Daniel W. Van Horn, Admitted Pro Hac 

Adam M. Langley, Admitted Pro Hac

R. Campbell Hillyer, Admitted Pro Hac

Butler Snow LLP 

6075 Poplar Ave., Ste. 500 

Memphis, TN 38119 

(901) 680-7200 

Martin A. Sosland, TX Bar No. 18855645 

Candice Carson, TX Bar No. 24074006 

Butler Snow LLP 

2911 Turtle Creek Blvd., Ste. 1400 

Dallas, TX 75219 

(469) 680-5502 

Attorneys for FedEx Supply Chain Logistics & Electronics, Inc. 

IN THE UNITED STATES BANKRUPTCY COURT 

FOR THE NORTHERN DISTRICT OF TEXAS 

DALLAS DIVISION 

In re: ) 

 ) 

GOODMAN NETWORKS, INC., ) Case No. 23-31641-mvl-7 

 ) 

 Debtor. ) (Chapter 7) 

 ) 

 

SCOTT M. SEIDEL, TRUSTEE, ) 

 ) 

 Plaintiff, ) Adversary Proceeding 

 ) No. 23-03091 

v. ) 

 ) 

FEDEX SUPPLY CHAIN LOGISTICS ) 

& ELECTRONICS, INC., ) 

 ) 

 Defendant. ) 

FEDEX SUPPLY CHAIN LOGISTICS & ELECTRONICS, INC.’S 

BRIEF IN SUPPORT OF ITS MOTION TO DISMISS 

THE TRUSTEE’S ORIGINAL COMPLAINT 

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TABLE OF CONTENTS 

TABLE OF AUTHORITIES .......................................................................................................... 1

PRELIMINARY STATEMENT .................................................................................................... 1

MOTION TO DISMISS STANDARD ........................................................................................... 2

RULE 12(B)(1): LACK OF SUBJECT-MATTER JURISDICTION ............................................ 3

A. There is no jurisdiction over the Stay Counts. .............................................................. 4

B. The Declaratory Counts are not justiciable. ................................................................. 6

RULE 12(B)(6) FAILURE TO STATE A CLAIM ........................................................................ 9

A. The District Court Lawsuit did not violate the automatic stay because it is against 

non-debtors for direct damages to FSCLE. ............................................................. 9

(i) Section 362(a)(1) does not apply to claims against non-debtors. .................... 10

(ii) The District Court Lawsuit seeks direct damages to FSCLE – it does not assert 

derivative claims that are property of the estate. ...................................... 11

(iii) The automatic stay was not violated, and the Trustee cannot seek relief under 

section 362(k); therefore, there is no entitlement to damages. ................. 18

B. The Declaratory Counts fail to state a claim upon which relief can be granted ......... 19

(iv) As a matter of law, a thief does not obtain title under Texas Law. ................ 20

(v) Constructive Trusts are extraordinary but available remedies in Bankruptcy. 22

(vi) Without a specific res plead, the Trustee cannot obtain declaratory relief. ... 26

(vii) The Court should exercise its discretion to dismiss the Declaratory Counts. 27

CONCLUSION ............................................................................................................................. 32

CERTIFICATE OF SERVICE ..................................................................................................... 33

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TABLE OF AUTHORITIES 

Cases

Agar Corp., Inc. v. Electro Cirs. Int'l, LLC, 580 S.W.3d 136 (Tex. 2019) ............................ 13, 14 

Armco Industrial Credit Corp. v. SLT Warehouse Co., 782 F.2d 475 (5th Cir. 1986) ................. 17 

Arnold v. Garlock, Inc., 278 F.3d 426 (5th Cir. 2001) ................................................................. 10 

Bauer v. Texas, 341 F.3d 352 (5th Cir. 2003) ................................................................................. 7 

Brickley for CryptoMetrics, Inc. Creditors' Tr. v. ScanTech Identification Beams Sys., LLC, 

566 B.R. 815 (W.D. Tex. 2017 ................................................................................................. 28 

Butner v. United States, 440 U.S. 48 S.Ct. 914, 59 L.Ed.2d 136 (1979) ...................................... 20 

Butner, supra; Mission Prod. Holdings, Inc. v. Tempnology, LLC, 139 S. Ct. 1652 (2019) ........ 21 

Celotex Corp. v. Edwards, 514 U.S. 300 (1995) ........................................................................ 4, 5 

E.F. Hutton Southwest Properties II, Ltd., 103 B.R. 808 (Bankr. N.D. Tex 1989) ................ 12, 16 

GATX Aircraft Corp. v. M/V Courtney Leigh, 768 F.2d 711 (5th Cir. 1985) ............................... 10 

Grimmett v. Brown, 75 F.3d 506 (9th Cir. 1996) .......................................................................... 16 

Harris County Texas v. MERSCORP Inc., 791 F.3d 545 (5th Cir. 2015) .................................. 6, 8 

Havelock v. Taxel (In re Pace), 67 F.3d 187 (9th Cir. 1995) ....................................................... 18 

Heldenfels Bros. v. City of Corpus Christi, 832 S.W.2d 39 (Tex. 1992) ..................................... 15 

In re Amberjack Interests, Inc., 326 B.R. 379, 385 n. 1 (Bankr.S.D.Tex.2005) ........................... 19 

In re Bass, 171 F.3d 1016 (5th Cir. 1999) ...................................................................................... 4 

In re C.W. Min. Co., 477 B.R. 176 (10th Cir. BAP 2012) ............................................................ 18 

In re City Wide Cmty. Dev. Corp., 2023 WL 6542909 (Bankr. N.D. Tex. Oct. 6, 2023) .............. 3 

In re Educators Group Health Trust, 25 F.3d at 1284.................................................................. 12 

In re First Republic Bank Corp., 113 B.R. 277 (Bankr. N.D. Tex. 1989) .................................... 19 

In re FoodServiceWarehouse.com, LLC, 601 B.R. 396 (E.D. La. 2019) ............................... 29, 30 

In re Kalispell Feed & Grain Supply, 55 B.R. 627 (Bank. D. Mont. 1985) ................................. 16 

In re Leitner, 236 B.R. 420 (Bankr. D. Kan. 1999) ................................................................ 23, 25 

In re MortgageAmerica Corp., 714 F.2d 1266 (5th Cir. 1983) .................................................... 11 

In re New York Inn Inc., 2023 WL 2938371, (Bankr. N.D. Tex. Apr. 13, 2023 ............................ 6 

In re Newpower, 233 F.3d 922 (6th Cir. 2000) ................................................................. 20, 21, 25 

In re Omegas Group, Inc., 16 F.3d 1443 (6th Cir. 1994) ............................................................. 24 

In re Paul J. Paradise & Associates, Inc., 249 B.R. 360 (D. Del. 2000) ..................................... 25 

In re Providence Hosp. of N. Houston LLC, 653 B.R. 612 (Bankr. S.D. Tex. 2023) ..................... 7 

In re Seven Seas Petroleum, Inc., 522 F.3d 575 (5th Cir. 2008) ............................................ 12, 17 

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In re Tusa-Expo Holdings, Inc., 2014 WL 172276 (Bankr. N.D. Tex. Jan. 15, 2014) ................. 18 

In re With Purpose, Inc., 654 B.R. 715 (Bankr. N.D. Tex. 2023) ............................ 4, 5, 11, 12, 17 

KCM Fin. LLC v. Bradshaw, 457 S.W.3d 70 (Tex. 2015) ........................................................... 15 

Maritime Asbestosis Legal Clinic v. LTV Steel Co., Inc. (In re Chateaugay Corp.), 920 

F.2d 183 (2nd Cir.1990) ........................................................................................................... 19 

Matter of Approximately $80,600.00, 537 S.W.3d 207 (Tex. App.—Houston [1st Dist.] 

2017, pet. denied) ...................................................................................................................... 20 

Matter of Educators Grp. Health Tr., 25 F.3d 1281 (5th Cir. 1994) ............................................ 11 

Matter of Haber Oil Co., Inc., 12 F.3d 426 (5th Cir. 1994) ......................................... 7, 19, 22, 26 

Matter of Monnig's Dep't Stores, Inc., 929 F.2d 197 (5th Cir. 1991) ........................................... 23 

Matter of Okedokun, 968 F.3d 378 (5th Cir. 2020) ...................................................................... 20 

Matter of Quality Holstein Leasing, 752 F.2d 1009 (5th Cir. 1985) ................................ 23, 24, 25 

Matter of S.I. Acquisition, Inc., 817 F.2d 1142 (5th Cir. 1987) .............................................. 10, 11 

Matter of UTSA Apartments 8, L.L.C., 886 F.3d 473 (5th Cir. 2018) ................................ 7, 19, 22 

Matter of Zale Corp., 62 F.3d 746 (5th Cir. 1995) ..................................................................... 4, 5 

Meadows v. Bierschwale, 516 S.W.2d 125 (Tex.1974) ................................................................ 23 

Neochem Corp. v. Behring Int'l, Inc. (In re Behring Int'l, Inc.), 61 B.R. 896 

(Bankr.N.D.Tex.1986) .............................................................................................................. 22 

New Orleans Pub. Serv., Inc. v. Council of City of New Orleans, 833 F.2d 583 (5th Cir. 

1987) ........................................................................................................................................... 6 

PAJ, Inc. v. Yurman Design, Inc., No. CIV.A.3:98-CV-2847-P, 1999 WL 68651 (N.D. 

