1 19-1124-cv Ray v. Ray, et al. 

### UNITED STATES COURT OF APPEALS FOR THE SECO ND CIRCUIT SUMMARY ORDER

RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF APPELLATE PROC EDURE 32.1 AND THIS COURT = S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A DOCUMEN T FILED WITH THIS CO URT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATA BASE (WITH THE NOTATION “SUMMARY ORDER”). A PARTY CITING TO A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPR ESENTED BY COUNSEL. At a stated term of the United States Court of Appeals for th e Second Circuit, held at the Thurgood Marshall United States Courthouse, 40 Fole y Square, in the City of New York, on the 23 rd day of January, two thousand twenty.
Present: R EENA R AGGI D EBRA A NN L IVINGSTON , W ILLIAM J. N ARDINI , Circuit Judges

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_____________________________________ A MES R AY , Plaintiff-Appellant , v. 19-1124-cv C HRISTINA R AY , J OHN D OE AND G UARNERIUS E NTITIES 1–10, Defendants-Appellees

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_____________________________________ For Plaintiff-Appellant: R ITA W. G ORDON , New York, NY For Defendant-Appellee Christina Ray: D ONALD E. W ATNICK , New York, NY
Appeal from a judgment of the United States District Court fo r the Southern District of New York (Daniels, J .).2 UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED, AND DECREED that the judgment of the district court is AFFIRMED

. Plaintiff-Appellant Ames Ray (“Ames”) appe als from a March 28, 2019 order of the United States District Court for the Southe rn District of New York (Daniels, J. ) granting DefendantAppellee Christina Ray’s (“Christina”) motion to di smiss for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6). The case on appeal is the latest in a series of lawsuits brought by Ames against Christina, his ex-wife, for breach of c ontract and fraudulent conveyance, and the first of these actions brought in federal court. Ames seeks to set aside certain transfers of funds from Christina to Defendants-Appellees John Doe Guar nerius Entities 1–10 (the “JDG Entities”) on the basis that the transfers are c onstructive or intentiona l fraudulent conveyances under New York law. We assume the parties’ familia rity with the underlying facts, the procedural history of the case, a nd the issues on appeal.
* * * I. Constructive Fraudulent Conveyance On appeal, Ames challenges the district cour t’s dismissal of his constructive fraudulent conveyance claims under New York Debtor and Creditor Law (“NYDCL”) §§ 273 and 275. We review the district court’s grant of a motion to dismiss de novo , accepting as true all factual allegations in the complaint and drawing all reas onable inferences in fa vor of the plaintiff. Carpenters Pension Tr. Fund of St. Louis v. Barclays PLC , 750 F.3d 227, 232 (2d Cir. 2014). “To survive a motion to dismiss, a complaint must cont ain sufficient factual ma tter, accepted as true, to ‘state a claim that is plausible on its face.’” Ashcroft v. Iqbal , 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570 (2007)). “[T]he tene t that a court must accept as true all of the allegations contained in a complain t is inapplicable to legal conclusions. Threadbare3 recitals of the elements of a cause of action, supported by mere conclu sory statements, do not suffice.” Id. When considering claims rooted in New York law, we determine the applicable legal principles de novo

. In re Sharp Int’l Corp. , 403 F.3d 43, 49 (2d Cir. 2005). In so doing, we “afford[] the greatest weight to decisions of the New York Court of Appeals.” Id . (quoting McCarthy v. Olin Corp. , 119 F.3d 148, 153 (2d Cir. 1997)). If that court has not spoken on the rele vant question, we apply the law as interpreted by th e Appellate Division of the Ne w York Supreme Court unless we are persuaded that the Court of Appeals would rule differently if presented with the same issue. Zaretsky v. William Goldberg Diamond Corp. , 820 F.3d 513, 521 (2d Cir. 2016). NYDCL §§ 273 and 275 provide cr editors with two paths to allege that a debtor’s conveyance was constructively fraudulent. Each requires a showing that the debtor made the transfer in question without fa ir consideration in the pres ence of one of two additional circumstances. NYDCL §§ 273, 275. Under § 273, the credit or must also show that the debtor “is or will be [] rendered insolv ent [by the transaction].” NYDCL § 273. Under § 275, the creditor must also show that the debtor “intends or believes that he w ill incur debts beyond his ability to pay as they mature.” 1 NYDCL § 275. In this case, however, Ames has failed to allege facts supporting the absence of fair cons ideration and, therefore, has not adequately pleaded a claim under either section. A debtor has received “fair c onsideration” if the following three elements are satisfied: “first, the recipient of the debto r’s property must either convey property in ex change or discharge

