding down its business 

operations, and that all “property, assets, debts, and liabilities are currently 

in the process of being sold from Rescue Rangers as a Virginia LLC to Rescue 

Rangers as a Delaware LLC.” Young further requested that the insurance 

companies cause their records to reflect new corporate and tax information, 

including a new employer identification number. 

 On July 12, 2016, the Debtor filed its schedules and statement of 

financial affairs, listing total assets of $1,341.11 and total liabilities of 

$2,879,200.84. In Schedule E/F, the Debtor listed the Internal Revenue 

Service, Amex, and “Dwayne Vaughan, et al” as the only creditors. The 

Debtor did not list its contracts with the insurance companies and auto clubs 

on Schedule G, which requires a debtor to disclose executory contracts and 

unexpired leases. In an amended Schedule F, the Debtor stated that it owes 

Rescue Rangers Delaware $731,024.32 for “loans from Delaware, Rescue 

Rangers, LLC entity.” 

 In its statement of financial affairs, the Debtor disclosed that it had 

$4.2 million in revenue in 2014 and $3.2 million in 2015. The Debtor stated 

that it did not give any insider value in any form during the one year period 

prior to the petition date but disclosed that it paid $43,776.25 for attorney’s 

fees to “Jeffrey David Katz, JDKATZ, P.C.” between June 2015 and June 

2016. 

Case 17-03652-KLP Doc 88 Filed 03/22/18 Entered 03/22/18 16:38:58 Desc Main

 Document Page 10 of 28
11 

 During the Debtor’s July 20, 2016, meeting of creditors, Suero, acting 

as the Debtor’s designee, testified that the Debtor stopped operating on June 

10, 2016, the petition date. At the Debtor’s continued meeting of creditors on 

January 23, 2017, Suero testified that: 

a. Rescue Rangers Delaware’s operations are the same as the 

Debtor’s; 

b. Katz, Young, and JDKatz advised Suero to transfer the 

Debtor’s assets and operations to Rescue Rangers Delaware to 

separate the Debtor’s assets from its liabilities; 

c. Suero is the sole member of the Debtor and Rescue Rangers 

Delaware; 

d. The Debtor and Rescue Rangers Delaware have the same 

name for tax purposes; 

e. The Debtor stopped operating on January 1, 2016; 

f. Rescue Rangers Delaware started operating on January 1, 

2016;8

g. Rescue Rangers Delaware’s 2016 revenue was $2.4 million; 

h. Rescue Rangers Delaware now pays Office Dispatch’s payroll, 

which includes Suero’s $80,000.00 a year salary; and 

i. The $731,024.32 loan identified in the Debtor’s amended 

Schedule F (ECF No. 19) as being owed by the Debtor to Rescue 

 

8 The Trustee states in a footnote to the Second Amended Complaint that Debtor’s 

bank statements reflect that it was still receiving payments from the Motor Clubs in 

June 2016, the last statement provided to the Trustee by the Debtor. 

Case 17-03652-KLP Doc 88 Filed 03/22/18 Entered 03/22/18 16:38:58 Desc Main

 Document Page 11 of 28
12 

Rangers Delaware is actually an amount received by Rescue 

Rangers Delaware for work performed by the Debtor that 

Rescue Rangers Delaware owed to the Debtor.9

 The transfer of the Debtor’s assets to Rescue Rangers Delaware was 

accomplished by Suero to separate the Debtor’s assets from its liabilities for 

tax purposes and because the Collective Action was pending in the Virginia 

District Court. 

On June 10, 2016, the same date the Debtor filed its bankruptcy case, 

Suero filed an individual Chapter 7 bankruptcy petition in the Alexandria 

Division of this Court.10 Suero was denied a discharge, and in its Findings of 

Fact and Conclusions of Law,11 the Court found, among other things, that: 

a. “On December 9, 2015, [the Debtor]’s attorneys at JD 

Katz, P.C., advised the insurance companies that [the Debtor] 

was ‘winding down,’ and requested that the insurance 

companies transfer the contracts to [Rescue Rangers Delaware].” 