Tex. Feb. 9, 1999) ..................................................................................................................... 28 

Picco v. Glob. Marine Drilling Co., 900 F.2d 846 (5th Cir. 1990) .............................................. 10 

Pontchartrain Partners, L.L.C. v. Tierra de Los Lagos, L.L.C., 48 F.4th 603 (5th Cir. 

2022) ......................................................................................................................................... 27 

Serco Servs. Co., L.P. v. Kelley Co., 1994 WL 715913 (N.D. Tex. May 24, 1994), aff'd, 51 

F.3d 1037 (Fed. Cir. 1995) ....................................................................................................... 28 

Sherwin-Williams Co. v. Holmes Cnty., 343 F.3d 383 (5th Cir. 2003) .................................... 6, 27 

Sinclair Houston Fed. Credit Union v. Hendricks, 268 S.W.2d 290 (Tex. Civ. App. 1954 ........ 20 

Sonse v. Reinert & Duree, P.C. (In re Just Brakes Corp. Sys., Inc.), 108 F.3d 881 (8th Cir. 

1997) ......................................................................................................................................... 18 

Spookyworld, Inc. v. Town of Berlin (In re Spookyworld, Inc.), 346 F.3d 1 (1st Cir. 2003) ........ 18 

Travelers Ins. Co. v. La. Farm Bureau Fed'n, Inc., 996 F.2d 774 (5th Cir. 1993) ....................... 27 

United States v. Toney, 598 F.2d 1349 (5th Cir. 1979) ................................................................ 17 

Uranga v. Holiday Mkt., Inc., 2014 WL 349716 (N.D. Tex. Jan. 31, 2014) ................................ 10 

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Val-Com Acquisitions Tr. v. Chase Home Fin., L.L.C., 434 F. App’x 395 (5th Cir. 2011) ........... 6 

Wedgeworth v. Fibreboard Corp., 706 F.2d 541 (5th Cir. 1983) ................................................. 10 

Wilton v. Seven Falls Co., 515 U.S. 277 (1995) ....................................................................... 6, 27 

Statutes

18 U.S.C.A. § 1964 ....................................................................................................................... 16 

28 U.S.C. § 157 ............................................................................................................................... 5 

28 U.S.C. § 2201 ............................................................................................................................. 6 

Restatement (Second) of Torts § 229 cmt. D (1965) .................................................................... 20 

Rules

Fed. R. Bankr. P. 7001 .......................................................................................................... 7, 8, 19 

Fed. R. Bankr. P. 7012 .................................................................................................................... 2 

Fed. R. Bankr. P. 7022 ................................................................................................................ 8, 9 

Fed. R. Civ. P. 12 ............................................................................................................................ 2 

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TO THE HONORABLE MICHELLE V. LARSON, U.S. BANKRUPTCY JUDGE: 

Comes now FedEx Supply Chain Logistics & Electronics, Inc. (“FSCLE” or “FedEx”) and 

for its brief in support of its Motion to Dismiss the Trustee’s Original Complaint states as follows: 

PRELIMINARY STATEMENT 

1. The Trustee Complaint should be dismissed. It asserts two classes of claims: (1) 

two requests seeking to collaterally attack and stay FSCLE’s District Court Lawsuit (Counts 6-7, 

the “Stay Counts”) and (2) five requests for preemptive declarations that FSCLE cannot 

affirmatively seek remedies for constructive, express, and resulting trusts in the future (Counts 1-

5, the “Declaratory Counts”). The Trustee Complaint does not plead a cause of action against 

FSCLE but instead improperly seeks procedural remedies of declaratory and injunctive relief. 

2. The Stay Counts are a collateral attack on FSCLE and the District Court Lawsuit. 

They should be dismissed for failure to state a claim as to Count 6 (Damages for Violation of the 

Automatic Stay) and lack of subject-matter jurisdiction and failure to state a claim as to Count 7 

(Permanent Injunction). The Trustee alleges that some but not all the tort claims asserted by 

FSCLE in its District Court Lawsuit are property of the estate and protected by the automatic stay. 

Specifically, he asserts FSCLE’s RICO, theft, unjust enrichment, constructive trust, and civil 

conspiracy claims (Cause of Action Nos. 1, 2, 3, 4, 5, and 8) are derivative claims of the estate but 

admits FSCLE’s fraud and tortious interference claims (Cause of Action Nos. 6 and 7) are direct, 

personal claims of FSCLE against non-debtors. This splitting of hairs on FSCLE’s claims 

mischaracterizes the nature of FSCLE’s claims because the entirety of the claims seeks direct 

damages resulting from same tortious conduct of non-debtors. The claims rise and fall on the same 

injuries. The admission that some claims are direct and personal should end this Court’s inquiry. 

FSCLE has sued joint tortfeasors of the Debtor. The named Defendants are non-debtors and none 

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of the claims asserted are derivative claims (e.g., fraudulent transfers, breaches of fiduciary duty, 

denuding, alter ego, etc.). The District Court Lawsuit did not violate the automatic stay and should 

not be enjoined. 

3. The Declaratory Counts attempt to preempt FSCLE from taking future actions. 

They ask this Court to declare as a matter of law that under no circumstances can FSCLE 

affirmatively seek future property determinations or equitable relief in this bankruptcy case should 

factual circumstances ripen that justify such remedies. Property rights are determined by state law. 

Under Texas law, a thief does not acquire title, and actual fraud can give rise to a constructive trust 

with an effective date that relates back to the when the wrongful conduct gave rise to the remedy. 

FSCLE continues to reserve its right to assert equitable remedies and property rights in this case 

should the factual circumstances justify it. The adjudication of those remedies will only ripen when 

brought by FSCLE in an adversary proceeding on complete, factual pleadings. The Court should 

reject the Trustee’s preemptive use of declaratory relief to foreclose controversies that may ripen 

in the future and dismiss the Declaratory Counts. 

MOTION TO DISMISS STANDARD 

4. Bankruptcy Rule 7012 incorporates Civil Rule 12(b)(1) and (6) into this adversary 

proceeding. Fed. R. Bankr. P. 7012; Fed. R. Civ. P. 12(b)(1) and (6). This Court must dismiss a 

complaint where there is a “lack of subject-matter jurisdiction” or a “failure to state a claim upon 

which relief can be granted.” Id. This Court recently stated the applicable standards for motions to 

dismiss under Rule 12(b)(1) and (6): 

When a Rule 12(b)(1) motion is filed in conjunction with other Rule 

12 motions, as it is here, a court should consider the jurisdictional 

attack prior to turning to the merits. In considering a Rule 12(b)(1) 

motion, the court is empowered to consider matters of fact which 

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may be in dispute. Ultimately, the motion should be granted only if 

it appears that the plaintiff cannot prove any set of facts in support 

of his or her claim that would entitle the plaintiff to relief. 

In evaluating a Rule 12(b)(6) motion to dismiss, the Court must 

accept all well-pleaded facts as true, and view them in the light most 

favorable to the plaintiff. However, the Court need not “strain to find 

inferences favorable to the plaintiffs. To survive a motion to dismiss 

under Rule 12(b)(6), a complaint must contain sufficient factual 

allegations, which, if accepted as true, state a plausible cause of 

action. This plausibility requirement sits somewhere between 

possible and probable, and is satisfied where the plaintiff's pleaded 

facts allow the court to draw the reasonable inference that the 

defendant is liable for the misconduct alleged. 

In re City Wide Cmty. Dev. Corp., 2023 WL 6542909, *3-4 (Bankr. N.D. Tex. Oct. 6, 2023). 

RULE 12(B)(1): LACK OF SUBJECT-MATTER JURISDICTION 

5. This Court has subject-matter jurisdiction over this bankruptcy case and its “arising 

under,” “arising in” and “related to” proceedings and to hear and determine questions regarding 

property of the estate, including making declarations regarding such property. 28 U.S.C. § 1334(b) 

and (e). However, the Trustee Complaint does not present a case and controversary that falls 

within this Court’s subject-matter jurisdiction and authority for two reasons. First, the Stay Counts 

seek the recognition of, or imposition of, an injunction against portions of the FSCLE Complaint, 

and this Court lacks jurisdiction and authority over the FSCLE Complaint because FSCLE’s claims 

are its property and asserted against non-debtors in a non-bankruptcy forum. FSCLE’s claims arise 

under state and federal law other than title 11. They are not related to this bankruptcy case because 

FSCLE, a non-debtor, has asserted its personal claims against other non-debtors. Second, the 

Declaratory Counts do not present a case or controversy because neither FSCLE nor the Trustee 

has brought an action to determine rights in a specific res. The Declaratory Counts instead seek to 

preempt FSCLE from asserting future rights and actions, but this Court lacks jurisdiction over such 

preemptive use of the Declaratory Judgment Act because the Constitution mandates an actual case 

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and controversary – not a hypothetical, conjectural, or conditional declaration based upon the 

possibility of a factual situation that may never develop. 

A. There is no jurisdiction over the Stay Counts. 

6. This Circuit applies the “conceivable effect” test to determine whether a proceeding is 

“related to” the bankruptcy case, but “a bankruptcy court’s ‘related to’ jurisdiction cannot be 

limitless.” Matter of Zale Corp., 62 F.3d 746, 752 (5th Cir. 1995). 

More specifically, an action is related to bankruptcy if the outcome 

could alter the debtor’s rights, liabilities, options, or freedom of 

action (either positively or negatively) and in any way impacts upon 

the handling and administration of the bankruptcy estate. This test 

is obviously conjunctive: For jurisdiction to attach, the anticipated 

outcome of the action must both (1) alter the rights, obligations, and 

choices of action of the debtor, and (2) have an effect on the 

administration of the estate. 