1 We briefly note that all sections of the NYDCL relevant to this appeal have been repealed and replaced—effective April 4, 2020—by an act of th e New York legislature approved on December 6, 2019. See 2019 N.Y. Sess. Laws Ch. 580 (McKinney). The new provisions, however, will “not apply to a transfer made or oblig ation incurred before” the act’s ef fective date, “nor shall [they] apply to a right of action that has acc rued before [that] effective date.” Id.4 an antecedent debt in exchange; second, such exchange must be a fair equivalent of the property received; and third, su ch exchange must be in good faith.” United States v. Watts , 786 F.3d 152, 164 (2d Cir. 2015) (quoting In re Sharp Int’l Corp ., 403 F.3d 43, 53 (2d Cir. 2005)) (internal quotation marks and alterations omi tted). In his complaint, Ames al leges that the “[ t]ransfers by [Christina] to the JDG Entities . . . were not made in payment of an antecedent debt and thus were not made for fair consideration . . . .” J.A. 26. Not only is this little more than a “[t]hreadbare recital[]” of (one of) the statutory elements, see Iqbal , 556 U.S. at 678, but it also fails to allege— even superficially—that Christina received nothing in exchange for the transfers. Moreover, in his appellate briefing, Ames does not ar gue that he adequately pleaded a lack of good faith, requiring reversal of the district court’s determination to the contrary. In any case, we conclude that Ames has not sufficiently alleged a lack of good faith in connection with the transfers at issue. Although the complaint later refers to Christina’s having “made the[] transfers to the JDG Entities without consideration,” J.A. 26, it contains no factual allegations to “nudg[e] th[at] cl aim[] across the line from conceivable to plausible,” Twombly , 550 U.S. at 570. 2 Ames’s failure to plead a lack of consideration forecloses his claims under both §§ 273 and 275.