(Findings at p. 2). 

b. “Mr. Suero wrote a check payable to his attorneys at JD 

Katz, P.C., in the amount of $12,000, on November 11, 2015. Pl. 

 

9 The Trustee notes in a footnote to the Second Amended Complaint that the “loan” 

was not identified in the Debtor’s original schedules (ECF No. 17). The Trustee has 

not seen evidence of the $731,024.32 having been paid back to the Debtor. 

10 Case No. 16-12029-BFK (Bankr. E.D. Va.). 

11 Adv. Pro. No. 16-01184-BFK (Bankr. E.D. Va.), Docket # 41. The Court notes that 

the Court’s Findings of Fact and Conclusions of Law are now on appeal to the 

United States District Court. 

Case 17-03652-KLP Doc 88 Filed 03/22/18 Entered 03/22/18 16:38:58 Desc Main

 Document Page 12 of 28
13 

Ex. 12. The letters to the insurance companies went out on 

December 9, 2015. Def. Exs. S. T.” (Findings at n. 2) 

c. “It was [Suero’s] intent to file a bankruptcy petition for 

[the Debtor], and to go on with his business under the banners of 

[Rescue Rangers Delaware] and Office Dispatch, free and clear 

of the [Debtor’s] creditor’s claims.” (Findings at p. 15). 

d. Suero caused the Debtor “to transfer its most valuable 

assets, the third party contracts with the insurance companies, 

to his wholly-owned company for no consideration, effective 

January 1, 2016.” (Findings at p. 16). 

 e. “[A]lmost all of the badges of fraud are present: [the 

Debtor] had been sued by the Drivers in November 2015; [the 

Debtor’s] counsel was requesting an additional $75,000 to 

$100,000 to continue to represent the company; Mr. Suero was 

the 100% owner of both companies and retained possession, 

control and use of the assets; the transfer lacked any valuable 

consideration; and Mr. Suero attempted to conceal the transfers 

and the value of the assets in the [Debtor’s] bankruptcy 

proceedings.” (Findings at p. 17). 

f. “The Court finds that the transfer of the contracts from [the 

Debtor] to [Rescue Rangers Delaware] effective January 1, 2016 

Case 17-03652-KLP Doc 88 Filed 03/22/18 Entered 03/22/18 16:38:58 Desc Main

 Document Page 13 of 28
14 

was a transfer made with the intent to hinder, delay or defraud 

[the Debtor’s] creditors.” (Findings at p. 17). 

THE KATZ MOTION 

 The Katz Motion seeks dismissal of four counts of the Second Amended 

Complaint. Those counts are Count IXA (breach of fiduciary duty), Count X 

(aiding and abetting breach of fiduciary duty), Count XI (statutory business 

conspiracy), and Count XII (legal malpractice). In the alternative, the Katz 

Motion seeks to have the Court compel arbitration and stay proceedings 

pending arbitration. Docket 36 at 7, n.9.

 In Count IXA, the Trustee cites Virginia Code § 13.1-1024.1(A)’s 

proviso that “[a] manager shall discharge his or its duties as a manager in 

accordance with the manager’s good faith business judgment of the limited 

liability company.” The Trustee alleges that Suero breached his fiduciary 

duty to the Debtor by “fraudulently transferring all of the Debtor’s valuable 

assets and operations for no consideration to Rescue Rangers Delaware, 

leaving the Debtor with substantial debts and no assets with which to repay 

those debts.” 

 In Count X, the Trustee claims that the Katz Defendants assisted 

Suero with the fraudulent transfer of assets from the Debtor to Rescue 

Rangers Delaware. Further, the Trustee argues that the Katz Defendants, 

knowing of Suero’s fiduciary obligations to the Debtor, advised Suero to 

transfer the assets to Rescue Rangers Delaware for the purpose of avoiding 

Case 17-03652-KLP Doc 88 Filed 03/22/18 Entered 03/22/18 16:38:58 Desc Main

 Document Page 14 of 28
15 

the Debtor’s tax obligations and the pending Collective Action, thus aiding 

and abetting Suero in breaching his fiduciary obligations to the Debtor. The 

Trustee asserts that the Debtor and its estate have been damaged in the 

amount of the transferred assets and the costs of recovering those assets and 

seeks damages therefor. The Trustee also seeks an award of punitive 

damages, alleging that the actions of the Katz Defendants were willful and 

wanton. 