In re Bass, 171 F.3d 1016, 1022 (5th Cir. 1999). Bankruptcy jurisdiction extends “more 

broadly” in a reorganization case under chapter 11 than in a liquidation case under chapter 7. 

Celotex Corp. v. Edwards, 514 U.S. 300, 310 (1995). This Circuit and the “large majority of cases 

reject the notion that bankruptcy courts have ‘related to’ jurisdiction over third party actions” 

grounded in tort. Zale Corp., 62 F.3d at 753-57. 

7. “Related to” has a jurisdictional meaning distinguishable from two actions simply 

sharing related facts and parties. “Shared facts between the third-party action and a debtor-creditor 

conflict do not in and of themselves suffice to make the third-party action ‘related to’ the 

bankruptcy. Moreover, judicial economy alone cannot justify a court’s finding jurisdiction over an 

otherwise unrelated suit.” Zale Corp., 62 F.3d at 753–54; In re With Purpose, Inc., 654 B.R. 715, 

726 (Bankr. N.D. Tex. 2023) (Larson, M.). Related to jurisdiction to enjoin third party claims only 

exists upon a showing of “unusual circumstances.” Zale Corp., 62 F.3d at 761. 

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These circumstances include 1) when the nondebtor and the debtor 

enjoy such an identity of interests that the suit against the nondebtor 

is essentially a suit against the debtor, and 2) when the third-party 

action will have an adverse impact on the debtor’s ability to 

accomplish reorganization. When either of these circumstances 

occur, an injunction may be warranted. If not, a bankruptcy court 

may not enjoin the third-party action. 

Id. at 761 (citations omitted). The Trustee has not, and cannot, make this showing of 

unusual circumstances. First, there is no identify of interests because FSCLE does not seek liability 

against the Debtor in the District Court Lawsuit and the Trustee’s rights, obligations and choices 

of actions remain unaffected. And, pivotal here, there is no reorganizational administrative 

purpose that can be interfered with by the District Court Lawsuit because this is a chapter 7 

liquidation case. As stated by the Supreme Court, related to jurisdiction does not “extend more 

broadly” in a liquidation case under chapter 7. Celotex, 514 U.S. at 310. The rule barring 

jurisdiction over third party claims grounded in tort found in Zale Corp. applies in full force here. 

The Stay Counts must be dismissed for lack of subject-matter jurisdiction. 

8. In addition to the lack of subject-matter jurisdiction, neither the Constitution nor 

statute confers authority on bankruptcy courts to finally determine and issue relief on the Stay 

Counts, which are non-core claims. Core proceedings are those proceedings that derive from a 

statutory scheme enacted pursuant to the Bankruptcy Clause of the Constitution (i.e., title 11 or 

the Bankruptcy Code), meaning such proceedings are “arising under title 11 or arising in a case 

under title 11.” 28 U.S.C. § 157(b). FSCLE’s claims arise under state and non-bankruptcy federal 

law and are independent of this bankruptcy case. Such claims are non-core proceedings. With 

Purpose, 654 B.R. at 730 (“The issues are clearly non-core”). FSCLE does not consent to this 

Court determining the Stay Counts. Only the District Court has jurisdiction and authority to enjoin 

the FSCLE Complaint that is before it. 

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9. The District Court already has jurisdiction and Article III constitutional authority 

over the FSCLE Complaint. The Trustee has not sought to intervene in the District Court Lawsuit 

and, instead, has sought this non-core proceeding as a collateral attack. The Stay Counts should be 

dismissed for lack of authority. 

B. The Declaratory Counts are not justiciable. 

10. Bankruptcy courts may enter declaratory relief under the Declaratory Judgment 

Act, codified at 28 U.S.C. § 2201, where there is an actual controversy, but such relief is 

discretionary and “[a] court should dismiss a case for lack of ‘ripeness’ when the case is abstract 

or hypothetical.” New Orleans Pub. Serv., Inc. v. Council of City of New Orleans, 833 F.2d 583, 

586 (5th Cir. 1987); Wilton v. Seven Falls Co., 515 U.S. 277, 287 (1995) (“The Act “confers 

discretion on the courts [to grant declaratory relief] rather than an absolute right on a litigant [to 

such relief].”). “The Declaratory Judgment Act is not jurisdictional. It is procedural only, and 

merely grants authority to the courts to use a new remedy in cases over which they otherwise have 

jurisdiction.” In re New York Inn Inc., 2023 WL 2938371, *7 fn. 80 (Bankr. N.D. Tex. Apr. 13, 

2023) (citing Harris County Texas v. MERSCORP Inc., 791 F.3d 545, 553 (5th Cir. 2015)). Prior 

to exercising its discretion to decide or dismiss the action, the bankruptcy court must determine 

“whether the declaratory action is justiciable.” Sherwin-Williams Co. v. Holmes Cnty., 343 F.3d 

383, 387 (5th Cir. 2003). 

11. “A case is generally ripe if any remaining questions are purely legal ones; 

conversely, a case is not ripe if further factual development is required.” Harris County, 791 F.3d 

at 587; Val-Com Acquisitions Tr. v. Chase Home Fin., L.L.C., 434 F. App’x 395, 395–96 (5th Cir. 

2011) (“An actual controversy is a dispute that is definite and concrete, touching the legal relations 

of parties having adverse legal interests. The controversy must be such that it can presently be 

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litigated and decided and not hypothetical, conjectural, conditional or based upon the possibility 

of a factual situation that may never develop. The plaintiffs have the burden of establishing the 

existence of an actual controversy under the Act.”) “To have standing under the [Declaratory 

Judgment Act], the plaintiff may show that ‘actual present harm or a significant possibility of 

future harm’ exist ‘even though the injury-in-fact has not yet been completed.’” In re Providence 

Hosp. of N. Houston LLC, 653 B.R. 612, 623 (Bankr. S.D. Tex. 2023) (citing Bauer v. Texas, 341 

F.3d 352, 357-58 (5th Cir. 2003)). 

12. In the Providence Hosp. of N. Houston case, the plaintiff trustee had sought a 

declaration that “[Defendant] holds no valid claim against the Debtor or the Estate.” In re 

Providence Hosp. of N. Houston LLC, 653 B.R. at 624-25. But, the Texas bankruptcy court held 

this declaratory relief was not justiciable because it did not present an actual controversy. Id. The 

defect was that the defendant had not yet “filed a claim or otherwise asserted that any amount is 

due from the Debtor.” Id. The court would not declare a negative in the abstract. Id. The trustee 

could not preemptively bar the claimant from seeking relief in the future. Id. 

13. While FSCLE has filed a claim as an unsecured creditor, it is has not taken the 

further step of commencing an adversary proceeding to determine property rights or assert 

equitable interests or remedies related to property. FSCLE recognizes that it must commence an 

adversary proceeding if it wants this Court to determine an interest in property, including declaring 

a constructive or resulting trust. Fed. R. Bankr. P. 7001(2) and (9); Matter of Haber Oil Co., Inc., 

12 F.3d 426 (5th Cir. 1994) (holding a constructive trust in bankruptcy must be asserted through 

an adversary proceeding and not a proof of claim); Matter of UTSA Apartments 8, L.L.C., 886 F.3d 

473 (5th Cir. 2018) (same). Absent a cause of action commenced by FSCLE, there is no current 

case or controversy, and the Declaratory Counts should be dismissed because the Trustee cannot 

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seek a “procedural” remedy of declaratory judgment where there is no underlying cause of action. 

See Harris County, supra. 

14. FSCLE reserved in its Proof of Claim the right to seek remedies. POC No. 32, ¶ 54 

(“FSCLE reserves the right to seek remedies at law and equity to have the monies unlawfully 

appropriated from it any traceable proceeds to be determined as subject to an express, equitable, 

constructive, resulting, or other trust.”). And, it reserved the right to seek property determinations. 

Id. (“FSCLE specifically reserves the right to asset that the monies unlawfully appropriated from 

it by Goodman Networks are its related parties and co-conspirators any traceable proceeds thereof 

are not property of the estate, property of Goodman Networks, or property of the related parties 

and co-conspirators.”). Contrary to the Trustee’s allegations, nothing in the Proof of Claim seeks 

a determination or declaration of an interest in property because reservations of rights are not 

affirmative requests for relief. The Trustee was put on notice of potential defects in title of the 

Debtor, but no affirmative relief was sought when FSCLE submitted its Proof of Claim. 

15. The Trustee seeks to preempt FSCLE’s reserved rights and have this Court declare 

a negative in the abstract. He asks this court to prematurely declare that FSCLE cannot seek a 

future determination, declaration, or equitable remedy under any circumstances. To be clear, the 

Trustee is not seeking a determination of an interest in specific property pursuant to Fed. R. Bankr. 

P. 7001(3) and has not interplead specific property pursuant to Fed. R. Bankr. P. 7022. Facts and 

property rights are not at issue in the Trustee Complaint on the Declaratory Counts. The Trustee 

only seeks a declaration that FSCLE cannot assert property rights or equitable interests and 

remedies in this case no matter the facts that develop or the property that is located or recovered. 

This preemptive declaration is contrary to established declaratory judgment standards. The 

Declaratory Counts are hypothetical, conjectural, premature and based upon the possibility that 

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FSCLE will seek a future determination over property recovered by the Trustee. Because FSCLE 

has not yet done so, the Declaratory Counts are not ripe. 

