Tort/Negligence — Fraudulent Conveyance & Civil Conspiracy – Additional Allegations & Special Damages – Attorney’s Fees – Jury Trial

Integrity Worldwide, Inc. v. International Safety Access Corp. (Lawyers Weekly No. 002-056-15, 14 pp.) (Margaret Seymour, S.J.) 0:14-cv-00213; D.S.C.

Holding: While plaintiffs assert their fraudulent conveyance claim against only two corporate defendants, they assert their civil conspiracy claim against all defendants and allege that “in furtherance of this conspiracy, Defendants communicated with each other, drafted documents, signed agreements and undertook other additional affirmative steps.” Plaintiffs also allege that the conspiracy was executed in at least one instance. The complaint contains independent allegations of a civil conspiracy with language that is not identical to the fraudulent conveyance claim.

Defendants’ motion to dismiss is granted as to plaintiffs’ demand for attorneys’ fees arising out of their fraudulent conveyance claim. Plaintiffs are only entitled to a jury trial on their civil conspiracy claim. Otherwise, defendants’ motions to dismiss and to strike are denied.

The plaintiff-judgment creditors allege that defendants engaged in fraudulent conveyances that frustrated plaintiffs’ ability to enforce their judgment.

Plaintiffs assert their fraudulent conveyance claim pursuant to the Statute of Elizabeth. Since the Statute of Elizabeth does not provide for attorneys’ fees and since South Carolina courts have declined to award attorneys’ fees under allegations similar to plaintiffs’ allegations, plaintiffs’ request for attorneys’ fees associated with the fraudulent conveyance claim shall be stricken from the complaint.

In support of their civil conspiracy claim, plaintiffs assert that they “sustained special damage, including (but not limited to) unnecessary delay and attorneys’ fees incurred in collecting the judgment from ISAC [defendant International Safety Access Corp.].” When attorneys’ fees are requested as special damages, South Carolina courts have routinely departed from the general rule and permitted the recovery of attorneys’ fees. Because the request for attorneys’ fees associated with the fraudulent conveyance claim will be stricken, the requests for damages no longer overlap, and plaintiffs have sufficiently pled special damages in connection with their civil conspiracy claim.

Although it is rarely done, compensatory damages can be awarded in equity when an equitable remedy alone does not grant complete relief. It would be premature to strike plaintiffs’ request for relief in the form of compensatory damages at this time.

Punitive damages are not permitted in equity. However, plaintiffs have asserted a claim for civil conspiracy, an action at law, for which plaintiffs could be entitled to punitive damages.

Although plaintiffs did not use the words “willful, wanton, and reckless” in their complaint, plaintiffs pleaded that defendants purposefully took action to defraud them. These allegations are sufficient to support their request for punitive damages.

Plaintiff’s declaratory judgment action is not redundant. In order to afford plaintiffs declaratory relief, the court need not determine that the contested security interest is void. The court is only required to determine whether plaintiffs’ interest in executing upon ISAC’s assets to secure the judgment owed to them takes precedence over defendant Klear-Knit, Inc.’s claimed security interest in those assets. The court declines to forgo its exercise of jurisdiction over the declaratory judgment action at this time.

Plaintiffs have demanded a jury trial.

A fraudulent conveyance claim pursuant to the Statute of Elizabeth, a claim to declare a constructive trust, and an action to pierce the corporate veil are all equitable actions for which plaintiff is not entitled to a jury trial.

Plaintiffs’ civil conspiracy claim is legal in nature, so plaintiffs are entitled to a jury trial on this claim.

The action that underlies plaintiffs’ declaratory judgment claim is one in which the court would determine the priority of the liens on ISAC’s assets. An action to determine the priority of liens is ordinarily an action in equity. Accordingly, plaintiffs’ declaratory judgment action is an equitable action, and plaintiffs are not entitled to a jury trial with respect to that claim.

Motions granted in part and denied in part.