 In Count XI, the Trustee alleges that collaborative actions of Suero and 

the Katz Defendants in causing the transfer of the Debtor’s assets to Rescue 

Rangers Delaware constituted a conspiracy in violation of Va. Code Ann. 

§ 18.2-499.12 The Trustee seeks the same damages sought in Count X and 

seeks treble damages as prescribed in Va. Code Ann. § 18.2-500.13

 

12 Va. Code Ann. § 18.2-499 provides that: 

A. Any two or more persons who combine, associate, agree, mutually 

undertake or concert together for the purpose of (i) willfully and 

maliciously injuring another in his reputation, trade, business or 

profession by any means whatever or (ii) willfully and maliciously 

compelling another to do or perform any act against his will, or 

preventing or hindering another from doing or performing any lawful 

act, shall be jointly and severally guilty of a Class 1 misdemeanor. 

Such punishment shall be in addition to any civil relief recoverable 

under § 18.2-500. 

B. Any person who attempts to procure the participation, cooperation, 

agreement or other assistance of any one or more persons to enter into 

any combination, association, agreement, mutual understanding or 

concert prohibited in subsection A of this section shall be guilty of a 

violation of this section and subject to the same penalties set out in 

subsection A. 

C. This section shall not affect the right of employees lawfully to 

organize and bargain concerning wages and conditions of employment, 

and take other steps to protect their rights as provided under state 

and federal laws. 

13 Va. Code Ann. § 18.2-500(A) provides that: 

Case 17-03652-KLP Doc 88 Filed 03/22/18 Entered 03/22/18 16:38:58 Desc Main

 Document Page 15 of 28
16 

 In Count XII, the Trustee alleges that the Katz Defendants, by 

advising and assisting Suero to fraudulently transfer Debtor’s assets to 

Rescue Rangers Delaware, breached their duties to the Debtor and also 

breached their contract to provide legal services to the Debtor, thus causing 

the Debtor’s loss of its assets. Count XII appears to base its claim both on 

negligence and upon breach of contract. The Trustee seeks an award of the 

same damages sought in Count X and also seeks an award of punitive 

damages, asserting that the actions of the Suero and the Katz Defendants 

were willful and wanton. 

 As a preliminary matter, the Court notes that Count IXA does not seek 

relief against the Katz Defendants. The Katz Motion requests that the count 

be dismissed “[t]o the extent [the Katz Defendants] are named as parties.” 

Although Count IXA as set forth in the Second Amended Complaint does not 

assert liability on the part of the Katz Defendants for breach of fiduciary 

duty, the prayer for relief is less clear. The prayer seeks a judgment against 

the Katz Defendants and Suero, jointly and severally, for “breach of fiduciary 

duty and aiding and abetting and [sic] breach of fiduciary duty.” However, 

because Count IXA itself does not allege any breach of fiduciary duty by the 

Katz Defendants, it fails to state a cause of action against them and must be 

 

A. Any person who shall be injured in his reputation, trade, business 

or profession by reason of a violation of § 18.2-499, may sue therefor 

and recover three-fold the damages by him sustained, and the costs of 

suit, including a reasonable fee to plaintiff's counsel, and without 

limiting the generality of the term, “damages” shall include loss of 

profits. 

Case 17-03652-KLP Doc 88 Filed 03/22/18 Entered 03/22/18 16:38:58 Desc Main

 Document Page 16 of 28
17 

dismissed as to them. Therefore, the Katz Motion as to Count IXA will be 

granted and that count will be dismissed as to the Katz Defendants. 