2 Ames argues throughout his appe llate briefing that where necessary facts “are peculiarly within the possession and control of the defendant,” he is entitled to allege facts upon information and belief. See Arista Records, LLC v. Doe 3 , 604 F.3d 110, 120 (2d Cir. 2010). But this does not give him carte blanche to make baseless assu mptions about otherwise permissible conduct. See RTN Networks, LLC v. Telco Grp., Inc. , 126 A.D.3d 477, 478 (1st Dep’t 2015) (“Plaintiff’s ‘mere belief’ that [the debtor] tran sferred its assets wit hout fair consideration is insufficient.”); Jaliman v. D.H. Blair & Co., Inc. , 105 A.D.3d 646, 647 (1st Dep’t 2013) (same); cf. Arista , 604 F.3d at 120 (“Because the . . . complaint’s factual allegations described only actions that were . . . doctrinally consistent with lawful conduct, the conclusory allegation on informati on and belief that the observed conduct was the product of an unlawful ag reement was insufficient to make the claim plausible.”).5 II. Intentional Fraudulent Conveyance Ames also argues that the dist rict court erred in dismissing his cl aim under NYDCL § 276, which deems conveyances made “with actual intent . . . to hinder, delay, or defraud eith er present or future creditors” fraudulent. NYDCL § 276. Pursuant to Federal Rule of Civil Procedure 9(b), Ames’s complaint must “state with particularity the circumstances constitu ting fraud or mistake.” Fed. R. Civ. P. 9(b). To survive a motion to di smiss, the facts supporting general allegations of “actual intent to hinder, de lay, or defraud” must be “pled with specificity.” See Sharp , 403 F.3d at 56 (internal quotati on marks omitted); see also First Capital Asset Mgmt., Inc. v. Satinwood, Inc. , 385 F.3d 159, 179 (2d Cir. 2004) (“[T]he plaintiffs must allege facts that give rise to a strong inference of fraudulent intent . . . .” (emphasis in or iginal) (internal quota tion marks omitted)). “Due to the difficulty of proving actual intent to hinder, delay, or defraud creditors, the pleader is allowed to rely on ‘badges of fraud’ . . . i.e. , circumstances so comm only associated with fraudulent transfers that thei r presence gives rise to an inference of intent.” Sharp , 403 F.3d at 56 (internal quotation marks omitted) . Badges of fraud may include, inter alia , “a close relationship between the parties to th e alleged fraudulent transact ion; a questionable tran sfer not in the usual course of business; inad equacy of the consideration; the tran sferor’s knowledge of the creditor’s claim and the inability to pay it; and retention of control of the pr operty by the transferor after the conveyance.” Wall St. Assocs. v. Brodsky , 257 A.D.2d 526, 529 (1st Dep’t 1999). But “the presence of one or more badges of fraud does not necessari ly compel the conclusion that a conveyance is fraudulent.” A&M Global Mgmt. Corp. v. No rthtown Urology Assocs., P.C. , 115 A.D.3d 1283, 1288–89 (4th Dep’t 2014). The district court properly found that Ames has not plausi bly pleaded intent—with or without the use of “badges of fr aud”—with sufficient specificity to survive a motion to dismiss.6 On appeal, Ames argues that he has sufficiently alleged that Christina and the JDG Entities shared a “close relationship,” that Chri stina had admitted knowledge of he r debts to Ames, and that she had engaged in a decades-long fraudulent course of conduct by evading his attempts to recover payment. None of these allegations, however, is sufficient to state a claim for fraudulent conveyance. First, Ames’s pleading suggests that Christina’s relationship with the JDG Entities is nothing more than a contractual arrangement pursu ant to which she provided the JDG Entities with consulting services in exchange for a salary and a share of their profits. Second, Ames’s allegations that Christina acknowledged the debts on a phone cal l two years after the tr ansfers at issue, and made clear her intent not to pay him, are insufficient to allege that she made the transfers with actual intent to commit fraud. 3 See First Capital, 385 F.3d at 179–80 (“[A]llegations of motive and opportunity alone [do not] suffice”); see also Wall St. Assocs. , 257 A.D.2d at 529 (identifying the relevant badge not as mere knowledge of a debt, but as “knowledge of the creditor’s claim and the inability to pay it ” (emphasis added))

. This is particularly true because, at the time of the transfers, the parties were activel y litigating the validity of the de bts in a decades-old action that remains ongoing in the courts of New York. Christina’s participation in this litigation likewise defeats Ames’s claim that her failure to pay the debts is sufficient to allege her fraudulent intent. Refusing payment while the New York courts determ ine the debts’ enforceability in the first place hardly gives rise to a plausible inference of fraud. Because Ames has failed to raise a strong

3 Indeed, the Appellate Division of the New York Supreme Court, First Judicial Department, has already upheld the dismissal of an earlier fraudulent conveyance act ion, in which Ames relied on the same evidence to allege Chri stina’s fraudulent intent in conn ection with a different set of transfers. See Ray v. Ray , 158 A.D.3d 578, 579 (1st Dep’t 2018) (“[T]he complaint does not plead intent to defraud sufficiently to support a clai m under [DCL] § 276.”). The allegations are no more plausible here than they were in that unsuccessful action.7 inference of Christina’s intent to commit fraud, he has failed to meet his burden under Rule 9(b) and, consequently, to state a claim for fra udulent transfer under NYDCL § 276. We have considered Ames’s remaining arguments and find them to be without merit. Accordingly, we AFFIRM the judgment of the district court. FOR THE COURT: Catherine O’Hagan Wolfe, Clerk