THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF OREGON 

PORTLAND DIVISION 

MALBCO HOLDINGS, LLC, 

Plaintiff, 

v. 

BHUPENDRA R. PATEL, et al., 

Defendants. 

PAP AK, Magistrate Judge: 

No. 3:14-cv-00947-PK 

FINDINGS AND RECOMMENDATION 

Plaintiff Malbco Holdings, LLC brings this diversity action asserting claims for 

fraudulent transfer under Oregon law against members of the Patel family. Plaintiff alleges that 

Bhupendra and Nila Patel (the Patel Parents) gave personal guaranties for a $4.3 million 

promissory note delivered to Wachovia Commercial Mmigage in 2006. As security for the 

promissmy note, the Patel Parents executed a trust deed against real property in Idaho. In 2012, 

Wachovia's successor by merger, Wells Fargo Bank, N.A., assigned its interest in the promissoty 

note to Plaintiff. When the Patel Parents were delinquent on payments due, Plaintiff brought an 

action in Idaho state court against them. Plaintiff prevailed at summmy judgment, receiving a 

$3 .9 million judgment against the Patel Parents. Plaintiff alleges that the Idaho judgment is 

unpaid. 

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Plaintiff alleges that between 2010 and 2013, the Patel Parents transferred assets wmih 

several million dollars to their son and daughter, defendants Heetan Patel and Heetal Patel, and 

to Bhupendra Patel's brother, defendant Mukesh Patel, without adequate consideration, to avoid 

paying the Idaho state judgment against them. 

Defendants now move to dismiss Plaintiffs claims for punitive damages and attorney's 

fees. I recommend denying Defendants' Motions to Dismiss. 

DEFENDANTS' iVIOTIONS TO DISMISS 

Plaintiff asse1is two claims against Defendants for fraudulent transfers in violation of the 

Oregon Unifonn Fraudulent Transfer Act 1

, Or. Rev. Stat.§§ 95.200 - 95.310 (UFTA). The 

operative complaint, Plaintiffs Second Amended Complaint, seeks punitive damages and 

attorney's fees for the UFTA claims. 2d Amend. Comp!. 'il'il 57, 58, 66, & 67, ECF No. 126. 

I. Legal Standards for iVIotions to Dismiss 

When a defendant moves to dismiss for failure to state a claim under Federal Rule of 

Civil Procedure 12(b )( 6), "the district court must accept all material allegations in the complaint 

as true, and construe them in the light most favorable to the non-moving pmiy." Chubb Custom 

Ins. Co. v. Space Sys./Loral, Inc., 710 F.3d 946, 956 (9th Cir. 2013). "To survive a motion to 

dismiss, a complaint must contain sufficient factual matter, accepted as true, 'to state a claim to 

relief that is plausible on its face."' Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell 

At!. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). "Dismissal is proper when the complaint does 

1

The UFTA was "recently amended and renamed the Unifo1m Voidable Transfer Act." 

1Vfosier v. Center St. Lending LLC, No. SACV 15-1852-JLS (JCx), 2016 WL 3574627, at *3 n.3 

(C.D. Cal. Mar. 3, 2016) (California adopted amended UVTA as of January 1, 2016); Dan J. 

Sheehan Co. v. Fairlawn on Jones Condo. Ass'n, Inc., 780 S.E. 2d 35, 37 n.l (Ga. App. 2015) 

(Georgia adopted amended UVTA, effective July 2015). 

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not make out a cognizable legal theoty or· does not allege sufficient facts to support a cognizable 

legal theoty." Chubb Custom Ins., 710 F.3d at 956. 

II. Motion to Dismiss Claim for Punitive Damages 

The UFTA does not expressly authorize or prohibit awards of punitive damages. The 

parties do not cite, and I have not found, Oregon appellate authority on point. '"When a decision 

turns on applicable state law and the state's highest comt has not adjudicated the issue, a federal 

court must make a reasonable determination of the result the highest state court would reach if it 

were deciding the case."' Kona Enters., Inc. v. Estate of Bishop, 229 F.3d 877, 885 n.7 (9th 

Cir.2000) (quoting Aetna Cas. & Sur. Co. v. Sheft, 989 F.2d 1105, 1108 (9th Cir.1993)). The 

federal comt must use its "best judgment" to predict how the highest state court would decide the 

issue. lvfed. Lab. lvlgmt. Consultants v. Am. Broadcasting Companies, Inc., 306 F.3d 806, 812 

(9th Cir. 2002). 