The Katz Defendants assert that the remaining three counts at issue 

should be dismissed for a lack of subject matter jurisdiction and for failure to 

state a claim. Alternatively, they request that the Court compel arbitration 

on any counts asserted against them. In support of their position, they point 

to the arbitration provision of the October 1, 2014, engagement agreement 

(the “Engagement Agreement”) between the parties. A copy of the 

Engagement Agreement is attached to the Katz Motion as Exhibit 1. The 

Engagement Agreement consists of two parts, a retainer agreement in letter 

form (the “Retainer Letter”) and a document entitled “Terms of Engagement,” 

which was attached to and referenced in the Retainer Letter. The arbitration 

provision (the “Arbitration Provision”) is contained in the Terms of 

Engagement document. That provision states that: 

Any controversy or claim arising out of or relating to this 

contract, or the breach thereof, shall be settled by arbitration 

administered by Creative Dispute Resolutions, LLC, or its 

successor in interest, in accordance with its arbitration rules, 

and judgment on the award rendered by the arbitrator(s) may be 

entered in any court having jurisdiction thereof. 

The Trustee counters that the Arbitration Provision is inapplicable because 

of the further qualification found in the Retainer Letter that “[t]he scope of 

this engagement does not include any representation on any other matter, 

trial, or any appeal, should there be any. These would also be the subject of 

separate engagements, should they ever become necessary.” The Trustee 

Case 17-03652-KLP Doc 88 Filed 03/22/18 Entered 03/22/18 16:38:58 Desc Main

 Document Page 17 of 28
18 

argues that any advice on the transfer of assets would not have been covered 

by the Engagement Letter and thus the Arbitration Provision contained 

therein would not apply to advice as to the transfer of assets. 

 While it is true that the Court may not require a party to submit to 

arbitration if that party has not agreed to do so,14 the Fourth Circuit has held 

that “we leave all questions concerning the scope of an arbitration agreement 

to the arbitrator, ‘unless it can be said with positive assurance that the 

arbitration clause is not susceptible of an interpretation that covers the 

asserted dispute.’” Winston Salem Mailers Union 133, CWA v. Media Gen. 

Operations, Inc., 55 F. App’x 128, 133 (4th Cir. 2003) (quoting AT & T Techs., 

Inc. v. CWA, 475 U.S. 643, 50 (1986). Therefore, in this instance, if the Court 

finds arbitration to be proper, the scope of the Arbitration Provision is 

properly an issue for the arbitrator to determine. 

 The Katz Defendants point to the strong public policy in favor of 

arbitration that is set forth in the Federal Arbitration Act, 9 U.S.C. §§ 1-307. 

In Moses v. CashCall, Inc., 781 F.3d 63 (4th Cir. 2015), the Fourth Circuit 

stated that “[t]o be sure, the arbitration policies implemented by the Federal 

Arbitration Act are to be robustly followed.” Id. at 71 (citation omitted).15 It 

 

14 United Steelworkers of Am. v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582 

(1960). 

15 See, e.g., CompuCredit Corp. v. Greenwood, 132 S. Ct. 665, 669 (2012) (“[The FAA] 

establishes ‘a liberal federal policy favoring arbitration agreements.’”) (quoting 

Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983)); Dean 

Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 221 (1985) (“The preeminent concern of 

Congress in passing the [FAA] was to enforce private agreements into which parties 

had entered, and that concern requires that we rigorously enforce agreements to 

Case 17-03652-KLP Doc 88 Filed 03/22/18 Entered 03/22/18 16:38:58 Desc Main

 Document Page 18 of 28
19 

stated that “in cases where tension arises between the FAA and another 

statute, the Supreme Court has provided a framework for resolving it, 

holding that the party seeking to prevent enforcement of an applicable 

arbitration agreement must show that ‘Congress has evinced an intention to 

preclude a waiver of judicial remedies for the statutory rights at issue.’” Id. 

(quoting Green Tree Fin. Corp. v. Randolph, 531 U.S. 79, 90 (2000)). The 

court then emphasized that by enacting the Bankruptcy Code, “Congress 

intended to grant comprehensive jurisdiction to bankruptcy courts so that 

they might deal efficiently and expeditiously with all matters connected with 

the bankruptcy estate.” Id. (quoting Celotex Corp. v. Edwards, 514 U.S. 300, 

308 (1995)). 