16. This Court should decide any future controversaries based on the factual record 

developed in an adversary proceeding related to specific property. If the Trustee should locate or 

recover disputed property and need a determination on specific property in his possession, he has 

tools related to identifiable property. He may interplead that property pursuant to Fed. R. Bankr. 

P. 7022 and force FSCLE and any other party in interest, including himself, to assert its rights 

relative to that specific property. Or, he may seek a property determination on specific property in 

his possession. It is not appropriate to conjecture as to what assets will be recovered, from whom 

they will be recovered, the factual circumstances at that time, and whether the assets are traceable 

to the frauds and thefts against FSCLE. The Declaratory Counts are not ripe and should be 

dismissed as not justiciable. 

RULE 12(B)(6) FAILURE TO STATE A CLAIM 

A. The District Court Lawsuit did not violate the automatic stay because it is 

against non-debtors for direct damages to FSCLE. 

17. The bankruptcy automatic stay does not stay a plaintiff non-debtor’s action against 

non-debtors for direct damages to the plaintiff non-debtor. FSCLE is a plaintiff non-debtor. Its 

District Court Lawsuit is brought against non-debtors. And, the damages asserted in the District 

Court Lawsuit are direct damages to FSCLE – not derivative damages of the Debtor’s estate (a.k.a. 

collective damages). FSCLE seeks remedies for injuries it uniquely sustained due to the nondebtors tortious conduct. The automatic stay in this case does not apply to the District Court 

Lawsuit. 

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(i) Section 362(a)(1) does not apply to claims against non-debtors. 

18. It is well-settled law in this Circuit that actions against non-debtors are not stayed 

under section 362(a)(1). “In short, the automatic stay generally forestalls any action against debtors 

in bankruptcy but not against co-debtors, co-tortfeasors, or other non-debtors.” Uranga v. Holiday 

Mkt., Inc., 2014 WL 349716, at *1 (N.D. Tex. Jan. 31, 2014). 

19. A survey of applicable Circuit law confirms this. Wedgeworth v. Fibreboard Corp., 

706 F.2d 541, 547 (5th Cir. 1983) (“Section 362 . . . provides a narrow protection directed at the 

debtor and its estate.”); GATX Aircraft Corp. v. M/V Courtney Leigh, 768 F.2d 711, 716 (5th Cir. 

1985) (“By its terms the automatic stay applies only to the debtor, not to co-debtors under Chapter 

7 or Chapter 11 of the Bankruptcy Code nor to co-tortfeasors.”); Matter of S.I. Acquisition, Inc., 

817 F.2d 1142, 1147 (5th Cir. 1987) (“. . . a section 362(a)(1) stay is available only for the debtor’s 

benefit and does not prohibit actions against nonbankrupt third parties or codefendants.”); Picco 

v. Glob. Marine Drilling Co., 900 F.2d 846, 850 (5th Cir. 1990) (“The automatic stay of the 

bankruptcy court does not divest all other courts of jurisdiction to hear every claim that is in any 

way related to the bankruptcy proceeding.”); Arnold v. Garlock, Inc., 278 F.3d 426, 436 (5th Cir. 

2001) (“Section 362 is rarely, however, a valid basis on which to stay actions against nondebtors.”). In Wedgeworth, the controlling case, the Circuit Court analyzed the plain language of 

the section 362(a) and its related provisions, the legislative history, and the applicable public 

policies and refused to apply or extend the automatic stay to joint tortfeasors. Wedgeworth, 706 

F.2d at 544. The same plain language, legislative history, and policies apply here. 

20. The District Court Lawsuit is against twenty-six non-debtors. The Debtor is not a 

named defendant. And, the District Court Lawsuit makes this clear by expressly disclaiming that 

the plead claims are brought against the Debtor. FSCLE Complaint, ¶ 415 (“No claims are brought 

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in this case against Goodman Networks.”). The District Court Lawsuit does not violate the 

automatic stay because it is not an action against the Debtor. 

(ii) The District Court Lawsuit seeks direct damages to FSCLE – it does not 

assert derivative claims that are property of the estate. 

21. FSCLE requests direct damages from non-debtors for their tortious and 

racketeering activities that injured FSCLE. It does not seek to recover damages on claims resulting 

from injuries the non-debtors caused to the bankruptcy estate or the Debtor. Put another way, 

FSCLE’s injuries arose from misappropriations of funds from its bank accounts and 

misrepresentations directed to it. These injuries are not collectively shared with others. 

22. This Circuit recognizes that a narrow class of claims against non-debtors are stayed 

under section 362(a)(3). That narrow class is derivative claims. Derivative claims are those claims 

“belonging to the corporation itself.” With Purpose, 654 B.R. at 722 (“a more important initial 

question has to be answered: does the plaintiff seek to bring a claim belonging to her personally 

or one belonging to the corporation itself?”) (emphasis original). Derivative claims are property 

of the estate because they belong to the debtor corporation even though the named plaintiffs are 

creditors or shareholders. Derivative claims benefit the debtor corporation and its collective 

creditors and equity members. Examples of derivative claims include fraudulent transfers, 

breaches of fiduciary duty, denuding, and alter ego. See, e.g., In re MortgageAmerica Corp., 714 

F.2d 1266 (5th Cir. 1983); Matter of S.I. Acquisition, Inc., 817 F.2d 1142, 1152 (5th Cir. 1987). 

23. This Circuit looks to “the nature of the injury for which relief is sought” to 

determine whether a plaintiff’s claim is direct and personal or derivative of the corporation. Matter 

of Educators Grp. Health Tr., 25 F.3d 1281, 1284 (5th Cir. 1994) (“The injury characterization 

analysis should be considered as an inseparable component of whether an action belongs to the 

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[estate] or individual [creditor].”) (citing E.F. Hutton Southwest Properties II, Ltd., 103 B.R. 808, 

812 (Bankr. N.D. Tex 1989)); In re Seven Seas Petroleum, Inc., 522 F.3d 575, 584 (5th Cir. 2008) 

(“. . . we look to the nature of the injury for which relief is sought and consider the relationship 

between the debtor and the injury.”). 

24. Where the nature of the injury is “direct harm to the corporation, and indirect harm 

to creditors and shareholders,” the action is derivative. E.F. Hutton, 103 B.R. at 813. 

If a cause of action alleges only indirect harm to a creditor 

(i.e., an injury which derives from harm to the debtor), and the 

debtor could have raised a claim for its direct injury under the 

applicable law, then the cause of action belongs to the estate. . . . 

Conversely, if the cause of action does not explicitly or implicitly 

allege harm to the debtor, then the cause of action could not have 

been asserted by the debtor as of the commencement of the case, and 

thus is not property of the estate.” 

In re Seven Seas Petroleum, Inc., 522 F.3d at 584 (5th Cir. 2008) (quoting In re Educators 

Group Health Trust, 25 F.3d at 1284). 

25. This Court correctly recognized that a “[creditor’s] claims and the estate’s claims 

are not mutually exclusive,” and “[t]here is nothing contradictory in saying that [a defendant] 

might have inflicted direct injuries on both the estate and the [creditor].” With Purpose, 654 B.R. 

at 725. Claims for direct injuries to the creditor are not stayed even if the debtor also suffered direct 

injuries from the same tortious conduct. Here, as in With Purpose, “it is clear that the . . . causes 

of action are direct, not derivative” because the Debtor benefited from the injuries to FSCLE. Id. 

at 723 (“The misrepresentations that allegedly caused the Plaintiffs’ losses injured only the 

Plaintiffs; they did not injure the corporation. In fact, the Debtor itself benefited from these alleged 

misrepresentations as the Debtor received millions . . .”). The Debtor, here, benefited from the 

misappropriations when it received in excess of $66 million from FSCLE into the 4352 Account. 

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26. It is undisputed that FSCLE alleged direct injuries resulting from fraud. FSCLE 

Complaint, Claim No. 6 (the Actual Fraud Claim). Specifically, FSCLE alleges it was fraudulently 

induced to transfer funds in excess of $66 million to the Debtor, which funds were initially held in 

the 4352 Account before being further misappropriated for the personal benefit of Frinzi and James 

Goodman and their co-conspirators. The Trustee admits that the fraud claims in the District Court 

Lawsuit are personal to FSCLE and are not property of the estate. Trustee Complaint, ¶¶ 26, 88. 

In addition, the Trustee admits FSCLE plead direct claims for tortious interference. 

27. Despite admitting that FSCLE plead direct claims for fraud and tortious 

interference, the Trustee wrongly asserts FSCLE’s other claims are not similarly direct. This is 

wrong as a matter of law. Each claim is premised on the same injuries. 

28. This is most obvious as it pertains to the civil conspiracy claims against all 

Defendants. Conspiracy claims are not standalone claims. They flow from another, primary tort. 

Agar Corp., Inc. v. Electro Cirs. Int'l, LLC, 580 S.W.3d 136, 140–41 (Tex. 2019) (“We have 

repeatedly called civil conspiracy a ‘derivative tort,’ meaning it depends on some underlying tort 

or other illegal act.”). The nature of the primary tort will determine whether the conspiracy is a 

direct claim or derivative claim.1 “Civil conspiracy depends entirely on the injury caused by the 

underlying tort; the injury is the damage from the underlying wrong, not the conspiracy itself.” Id. 

at 141. Where certain defendants caused direct injuries to FSCLE resulting from a fraud or tortious 

1

 A “derivative tort” does not mean a derivative claim of the corporation. It means civil conspiracy 

is a secondary tort that must be derived from a primary tort. Id. at 141 (“Our use of the word 

‘derivative’ in this context means a civil conspiracy claim is connected to the underlying tort and 

survives or fails alongside it.”). 