Here, Plaintiff cites lvlitchell v. Burt & Gordon, P.C. (In re Stein), Civ. No. 93-438-FR, 

1997 WL 30822, at *l (D. Or. Jan. 17, 1997) ("11/itchell). Inlvlitchell, the bankruptcy trustee 

brought a claim for equitable relief under the Oregon UFTA, seeking to recover more than $1 

million held in an interpleader account. The trustee also sought punitive damages. 

This comt denied a motion to dismiss the trustee's claim for punitive damages under the 

UFT A, concluding that "the relief sought by the trustee ... constitutes the type of equitable relief 

that demonstrates harm to a person who does not have an adequate remedy at law." Id. This 

comt dete1mined that Oregon would allow a party who sought only equitable relief under the 

UFTA to recover punitive damages. "11/itchell focused on the equitable relief issue and seemed to 

assume that punitive damages were generally available under the UFT A. 

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Without binding Oregon authority, I look to the text and context of the statute itself. 

Gladhart v. Oregon Vineyard Supply Co., 332 Or. 226, 233, 26 P.3d 817, 819 (2001) (statute's 

wording is "the best evidence of the legislature's intent" (citation omitted)). Based primarily on 

the UFTA's broad "catch-all" remedies provision, quoted below, I agree with Plaintiff that the 

Oregon Supreme Court would conclude that the UFT A allows awards of punitive damages. 

The UFTA provision on remedies for creditors, Or. Rev. Stat.§ 95.260, provides: 

(1) In any action for relief against a transfer or obligation under ORS 95.200 to 

95.310, a creditor, subject to the limitations provided in ORS 95.270, may obtain: 

(a) Avoidance of the transfer or obligation to the extent necessary to satisfy the 

creditor's claim. 

(b) An attachment or other provisional remedy against the asset transfened or 

other property of the transferee in accordance with the procedure prescribed by 

any applicable provision of any other statute or the Oregon Rules of Civil Procedure. 

( c) Subject to applicable principles of equity and in accordance with applicable 

rules of civil procedure: 

(A) An injunction against further disposition by the debtor or a transferee, or 

both, of the asset transferred or of other prope1ty; 

(B) Appointment of a receiver to take charge of the asset transferred or of other 

property of the transferee; or · 

(C) Any other relief the circumstances may require. 

(Emphasis added.) 

The statutory phrase "[a]ny other reliefthe circumstances may require" is broad enough 

to encompass punitive damages. Courts in other jurisdictions have focused on this provision in 

holding that the UFTA authorizes punitive damages. See, e.g,, Klein v. Weidner, 729 F.3d 280, 

295 (3d Cir. 2013) (concluding the Pennsylvania Supreme Court would hold that the UFTA 

permits punitive damages, reaching "the same result as the courts of Maine, Missouri, Ohio, and 

Utah"). In addition, the UFTA provides that unless specifically displaced by the UFT A, "the 

principles of law and equity, including the law merchant and the law relating to principal and 

agent, estoppel, !aches, fraud, misrepresentation, duress, coercion, mistake, insolvency or other 

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validating or invalidating cause, supplement its provisions." Or. Rev. Stat. § 95.290. 

Defendants respond that the UFTA does not specifically authorize punitive damages. 

Defendants are conect, but the UFTA's failure to specifically authorize punitive damages does 

not resolve the issue. 