In Moses v. CashCall, the Fourth Circuit found that “forcing [a debtor] 

to arbitrate her constitutionally core claim would inherently conflict with the 

purposes of the Bankruptcy Code.” Id. at 73. However, it further held that 

the refusal to send a non-core claim to arbitration requires more than a 

finding that arbitration would potentially conflict with the purposes of the 

Bankruptcy Code. Rather, the conflict must be inherent and “sufficient to 

override by implication the presumption in favor of arbitration.” Id. at 89 

(quoting U.S. Lines, Inc. v. Am. S.S. Owners Mut. Prot. & Indem. Ass'n (In re 

U.S. Lines), 197 F.3d 631, 640 (2d Cir. 1999)). The Fourth Circuit explained 

core and non-core claims and the role of the bankruptcy courts as to each: 

 

arbitrate....”). See also Bates v. Lundy Motors, LLC, 2016 WL 6089827, Civ. No. 

3:16cv133 (HEH) (E.D. Va. Sept. 30, 2016), report and recommendation adopted at 

Civil Action No. 3:16cv133-HEH, 2016 WL 6089727 (E.D. Va. Oct. 17, 2016). 

Case 17-03652-KLP Doc 88 Filed 03/22/18 Entered 03/22/18 16:38:58 Desc Main

 Document Page 19 of 28
20 

Bankruptcy courts may decide core bankruptcy claims, which include 

the “allowance or disallowance of claims against the estate” and 

“counterclaims by the estate against persons filing claims against the 

estate.” 28 U.S.C. § 157(b)(2)(B)-(C). A bankruptcy court may also hear 

related non-core claims, but it cannot finally resolve them and must 

instead submit proposed findings of fact and conclusions of law to the 

district court. Id. § 157(c)(1). 

The Supreme Court has modified these statutory assignments of 

responsibility, holding that Article III of the Constitution prohibits 

bankruptcy courts from issuing final orders regarding statutorily core 

claims unless they “stem [ ] from the bankruptcy itself or would 

necessarily be resolved in the claims allowance process.” Stern, 131 S. 

Ct. at 2618. And the Court has subsequently held that when a 

bankruptcy court is faced with a claim that is statutorily core but 

constitutionally non-core—a so-called “Stern claim”—it must treat the 

claim as if it were statutorily non-core, submitting proposed findings of 

fact and conclusions of law to the district court for de novo review. 

Exec. Benefits Ins. Agency v. Arkison, ––– U.S. ––––, 134 S. Ct. 2165, 

2173, 189 L. Ed. 2d 83 (2014). 

781 F.3d at 70. 

Counts X, XI, and XII here are not statutorily core claims in that 

jurisdiction over them does not arise under 28 U.S.C. § 157(b). Therefore, the 

Court must perform further analysis to determine whether there is a conflict 

between the purposes of the Federal Arbitration Act and the Bankruptcy 

Code in this case. 

In Moses v. CashCall, the Fourth Circuit set forth a three-part test to 

determine whether there is a congressional intent that would “preclude a 

waiver of judicial remedies for the statutory rights at issue.” 781 F.3d at 71. 

That intent must be discernable from “(1) the statute's text; (2) its legislative 

history; or (3) ‘an inherent conflict between arbitration and the statute's 

Case 17-03652-KLP Doc 88 Filed 03/22/18 Entered 03/22/18 16:38:58 Desc Main

 Document Page 20 of 28
21 

underlying purposes.’” Id. at 71 (quoting Shearson/Am. Express, Inc. v. 

McMahon, 482 U.S. 220, 227 (1987)). 

The Trustee has not provided the Court any persuasive basis upon 

which to find that there is an irreconcilable conflict between the provisions of 

the Bankruptcy Code and the Arbitration Provision; he has cited to no 

legislative history, statutory text, or inherent conflict between the statutory 

provisions. Having found no overriding Congressional intention to override 

the Federal Arbitration Act in this situation, the Arbitration Provision must 

govern. The Court therefore finds that arbitration is appropriate as to 

Counts X, XI, and XII. 

A more difficult question arises as to Counts XIII and XIV, the only 

other counts asserted against any of the Katz Defendants. While the Katz 

Motion does not seek dismissal of Counts XIII and XIV, the Katz Defendants 

argue that all issues alleged against them in the Second Amended Complaint 

are arbitrable. While Counts X, XI, and XII are non-core matters, Counts 

XIII and IV, asserted against JDKatz, are statutorily core under 28 U.S.C. 