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interference, it follows that other defendants, who conspired in the tortious conduct, also caused 

direct injuries to FSCLE. The fraud and conspiracy claims are of the same direct nature. 

29. Similarly, the same set of facts and injuries can establish multiple independent, 

direct claims. Theft often involves fraud. Where a thief utilizes false representations to unlawfully 

appropriate funds, the thief has caused direct injuries to the victim and the victim has claims for 

both fraud and civil theft. Theft, like fraud, is a civil tort under Texas law. Agar Corp., Inc. v. 

Electro Cirs. Int'l, LLC, 580 S.W.3d at 146 (identifying “civil theft” and “conversion” as 

“underlying torts” that can give rise to civil conspiracy claims). FSCLE asserts two theft claims 

alongside its fraud claims in the District Court Lawsuit. The theft and fraud claims arise from the 

same set of facts and assert the same direct injuries. FSCLE alleges “lies” were used to “keep 

FSCLE funding the 3452 Account,” and, therefore, the funds in FSCLE’s bank accounts were 

unlawfully appropriated into the 3452 Account based on those lies. FSCLE Complaint, ¶ 699. 

FSCLE makes it clear that the stolen/embezzled funds were “located in the 4352 Account” after 

the theft. Id. at ¶ 714. FSCLE then asserts claims against all other defendants for “their roles in 

either receiving the stolen money. . . or in taking acts to aid and abet the theft.” Id. at ¶ 715. Funds 

were unlawfully appropriated from FSCLE’s bank accounts into the 4352 Account and then 

laundered out of the 4352 Account through a number of schemes involving the Defendants. FSCLE 

plainly alleges “Each of the Defendants knew the original source of the funds and knew that these 

were FSCLE funds in the 4352 Accounts.” Id. at ¶ 716. Each of the Defendants accepted the funds 

knowing that they were stolen/embezzled.” Id. at ¶ 717. 

30. The Trustee’s confusion appears to stem from the allegations regarding the 4352 

Account. The Trustee appears to believe FSCLE is asserting theft claims solely based on funds 

flowing from the 4352 Account. And, he claims that any theft from the 4352 Account, a Debtor 

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account, is a claim of the estate. But, as shown above, FSCLE alleges theft of its funds into the 

4352 Account and that subsequent transfers from the 4352 Account were in furtherance of the 

original theft against FSCLE. The theft claims are personal to FSCLE in the same manner as the 

fraud claims because only FSCLE’s funds were misappropriated into the 4352 Account. No other 

creditor shares this injury. 

31. The unjust enrichment claim is no different than the theft and fraud claims. FSCLE 

alleges the same set of facts that establish the fraud and theft claims also establish unjust 

enrichment claims. “A party may recover under an unjust enrichment theory if one party has 

obtained a benefit from another by fraud, duress, or the taking of unfair advantage.” Heldenfels 

Bros. v. City of Corpus Christi, 832 S.W.2d 39, 41 (Tex. 1992). FSCLE plainly alleged fraud and 

the taking of unfair advantage as bases for recovery on its unjust enrichment claims. “It would be 

unjust for any of the Defendants to retain the stolen FSCLE funds or any portion thereof.” FSCLE 

Complaint, ¶ 737. The unjust enrichment claims are direct claims of FSCLE. 

32. FSCLE also asserts a constructive trust “claim.” Admittedly, constructive trust is 

an equitable remedy – not a standalone claim. KCM Fin. LLC v. Bradshaw, 457 S.W.3d 70, 87 

(Tex. 2015) (“A constructive trust is an equitable, court-created remedy designed to prevent unjust 

enrichment.”). “The party requesting a constructive trust must establish the following: (1) breach 

of a special trust or fiduciary relationship or actual or constructive fraud; (2) unjust enrichment of 

the wrongdoer; and (3) an identifiable res that can be traced back to the original property.” Id. 

Thus, where the underlying torts of fraud and unjust enrichment are proven and the defendant is 

holding property that is traceable back to the original wrongdoing, Texas law provides a remedy 

by granting the victim an equitable interest in any property traceable to the fraud. “In weighing the 

imposition of a constructive trust, a court will identify whether a wrongful taking has occurred.” 

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Id. Because a constructive trust is an available remedy on an underlying claim and not a standalone 

claim, it is not a property interest and, therefore, cannot become property of the estate or be 

subjected to the automatic stay. Only the underlying claim (i.e., fraud, unjust enrichment, etc.) is 

a property interest and, as shown above, the underlying claims here are FSCLE’s property. 

33. Finally, FSCLE asserts RICO claims against numerous defendants. RICO claims 

are plainly personal to FSCLE because injuries are broadly defined under the RICO statute to allow 

“any person” injured to their “business or property” to bring a claim. 18 U.S.C.A. § 1964(c) (“Any 

person injured in his business or property by reason of a violation of section 1962 of this chapter 

may sue therefor in any appropriate United States district court . . .”) (emphasis added). While the 

RICO statute is complex, the standing provision is plain and broad. FSCLE asserts an injury to its 

property and business in excess of $66 million that is not shared by other creditors and arises from 

violations of the RICO statute. It has standing to bring the RICO claim. 

34. In E.F. Hutton, the Northern District of Texas Bankruptcy Court was tasked with 

determining whether individual creditors could assert claims, including RICO claims against third 

parties for damage to them as opposed to damage to a partnership. 103 B.R. at 815-16. The court 

ruled that the individual creditors’ claims, including RICO claims, were not property of the estate 

and could not be asserted by the trustee or a committee of creditors standing in the shoes of the 

trustee. Id.; see also Grimmett v. Brown, 75 F.3d 506, 515-16 (9th Cir. 1996) (creditor asserting 

RICO claim may separately assert the claim and does not have to wait for the parallel bankruptcy 

proceeding to run its course); In re Kalispell Feed & Grain Supply, 55 B.R. 627, 629 (Bank. D. 

Mont. 1985) (creditor may bring a separate RICO claim parallel to a bankruptcy proceeding). 

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35. Of course, many of the Trustee’s arguments really go to the merits of FSCLE’s 

RICO claims as opposed to whether those claims belong to the estate or to FSCLE. As this Court 

has noted, when considering whether a claim belongs to the estate or to FSCLE, the Court is not 

to delve into the merits of the claims. With Purpose, 654 B.R. at 724. Additionally, the Fifth 

Circuit has made it clear that “it is entirely possible for a bankruptcy estate and a creditor to own 

separate claims against a third party arising out of the same general series of events and broad 

course of conduct.” Seven Seas, 522 F.3d at 585. Thus, the fact that FSCLE has RICO claims 

predicated upon money laundering for the specific dollars stolen and defrauded from it and the 

bankruptcy estate may also have certain claims to recover certain funds does not render FSCLE’s 

RICO claim property of the estate. The point of stealing the funds from FSCLE in the first place 

was to launder those funds back to Frinzi, James Goodman and others. This is not a case where 

funds otherwise owed to the Debtor went to Debtor after November 3 and then were laundered in 

a first theft from Debtor. The money laundering efforts that occurred in 2021 and 2022 were a 

continuance of the enterprise to steal the funds from FSCLE in the first place (as opposed to the 

sums paid to Debtor prior to November 3). Thus, those who worked with Frinzi, James Goodman, 

and others to support the original theft and to launder the funds back to them are each fully liable 

for the entire damage done to FSCLE. See Armco Industrial Credit Corp. v. SLT Warehouse Co., 

782 F.2d 475, 485-86 (5th Cir. 1986) (RICO liability for aiding and abetting predicate acts); United 

States v. Toney, 598 F.2d 1349, 1355 (5th Cir. 1979) (co-conspirators under RICO conspiracy are 

liable for all the acts of other members of the enterprise). In addition, RICO carries with it the 

prospect of treble damages. FSCLE has the right to assert its RICO claims for the particularized 

harm done to it. 

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36. FSCLE’s claims are its personal property. The injuries asserted are direct injury on 

FSCLE caused by the defendant non-debtors. FSCLE’s claims are not property of the estate under 

section 541(a), and, therefore, the automatic stay under section 363(a)(3) is inapplicable. 

(iii) The automatic stay was not violated, and the Trustee cannot seek relief 

under section 362(k); therefore, there is no entitlement to damages. 

37. As shown above, FSCLE’s claims are against non-debtors and are its personal 

property. Therefore, the Trustee cannot show a willful stay violation that entitles the estate to 

damages of any sort. Moreover, the Trustee is not eligible for relief under section 362(k). Thus, if 

a stay violation was proven, the Trustee cannot recover actual damages, costs, attorney fees, or 

punitive damages. 

38. Section 362(k) is inapplicable to corporate debtors because only “an individual 

injured by any willful violation of a stay” can recover under this subsection.” In re Tusa-Expo 

Holdings, Inc., 2014 WL 172276, at *4 (Bankr. N.D. Tex. Jan. 15, 2014) (stating “the Trustee, 

acting on behalf of the estate of a debtor corporation lacks standing to seek damages under section 

362(k)” and collecting the following cases: In re C.W. Min. Co., 477 B.R. 176, 193–94 (10th Cir. 