Defendants contend that the "any other relief' provision must be read in light of an 

Oregon Supreme Court decision holding that punitive damages are not a "remedy" under the 

Remedy Clause of the Oregon Constitution, but instead are "a means of vindicating society's 

interest in punishing and detening especially egregious conduct." Defs.' Reply 5 (quoting 

Ddiendoza v. Huffman, 334 Or. 425, 446, 51P.3d1232, 1244 (2002) (interpreting Or. Const. 

art. I, § 10)). In Ddvfendoza, the Oregon Supreme Court determined that the Remedy Clause did 

not prohibit the deduction of a percentage of punitive damages awards for a state fund for crime 

victims. I conclude that De1'vfendoza is not relevant here. 

Defendants note that the Uniform Law Commission, which drafted the UTFT A, recently 

declined to amend the UFTA to expressly authorize punitive damages (or attorney's fees, the 

other claim at issue here). One report submitted to the Uniform Law Commission noted a split 

among the states on this issue, with the majority favoring punitive damages. The repo1i stated, 

"Not surprisingly, however, other couiis have concluded they lack power to award punitive 

damages due to the absence of express reference in the UFT A." Kenneth Kettering, 

Developments at and after the Annual 1'1Jeeting 3 (Aug. 13, 2013), attached to Def.'s Motion to 

Dismiss, ECF No. 128, at 25. I find the minority position on punitive damages unpersuasive in 

light of the UFT A's broad relief provision. 

I conclude that the Oregon Supreme Couii would hold that the UFT A authorizes punitive 

damages. I recommend denying Defendants' Motion to Dismiss Plaintiffs claim for punitive 

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damages under the Oregon UFT A. 

III. Motion to Dismiss Claim for Attorney's Fees 

Defendants move to dismiss Plaintiffs claim for attorney's fees. The UFTA does not 

expressly allow or prohibit awards of attorney's fees. 

The parties did not cite, and I did not find, Oregon appellate decisions on this issue. In 

the 1\;Jitchell decision cited above, this co mi declined to address whether attorney's fees were 

available on a fraudulent transfer claim, stating, "this court decides matters relating to attorney 

fees after the entry of judgment. The comi will not address this issue at this stage in the 

proceedings." }vfitchell, at *2. 

I agree with Mitchell that this comi may defer ruling on attorney's fees until entry of 

judgment. I recommend denying Defendants' motions to dismiss Plaintiffs claim for attorney's 

fees at this time, with leave to renew after ent1y of judgment. 

CONCLUSION 

For the reasons provided above, Defendants Heetal B. Patel-Manini and Heetan B. 

Patel's Motion to Dismiss Malbco's Claims for Attorney Fees and Punitive Damages in Second 

Amended Complaint, ECF No. 128; Defendants Bhupendra R. Patel and Nila B. Patel's Motion 

to Dismiss Malbco's Claims for Attorney Fees and Punitive Damages in Second Amended 

Complaint, ECF No. 129; and Defendant Mukesh Patel's Motion to Dismiss Malbco's Claims 

for Attorney Fees and Punitive Damages in Second Amended Complaint, ECF No. 130, should 

be denied, with leave to renew the motions to dismiss Plaintiffs claim for attorney's fees after 

ently of judgment. 

SCHEDULING ORDER 

The Findings and Recommendation will be referred to a. district judge. Objections, if any, 

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are due fomieen (14) days from service of the Findings and Recommendation. If no objections 

are filed, then the Findings and Recommendation will go under advisement on that date. 

If objections are filed, then a response is due fomieen (14) days after being served with a 

copy of the objections. When the response is due or filed, whichever date is earlier, the Findings 

and Recommendation will go under advisement. 

NOTICE 

A pmiy's failure to timely file objections to any ofthe.se findings will be considered a 

waiver of that party's right to de novo consideration of the factual issues addressed herein and 

will constitute a waiver of the party's right to review of the findings of fact in any order or 

judgment entered by a district judge. These Findings and Recommendation are not immediately 

appealable to the Ninth Circuit Court of Appeals. Any notice of appeal pursuant to Rule 4(a)(l) 

of the Federal Rules of Appellate Procedure should not be filed until entry of judgment. 

~·· 

Dated this :31 $I day of August, 2016. 

Honorable Paul P fak 

United States Magistrate Judge 

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