§ 157(b)(2)(H) because in them, the Trustee seeks to set aside and recover 

damages from a fraudulent conveyance. It remains for the Court to 

determine whether that alone suffices to override the Arbitration Provision. 

The case of McCarthy v. Wells Fargo Bank, N.A. (In re El-Atari), No. 

1:11cv1091, 2011 WL 5828013 (E.D. Va. Nov. 18, 2011), informs the Court’s 

decision in this matter. In El-Atari, the trustee in the debtor’s chapter 7 case 

Case 17-03652-KLP Doc 88 Filed 03/22/18 Entered 03/22/18 16:38:58 Desc Main

 Document Page 21 of 28
22 

filed multiple adversary proceedings based upon § 548 of the Bankruptcy 

Code. One of the defendants moved to withdraw the reference of the 

adversary proceeding pursuant to 28 U.S.C. § 157(d), arguing that the 

bankruptcy court lacked constitutional authority to hear and decide the 

matter. The district court found that based upon the Supreme Court’s ruling 

in Stern v. Marshall, 564 U.S. 462 (2011), fraudulent conveyance actions are 

not constitutionally core proceedings and bankruptcy courts have no 

jurisdiction to issue final orders in such proceedings.16 The court in El-Atari

held that although § 548 fraudulent conveyance suits are statutorily core 

under 28 U.S.C. § 157(b)(2)(H), they are more “akin to a common law contract 

suit rather than an intertwined component of federal regulation.” 2011 WL 

5828013, at *2. 

The Trustee seeks a money judgment against the Katz Defendants 

under § 548 of the Bankruptcy Code. Under the analysis of El-Atari, the 

claim is statutorily core but not constitutionally core, since it seeks to 

enhance the bankruptcy estate but does not arise through the claims 

allowance process.17 As required by Moses v. CashCall, the Court must defer 

 

16 McCarthy v. Wells Fargo Bank, N.A. (In re El-Atari), No. 1:11cv1091, 2011 WL 

5828013, at *3 (E.D. Va. Nov. 18, 2011). 

17 In El-Atari, the district court noted that “[t]he Stern Court confirmed the 

inanciera view in its discussion of actions ‘at common law that simply attempt[ ] to 

augment the bankruptcy estate [which are] the very type of claim that we held in ... 

Granfinanciera must be decided by an Article III court.’ Stern, 131 S.Ct. at 2616. 

Stern, together with Granfinanciera, clearly supports the conclusion that the 

authority to issue a final decision in a fraudulent conveyance action is reserved for 

Article III courts. See Paloian v. Am. Express Co. (In re Canopy Fin., Inc.), No. 11 C 

5360, 2011 WL 3911082, at *2 (N.D.Ill. Sept. 1, 2011)(‘[B]y likening the claim in 

Case 17-03652-KLP Doc 88 Filed 03/22/18 Entered 03/22/18 16:38:58 Desc Main

 Document Page 22 of 28
23 

to the Arbitration Provision unless it finds an inherent conflict with the 

Bankruptcy Code that is sufficient to override by implication the presumption 

in favor of arbitration. Using the Fourth Circuit’s three-part test, the Court 

can make no finding of a congressional intent to override the Federal 

Arbitration Act. 

At its heart, the § 548 claim in this case is simply an attempt to 

reclaim fees paid to the Katz Defendants. The Trustee alleges that “[t]he 

Debtor did not receive reasonably equivalent value in exchange for any 

payments made to JDKatz during the two-year period prior to the Petition 

Date.” Second Amended Complaint ¶ 104. This allegation is in the nature of 

a fee dispute, which is exactly what the Arbitration Provision was surely 

meant to address. Further, the Court finds that resolution of this issue along 

with the other issues between and among the Trustee and the Katz 

Defendants would be economically efficient and will not lead to inconsistent 

results. Therefore, using the analysis of Moses v. CashCall, the Court will 

compel Counts XIII and XIV to be arbitrated pursuant to the Arbitration 

Provision. 