BAP 2012) (holding that a trustee acting on behalf of a bankruptcy estate, which is an artificial 

entity, is not an “individual”); Spookyworld, Inc. v. Town of Berlin (In re Spookyworld, Inc.), 346 

F.3d 1, 8 (1st Cir. 2003) (holding that a corporation is not an “individual” for purposes of 362(h)); 

Havelock v. Taxel (In re Pace), 67 F.3d 187 (9th Cir. 1995) (holding that a trustee is not an 

“individual” for purposes of 362(h)); Sonse v. Reinert & Duree, P.C. (In re Just Brakes Corp. Sys., 

Inc.), 108 F.3d 881, 884–85 (8th Cir. 1997) (holding that under 362(h), the term “individual” does 

not apply to corporate entities); Jove Eng'g, Inc. v. IRS, 92 F.3d 1539, 1551–53 (11th Cir. 1996) 

(same); Maritime Asbestosis Legal Clinic v. LTV Steel Co., Inc. (In re Chateaugay Corp.), 920 

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F.2d 183, 186–87 (2nd Cir.1990) (holding that the term “individual” applied only to natural 

persons and not artificial entities); In re Amberjack Interests, Inc., 326 B.R. 379, 385 n. 1 

(Bankr.S.D.Tex.2005) (stating that a trustee acting on behalf of the estate of a debtor corporation 

cannot be considered an “individual” for purposes of 362(h)); In re First Republic Bank Corp., 

113 B.R. 277, 278–79 (Bankr. N.D. Tex. 1989) (holding that a corporation is not an individual 

under section 362(h))). 

39. This Court must dismiss Count 6 for failure to state a claim under section 362(k). 

B. The Declaratory Counts fail to state a claim upon which relief can be granted 

40. As discussed in the jurisdictional section, FSCLE recognizes that it must commence 

an adversary proceeding if it wants this Court to determine an interest in property, including 

declaring a constructive or resulting trust. Fed. R. Bankr. P. 7001(2) and (9); Matter of Haber Oil 

Co., Inc., 12 F.3d 426 (5th Cir. 1994); Matter of UTSA Apartments 8, L.L.C., 886 F.3d 473 (5th 

Cir. 2018). FSCLE has not brought a complaint for a property determination or declaration against 

any property in the possession of the Trustee; therefore, there is no current case or controversy, 

and the Declaratory Counts should be dismissed for lack of jurisdiction. 

41. Ignoring the lack of jurisdiction, the Declaratory Counts should also be dismissed 

for failure to state a claim on two grounds: (1) equitable remedies and property determinations are 

available in bankruptcy as a matter of law for victims of theft and actual fraud and (2) the 

declaratory relief sought does not identify a specific res. Alternatively, the Court should exercise 

its discretion and dismiss the Declaratory Counts. 

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(iv) As a matter of law, a thief does not obtain title under Texas Law. 

42. It is no secret that FSCLE asserts that the Debtor and its co-conspirators directly 

damaged FSCLE in an amount equal to at least $81,158,452.82. See Proof of Claim and the District 

Court Lawsuit. The Debtor and its officers and co-conspirators stole from FSCLE. 

43. State law controls property rights in bankruptcy. Butner v. United States, 440 U.S. 

48, 99 S.Ct. 914, 59 L.Ed.2d 136 (1979). Here, Texas law applies and makes clear that “[t]he 

general rule is that when property is stolen, the party who acquires the stolen property does not 

acquire its title.” Matter of Okedokun, 968 F.3d 378, 390 (5th Cir. 2020) (citing Matter of 

Approximately $80,600.00, 537 S.W.3d 207, 211 (Tex. App.—Houston [1st Dist.] 2017, pet. 

denied)).2 Where property held by the debtor is stolen, the stolen property, while appearing in legal 

form or possession to be property of the debtor, is not property of the debtor and, therefore, does 

not become property of the estate under section 541(a) when a bankruptcy case is commenced. 

44. In In re Newpower, 233 F.3d 922 (6th Cir. 2000), the Sixth Circuit examined 

whether stolen funds were assets of the bankruptcy estate of the thief and thus subject to the 

automatic stay. Like the Texas law, the Sixth Circuit first determined that the person or entity 

which steals money or property does not obtain any title to the property stolen under Michigan 

law. Id. at 929 (also citing to the Restatement (Second) of Torts § 229 cmt. D (1965)). On that 

basis, the Sixth Circuit held that, “the debtor’s bankruptcy estate has no property interest in such 

2

 The Approximately $80,600 court recognizes that there is an exception for stolen “money” 

obtained by a third party to the theft, who receives the stolen money in “due course of business, in 

good faith, and for valuable consideration.” Id. at 212 (citing Sinclair Houston Fed. Credit Union 

v. Hendricks, 268 S.W.2d 290, 295 (Tex. Civ. App. 1954), writ refused NRE). The Hendricks court 

further held “where stolen money is acquired in an unlawful manner, the reason for the exception 

to the rule fails.” Sinclair Houston Fed. Credit Union v. Hendricks, 268 S.W.2d at 295. Here, the 

Debtor is not a third party to the ft and this exception does not apply. 

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embezzled funds which are now in the hands of third parties. As discussed, debtor never had a 

legal interest in such funds and appellants should be allowed to pursue third party recipients to 

recover embezzled funds and property traceable to such funds to the extent that the law allows.” 

Id. at 931. This holding is consistent with Supreme Court and Fifth Circuit precedent. See Butner, 

supra; Mission Prod. Holdings, Inc. v. Tempnology, LLC, 139 S. Ct. 1652, 1663 (2019) (“The 

estate cannot possess anything more than the debtor itself did outside bankruptcy. As one 

bankruptcy scholar has put the point: Whatever ‘limitation[s] on the debtor’s property [apply] 

outside of bankruptcy[ ] appl[y] inside of bankruptcy as well. A debtor’s property does not shrink 

by happenstance of bankruptcy, but it does not expand, either.’”) (quoting D. Baird, Elements of 

Bankruptcy at 97 (6th ed. 2014). 

45. The Sixth Circuit did find that, if the debtor had any property purchased with the 

stolen funds, the property purchased and still in the debtor’s possession (i.e., proceeds of the stolen 

property) would be assets of the estate but only to the extent of legal title. Newpower, 233 F.3d at 

929-931. Section 541(d) places a limitation on property of the estate because equitable interests 

not held by the debtor are excluded. “Property in which the debtor holds, as of the commencement 

of the case, only legal title and not an equitable interest . . . becomes property of the estate . . . 

only to the extent of the debtor’s legal title to such property, but not to the extent of any equitable 

interest in such property that the debtor does not hold.” 11 U.S.C. § 541(d). Thus, while proceeds 

of stolen property in the debtor’s possession may be property of the estate because of the debtor’s 

legal title, equitable title in the proceeds can still resides in the victim of the stolen property. The 

Sixth Circuit granted relief from the stay to allow the victim of the theft to proceed to state court 

to determine its equitable interest in the proceeds of the stolen property. Newpower, 233 F.3d at 

935. 

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46. Here, FSCLE is entitled as a matter of Texas law to recover its stolen property or 

obtain an equitable remedy to recover the proceeds of its stolen property. The Trustee 

mischaracterizes the nature of FSCLE’s fraud and theft allegations in the District Court Lawsuit 

by focusing on the funds out of the 4352 Account rather than focusing on the unlawful 

appropriation of funds into the 4352 Account. The Trustee states: “Because FedEx did not own 

the 4352 Account or the funds therein, its property was not stolen . . .” Trustee Complaint, ¶ 77. 

FSCLE admits it did not own the 4352 Account. But, the 4352 Account only had funds in it because 

funds were first stolen from FSCLE’s accounts. FSCLE is asserting it was directly and originally 

damaged when the Debtor and its co-conspirators fraudulently induced FSCLE to fund the 4352 

Account while intending to embezzle those funds for their own personal benefit. If the Trustee 

possesses, locates, avoids, or recovers property stolen from FSCLE, FSCLE may commence an 

adversary proceeding to determine the extent of its title or an equitable interest in the stolen 

property and to compel its return. The Trustee fails to state a claim that as a matter of law FSCLE 

could never have an interest in, or equitable remedy to, any property possessed by the Trustee or 

held in the bankruptcy estate. 

(v) Constructive Trusts are extraordinary but available remedies in Bankruptcy. 

47. This Circuit recognizes that the remedy of constructive trust may be asserted in a 

bankruptcy case through an adversary proceeding pursuant to the state law. Matter of Haber Oil 

Co., Inc., 12 F.3d 426, 437-40 (5th Cir. 1994); Matter of UTSA Apartments 8, L.L.C., 886 F.3d 

473, 490-91 (5th Cir. 2018). “The remedy of a constructive trust is . . . a potent one in bankruptcy 

. . .” Id. at 437. And, the remedy should only be imposed where there is “substantial reason to do 

so.” Id. (quoting Neochem Corp. v. Behring Int'l, Inc. (In re Behring Int'l, Inc.), 61 B.R. 896, 902 

(Bankr.N.D.Tex.1986)). 

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48. Again, state law controls property rights in bankruptcy, and Texas law applies here. 

The circumstances for imposition of a constructive trust under Texas law require proof of a “(1) 

Breach of an informal relationship of special trust or confidence arising prior to and apart from the 

transaction in question, or actual fraud; (2) Unjust enrichment of the wrongdoer; and (3) Tracing 

to an identifiable res.” Matter of Monnig's Dep't Stores, Inc., 929 F.2d 197, 201 (5th Cir. 1991). 