Accordingly, the Court grants the parties such relief from the 

automatic stay of the Bankruptcy Code, 11 U.S.C. § 362(a), as may be 

necessary to enable arbitration of Counts X, XI, XII, XIII, and XIV, and 

 

question to the fraudulent conveyance claims in Granfinanciera, the Stern Court 

made clear that the Bankruptcy Court lacks constitutional authority to enter final 

judgment on the [fraudulent conveyance] claims presented here.’).” 2011 WL 

5828013, at *2. 

Case 17-03652-KLP Doc 88 Filed 03/22/18 Entered 03/22/18 16:38:58 Desc Main

 Document Page 23 of 28
24 

further action in this Court to recover against the Katz Defendants on the 

claims asserted against them in Counts X, XI, XII, XIII, and XIV is stayed 

pending the outcome of arbitration. 

THE SUERO MOTION 

 The Suero Motion seeks dismissal of two counts of the Second 

Amended Complaint. Those counts are Count IX (conversion) and Count XI 

(statutory business conspiracy). In Count IX, the Trustee alleges that Suero 

and Rescue Rangers Delaware converted the Debtor’s assets and operations 

by transferring them to Rescue Rangers Delaware. The Trustee seeks an 

award in the amount of the value of the transferred assets and the costs of 

recovering those assets. The business conspiracy allegations of Count XI as 

to Suero are the same as the allegations against the Katz Defendants that 

are summarized above. 

 In addition to his arguments as to each specific count, Suero also 

argues that he should be dismissed as a party defendant in this adversary 

proceeding. He argues that the Trustee was tardy in asserting his claims 

against Suero and that “myriad claims that have already been filed in this 

case makes filing another claim unnecessary.” The Trustee points out that 

Suero was a debtor in this Court until October 16, 2017, and could not have 

been named a defendant at the inception of the adversary proceeding because 

of the automatic stay of § 362 of the Bankruptcy Code. In addition, the 

Trustee points to Rule 15 of the Federal Rules of Civil Procedure, Fed. R. Civ. 

Case 17-03652-KLP Doc 88 Filed 03/22/18 Entered 03/22/18 16:38:58 Desc Main

 Document Page 24 of 28
25 

P. 15, made applicable here by Bankruptcy Rule 7015, Fed. R. Bankr. P. 

7015, which provides that leave to amend a complaint should be granted 

freely “when justice so requires.” 

In this instance, the Court is of the opinion that adding Suero as a 

party defendant does not prejudice him in any significant way. The 

proceeding is not so far advanced that adding Suero at this stage will put him 

at a disadvantage. This is especially true because Suero was the sole owner 

of the Debtor and is the sole owner of Rescue Rangers Delaware. As such, he 

has already been involved in this adversary proceeding and will not be 

coming into this adversary proceeding unaware of its substance. Thus, the 

court finds that formally adding him as a party defendant will not be unduly 

prejudicial. Contrary to Suero’s contention, the fact that the Trustee has 

asserted claims against other entities does not relieve Suero of potential 

liability. Accordingly, the motion to dismiss him as a party defendant will be 

denied. 

 Suero next asserts that Count IX, the conversion claim, should be 

dismissed against him because it seeks money damages as opposed to the 

return of a specific piece of property. However, Suero’s reliance on the case of 

Mar Tech Mechanical, Ltd. v. Chianelli Bldg. Corp., No. L00-2234, 2001 WL 

1262387 (Cir. Ct. Va. Mar. 6, 2001), is misplaced. In that case, the Virginia 

court was addressing a subcontractor’s claim of conversion arising from the 

contractor’s failure to pay it for work performed on a contract. The court 

Case 17-03652-KLP Doc 88 Filed 03/22/18 Entered 03/22/18 16:38:58 Desc Main

 Document Page 25 of 28
26 

explained that in order to succeed on a claim of conversion, the plaintiff must 

establish that the defendant wrongfully deprived him of specific property, 

and that there could be no conversion without that “wrongful exercise or 

assumption of authority . . . over another’s goods, depriving him of their 

possession; [and any] act of dominion wrongfully exerted over property in 

denial of the owner’s right, or inconsistent with it.” Id. at *6. The court 

found that because the plaintiff did not allege that “a specific, tangible item 

[was] being wrongfully held,” the defendant’s demurrer as to the conversion 

claim should be sustained. Id. 

In Mar Tech, the Virginia court did not say that return of property was 

the only remedy in a conversion action, only that a conversion claim arises 

when a defendant has deprived a plaintiff of property to which the plaintiff 

had an immediate right of possession. The court found that under the facts 

before it, the plaintiff had stated a claim for contractual damages and not one 

for conversion, the defendant having not deprived the plaintiff of a specific 

res but rather having failed to perform under its contract. 

The law in Virginia is that “the measure of damages for conversion is 

the ‘value of the property converted at the time and the place of conversion.’” 

Marsteller v. ECS Fed., Inc., No. 1:13cv593 (JCC/JFA), 2013 WL 4781786, at 

*8 (E.D. Va., Sept. 5, 2013) (quoting Straley v. Fisher, 10 S.E.2d 551 (Va. 

1940)). See also E.I. DuPont de Nemours and Co. v. Kolon Indus., Inc., Civ. 

No. 3:09cv58, No. 2011 WL 4625760, at *2 (E.D. Va. Oct. 3, 2011). In Count 

Case 17-03652-KLP Doc 88 Filed 03/22/18 Entered 03/22/18 16:38:58 Desc Main

 Document Page 26 of 28
27 

IX, the Trustee has not alleged a claim for breach of contract, as was the case 

in Mar Tech, but one for conversion. Therefore, Suero’s motion to dismiss 

Count IX will be denied. 

 In Count XI, the Trustee argues that the Katz Defendants and Suero 

conspired, in violation of Va. Code Ann. § 18.2-499, to fraudulently transfer 

the assets and operations of the Debtor to Rescue Rangers Delaware. Suero 

has moved to have this count dismissed against him, arguing that the facts 

do not support this claim. He argues that he was acting as agent for the 

Debtor when causing the transfer of assets to Rescue Rangers Delaware and 

as such he could not have conspired with the Debtor, as an agent may not 

conspire with its principal. This is generally true under Virginia law. See 

Stradtman v. Republic Services, Inc., No. 1:14cv1289, 2014 WL 6698946, at 

*6 (E.D. Va. Nov. 25, 2014). However, viewing the facts as pled in the light 

most favorable to the Trustee, it is possible that Suero and the Katz 

Defendants were acting not as agents for the Debtor but perhaps as agent for 

Rescue Rangers Delaware. (See Complaint ¶¶ 25, 33 as well as Exhibit A). 

Because it is possible that Suero and/or the Katz Defendants were not 

acting as agents of the Debtor, the Second Amended Complaint contains 

sufficient allegations to allow the Court to draw the reasonable inference that 

Suero is liable. This satisfies the standard set forth in Iqbal, and dismissal is 

not proper. In light of the questions that exist as to the capacity in which 

Suero may have been acting, the Court need not yet further discuss the 

Case 17-03652-KLP Doc 88 Filed 03/22/18 Entered 03/22/18 16:38:58 Desc Main

 Document Page 27 of 28
28 

Virginia intracorporate immunity doctrine, undertaking that analysis only 

should it become necessary. 

Signed: March, 22, 2018 /s/ Keith L. Phillips 

 United States Bankruptcy Judge 

Copies: 

Christian K. Vogel 

Vogel & Cromwell, LLC 

8550 Mayland Drive Suite 204 

Richmond, VA 23294 

John T. Donelan 

Law Office of John T. Donelan 

125 S. Royal Street 

Alexandria, VA 22314 

Jeffrey H. Geiger 

Sands Anderson PC 

P.O. Box 1998 

Richmond, VA 23218-1998

John C. Smith 

Sands Anderson PC 

P.O. Box 1998 

Richmond, VA 23218-1998 

Lynn L. Tavenner 

20 North Eighth Street, Second Floor 

Richmond, VA 23219 

Entered on Docket: March 22, 2018

Case 17-03652-KLP Doc 88 Filed 03/22/18 Entered 03/22/18 16:38:58 Desc Main

 Document Page 28 of 28