“Under Texas law and [Bankruptcy] Code § 541(d) then, property that a debtor fraudulently 

obtained prior to the petition date enters the bankruptcy estate only to the extent of legal title unless 

the constructive trust beneficiary fails to assert his equitable interest.” Matter of Quality Holstein 

Leasing, 752 F.2d 1009, 1014 (5th Cir. 1985). Texas applies the majority state law rule that the 

effective date of the constructive trust relates back to “when legal title passes....” to the wrongful 

possessor of the property – not when the constructive trust is imposed by judicial decree. Id. (citing 

Meadows v. Bierschwale, 516 S.W.2d 125, 133 (Tex.1974)); see also In re Leitner, 236 B.R. 420, 

424 (Bankr. D. Kan. 1999) (“. . . under the majority state law rule, a constructive trust arises at the 

time of the occurrence of the events giving rise to the duty to reconvey the property, not at the date 

of final judgment declaring the trust . . .”). 

49. Contrary to the Trustee’s legal argument, the remedy of a constructive trust is 

available in bankruptcy and may become available to FSCLE if stolen property or its proceeds are 

located and possessed by the Trustee. The theft against FSCLE occurred beginning in late 2021 

and continued into 2022. Each wrongful act that unlawfully appropriated funds from FSCLE’s 

accounts occurred prior to the Petition Date. If FSCLE seeks the equitable remedy of a constructive 

trust over property located and possessed by the Trustee, the constructive trust would relate back, 

be effective pre-petition, and result in the equitable interest of such property being excluded from 

property of the estate under section 541(d). 

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50. The Trustee’s legal argument that a constructive trust remedy is not available postpetition in bankruptcy appears to be based in either of two misunderstandings. First it appears he 

misunderstands a quote from the Quality Holstein Leasing opinion, which states: “Where state law 

impresses property that a debtor holds with a constructive trust in favor of another, and the trust 

attaches prior to the petition date, the trust beneficiary normally may recover its equitable interest 

in the property through bankruptcy court proceedings.” 752 F.2d. at 1013-14 (emphasis added). 

It appears the Trustee wrongful believes that “attaches prior to the petition date” means the 

constructive trust must be imposed by final judgment prior to the petition date. But, as shown 

above, the effective date of attachment of a constructive trust in Texas relates back to the wrongful 

conduct. The date of imposition is irrelevant. 

51. Alternatively, the Trustee errs by relying on inapposite law derived from the Sixth 

Circuit’s holding in In re Omegas Group, Inc., 16 F.3d 1443 (6th Cir. 1994). The Sixth Circuit 

applied what appeared to be a bright line rule that constructive trusts are not an available remedy 

in bankruptcy unless they were imposed prepetition by court order. Id. Omegas is inapposite 

because in this Circuit Quality Holstein Leasing – not Omegas – is controlling. The Omegas panel 

expressly noted that it split from Fifth Circuit’s precedent stated in Quality Holstein Leasing. Id. 

at 1448 (criticizing Quality Holstein Leasing). 

52. Moreover, the Omegas holding has been widely criticized and even distinguished 

and limited within the Sixth Circuit. A Delaware court summarized this criticism: 

However, the Sixth Circuit panel’s blanket statement in Omegas, 

that constructive trusts come into existence at the time they are 

expressly recognized by a court, made without citation to any case 

authority, runs counter to the teaching of Third Circuit and Supreme 

Court law, that courts must look to state law to determine whether 

and when constructive trusts attach in bankruptcy law. The majority 

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state law rule is contrary to that announced by the Omegas court; 

that is, the majority rule is that constructive trusts attach or relate 

back to the time of the unlawful act that led to the creation of the 

trust. 

In re Paul J. Paradise & Associates, Inc., 249 B.R. 360, 370-71 (D. Del. 2000); see also Leitner, 

236 B.R. at 423 (collecting cases). Another Sixth Circuit panel in Newpower expressly limited the 

holding in Omegas, a non-theft case, and deemed its holding inapplicable to theft cases. In re 

Newpower, 233 F.3d 922, 936 (“[In Omegas] we were not faced with the question of either 

obtaining or enforcing a state court judgment holding that the equitable interest belonged to 

someone other than the debtor.”). This distinction was material. “The situation presented by this 

case is significantly different. Here, Newpower is a thief. The critical issue therefore is not only 

who has legal title to the property, but also who has equitable title to the property purchased with 

the stolen funds.” Id. The Sixth Circuit in Newpower held that stolen property is not property of 

the estate, “the debtor’s bankruptcy estate has no property interest in such embezzled funds which 

are now in the hands of third parties,” and relief from the stay should be granted to allow the state 

courts to determine whether the movant can “obtain” a constructive trust under state law over the 

proceeds of the embezzlement in the hands of the Trustee. Id. at 931, 935-36. 

53. Here, the Trustee seeks a declaration as a matter of law that under no circumstances 

can a constructive trust be imposed post-petition. As shown above, Fifth Circuit precedent, 

including Quality Holstein Leasing, allows the imposition of constructive trusts in bankruptcy, and 

the imposition of a constructive trust under Texas law and the majority state law rule relates back 

to the events that gave rise to the duty to recovery the property. Constructive and resulting trusts 

are extraordinary but available equitable remedies in bankruptcy. The Trustee fails to state a claim 

that as a matter of law FSCLE could never have a claim for equitable trust in this bankruptcy case. 

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If proceeds of the stolen property are possessed, located, avoided or recovered by the Trustee, 

FSCLE may assert title or an equitable interest in that property through an adversary proceeding. 

(vi) Without a specific res plead, the Trustee cannot obtain declaratory 

relief. 

54. The requests for declaration fail as a matter of law because they do not seek 

property determinations on specific property held by the Trustee. For example, The Trustee seeks 

in Counts 1 and 2 “a declaration that FedEx held no constructive trust against or to the 4352 

Account, the funds therein, and the Transfers and Proceeds of such funds, as of the Petition Date 

. . . the Debtor at no time held the 4352 Account or the funds therein in constructive trust for the 

benefit of FedEx.” Trustee Complaint, ¶¶ 55, 65. FSCLE does not dispute that as of the Petition 

Date, there was no order establishing a trust on the 4352 Account or the funds therein. Moreover, 

it is undisputed that as of the Petition Date the 4352 Account held no funds over which a trust 

could be established. All the stolen funds from FSCLE had already been further transferred from 

the 4352 Account to third parties. 

55. Today, the 4352 Account continues to have no funds. And, the stolen funds 

transferred out of the 4352 Account as part of the Transfers and Proceeds are not property of the 

estate. Possession of those transferred funds and their proceeds are held by third party, non-debtors. 

That traceable stolen property and proceeds of the stolen property exist outside of the bankruptcy 

estate presents a ripeness problem for the Trustee because “a constructive trust can attach only to 

a specific res, or to some identifiable property that can be traced back to the original res acquired 

by fraud.” Haber Oil, 12 F.3d at 442. An unfunded 4352 Account and non-debtor property do not 

present a specific res that can be attached in this bankruptcy case. FSCLE has correctly abstained 

from asserting a constructive trust until stolen property or its proceeds are possessed by the Trustee. 

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Conversely, the Trustee’s preemptive use of declaratory remedies to negate any future claim of 

FSCLE as to a constructive trust is inappropriate. 

56. To be clear, FSCLE, like every other creditor in the bankruptcy case, cannot assert 

a direct interest in any estate tort claims (i.e., breach of fiduciary duty) or the estate’s recovery on 

such tort claims. Similarly, FSCLE cannot assert a direct interest in property that is not traceable 

back to the theft on FSCLE. FSCLE acknowledges that its interests as to the estate’s tort claims 

and any non-stolen property of the Debtor are as an unsecured creditor. However, if the Trustee 

locates, avoids, or recovers stolen property or its proceeds, FSCLE is entitled to recover the stolen 

property from the Trustee or obtain an equitable remedy to recover the proceeds of the stolen 

property. 

(vii) The Court should exercise its discretion to dismiss the Declaratory 

Counts. 

57. “The Declaratory Judgment Act, 28 U.S.C. § 2201(a), ‘is an enabling act, which 

confers discretion on the courts rather than an absolute right on a litigant.’” Sherwin-Williams Co. 

v. Holmes Cnty., 343 F.3d 383, 389 (5th Cir. 2003) (quoting Wilton v. Seven Falls Co., 515 U.S. 

277, 287, 115 S.Ct. 2137, 2143, 132 L.Ed.2d 214 (1995)). If it is determined that the Declaratory 

Counts are justiciable, the Court should still exercise its discretion and dismiss the Declaratory 

Counts. This Circuit utilizes nonexclusive factors to assist a court in deciding whether to decide 

or dismiss a declaratory action.3

3 See Pontchartrain Partners, L.L.C. v. Tierra de Los Lagos, L.L.C., 48 F.4th 603, 605 (5th Cir. 

2022) (citing Travelers Ins. Co. v. La. Farm Bureau Fed'n, Inc., 996 F.2d 774, 778 (5th Cir. 

1993))(“ (1) whether there is a pending action in which all of the matters in controversy may be 

fully litigated; (2) whether the plaintiff's suit is anticipatory; (3) whether the plaintiff engaged in 

forum shopping; (4) whether possible inequities in allowing the declaratory plaintiff to gain 

precedent in time or to change forums exist; (5) whether the federal court is a convenient forum 

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58. The weight of factors strongly support dismissal here because the Trustee is using 

the Declaratory Judgment Act for two improper purposes: (1) he is collaterally attacking the 

District Court Lawsuit in effort to preclude claims against Frinzi and James Goodman for their 

theft and racketeering activities and (2) he preemptively filed suit in anticipation of FSCLE 

asserting property rights later in this case in an effort to litigate future claims now when facts are 

not readily ascertainable. Declaratory judgments are routinely dismissed where a “manufactured 

plaintiff” initiates a declaratory judgment action to gain tactical advantages over a “true plaintiff.”4

 

59. The Trustee “now stands in the shoes” of the Debtor, and the “debtor’s misconduct 

is imputed to the trustee because, innocent as he may be, he acts as the debtor’s representative.” 

Brickley for CryptoMetrics, Inc. Creditors' Tr. v. ScanTech Identification Beams Sys., LLC, 566 

B.R. 815, 842 (W.D. Tex. 2017). The doctrine of in pari delicto applies to bar the Trustee, acting 

on behalf of the Debtor, from pursuing FSCLE’s defendants for theft, racketeering, and other 

wrongdoing because the Debtor, through its officers, contributed to the injuries. 

60. While the Trustee, acting on behalf of the Debtor, cannot pursue claims for theft or 

racketeering, FSCLE can, and did so, by commencing the District Court Lawsuit. The Trustee 

for the parties and witnesses; and (6) whether retaining the lawsuit in federal court would serve 

the purpose of judicial economy. 

4 See, e.g., PAJ, Inc. v. Yurman Design, Inc., No. CIV.A.3:98-CV-2847-P, 1999 WL 68651, at *3 

(N.D. Tex. Feb. 9, 1999) (“Such motives have been found to constitute a ‘rush to the courthouse’ 

and grounds for the dismissal of a declaratory judgment suit. Courts have found that the party 

filing suit in anticipation of a suit in another forum should not be rewarded for what amounts to 

forum shopping. Put another way, the Court cannot allow a party to secure a more favorable forum 

by filing an action for declaratory judgment when it has notice that the other party intends to file 

suit involving the same issues in a different forum. Further, anticipatory suits deprive a potential 

plaintiff of his or her choice of forum.”; Serco Servs. Co., L.P. v. Kelley Co., 1994 WL 715913, at 

*2 (N.D. Tex. May 24, 1994), aff'd, 51 F.3d 1037 (Fed. Cir. 1995) (“A plaintiff's choice of forum 

should only be given protection where the plaintiff before the court is the proper plaintiff—not a 

manufactured plaintiff through the misapplication of a declaratory judgment.”).

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commenced this action in direct reaction to FSCLE commencing the District Court Lawsuit 

because he rightfully or wrongfully perceived it as a threat. Trustee Complaint, ¶ 1 (“. . . FedEx’s 

recent filing of a complaint with the District Court . . . has now forced the issue.”). The Trustee 

ironically complains FSCLE “has commenced the proverbial race to the courthouse against the 

Trustee.” Trustee Complaint, ¶ 32 (emphasis added). Yet, caselaw shows FSCLE’s action is 

proper5 and that the Trustee is the one improperly using the Declaratory Judgment Act to race to 

this courthouse6

 because he preemptively seeks declarations and injunctions in this case to 

preclude FSCLE from the fair litigation of its theft and racketeering claims against the Debtor’s 

officers and co-conspirators. The Declaratory Counts collaterally attack FSCLE and the District 

Court Lawsuit and improperly turn, FSCLE, the victim of the Debtor’s and its officers and coconspirators wrongdoing, into the defendant in a new lawsuit. The Declaratory Counts duplicate 

litigation and costs for FSCLE and unduly delay FSCLE’s prosecution of the District Court 

Lawsuit. 

5

 In In re FoodServiceWarehouse.com, LLC, 601 Fed. 396 (E.D. La. 2019), the Court held that a 

creditor directly injured may compete with a bankruptcy trustee for assets of non-debtors. The 

court stated: 

The Trustee’s confessed purpose in enjoining Pride’s claims is to clear the field of 

competition from any other claimants when pursuing [the debtor’s] claims against 

LaPorte so that the Trustee can obtain the entirety of the available insurance 

proceeds without interference from Pride. This way all of the creditors, including 

Pride, can share in the benefits of the Trustee's efforts. To be sure, equality of 

distribution among creditors is an important general policy of bankruptcy law, but 

Pride is not similarly-situated to the other creditors who do not possess a personal 

cause of action against LaPorte for direct injury. No principle of bankruptcy law 

suggests that Pride should be impoverished on its direct claims so that other 

creditors will be better off. 

Id. at 412 (citations omitted) (note Pride was the competing creditor and LaPorte is the defendant 

non-debtor). 

6 See Note 5, supra. 

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61. The Trustee complains that FedEx “wanted and wants control over the Bankruptcy 

Case and the Estate,” but, actually, it is the Trustee that wants to control FSCLE and its District 

Court Lawsuit and utilize this forum to do so. Trustee Complaint, ¶ 34. The Trustee complains that 

it is “virtually impossible” to “enter into settlements[] and grant releases without FedEx also giving 

a release to a particular defendant.” Id. at ¶ 35. This transparency shows that the purpose of the 

Trustee Complaint is to silence FSCLE so that the Trustee can do as he wishes. See 

FoodServiceWarehouse.com, 601 B.R. at 411-12 (noting the similar trustee motivations in that 

case). However, a bankruptcy trustee never has authority to settle third party claims and grant third 

party releases. Those claims and releases are owned by the third party, and allowing a trustee to 

takeover the claims of a third party would raise takings concerns under the U.S. Constitution. 

62. Contrary to the allegations of attempting to control the estate, FSCLE merely wants 

it stolen property back. FSCLE is acting in good faith and reserving and pursuing its rights. To 

date, FSCLE has exercised two remedies. First, it petitioned for this involuntary chapter 7 case 

and filed a proof of claim against the Debtor’s estate. This displaced the Goodmans, conspirators 

in the theft, from control of the Debtor and imposed an independent trustee. Second, FSCLE filed 

the District Court Lawsuit against non-debtors seeking to recover its direct damages resulting from 

the fraud and theft. 

63. At the time FSCLE joined as a petitioning creditor, FSCLE had no knowledge of 

where its stolen property was located. Was it still possessed by the Debtor? Was it traceable? Had 

it been laundered to other persons? Indeed, at the time FSCLE joined, it understood the Debtor 

was still operating several businesses and possessed business assets that could be liquidated for all 

creditors. That understanding has proven untrue. At the time FSCLE filed its proof of claim, 

FSCLE was still unsure where its stolen property was located but it had become clear that any 

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material portion of the stolen property was not being held by the Trustee or the Debtor and that it 

had been laundered through a series of transactions and shell companies. FSCLE’s Proof of Claim 

contained the reservation of rights to put everyone on notice that it may assert a property interest 

or other equitable remedy in any stolen property located, including stolen property located, 

recovered, or possessed by the Trustee. 

64. As a practical matter, FSCLE stands to recover approximately 70 cents of every 

dollar in this case without asserting any property interests or equitable rights. Therefore, FSCLE 

has a business decision to make on whether the value of litigation to obtain the full dollar of the 

stolen property is worth it compared with obtaining 70 cents without any litigation. It is 

conceivable that FSCLE may not seek any remedy against the estate to recover stolen property 

unless the Bondholders assert a security interest in the same stolen property and seek to take the 

full dollar for themselves. Plainly, the Bondholders cannot have an interest in stolen property if 

the estate does not have an interest in the stolen property. This uncertainty regarding the 

Bondholders is further cause for the Court to exercise its discretion at this time to dismiss the 

Declaratory Counts without prejudice. The Court should only resolve property interests in this 

bankruptcy case related to stolen property in adversary proceedings that involve all parties of 

interest, including FSCLE, the Trustee, and the Bondholders to the extent they assert a security 

interest in the same stolen property. The Declaratory Counts are not the right vehicle for these 

determinations because they do not identify specific property for a property determination and do 

not provide a complete resolution. The Court should dismiss the Declaratory Counts and resolve 

any future disputes when they accrue after property is located and rights are affirmatively claimed 

in such property. 

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CONCLUSION 

For the reasons stated herein, the Court should dismiss the Trustee Complaint. 

Respectfully submitted, 

BUTLER SNOW LLP 

/s/ Adam M. Langley 

Adam M. Langley (admitted pro hac vice) 

R. Campbell Hillyer (admitted pro hac vice) 

Danny Van Horn (admitted pro hac vice) 

6075 Poplar Avenue, Suite 500 

Memphis, TN 38119 

Telephone: (901) 680-7316 

adam.langley@butlersnow.com

cam.hillyer@butlersnow.com 

danny.vanhorn@butlersnow.com 

and 

Martin A. Sosland (TX Bar No. 18855645) 

Candice Carson (TX Bar No. 24074006) 

2911 Turtle Creek Blvd., Suite 1400 

Dallas, Texas 75219 

Telephone: (469) 680-5502 

candice.carson@butlersnow.com

martin.sosland@butlersnow.com 

Attorneys for FedEx Supply Chain 

Logistics & Electronics, Inc. 

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 CERTIFICATE OF SERVICE 

I, Adam M. Langley, certify that the foregoing pleading was filed electronically through 

the Court’s ECF system and served electronically on all parties enlisted to receive service 

electronically in this case. 

Dated: January 10, 2024 

/s/ Adam M. Langley 

85153181.v3 

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