Shareholders Return Assets Stripped From Strip Club

Photo Credit: The Elliot Legal Group, P.A.

Gavin Tudor Elliot, owner of the Elliot Legal Group, P.A., brings decades of business law experience – in and out of the courtroom and across the globe – to ensure that your company is positioned for success.

Elliot has more than 18 years of experience representing clients in Florida. He is also a licensed attorney in Washington, D.C., and a solicitor in Wales and England, where he was born. He has arranged the acquisitions of a financial institution and a software developer in Europe, the formation of an online retail start-up in the United States, and negotiated and drafted a distribution agreement under English law between Asia and the Middle East.

On July 16, 2012, a lawsuit was brought against a Strip Club and its shareholders in Federal Court in the Southern District of Florida. The basis of the suit was the breach of a Termination Agreement. On February 25th, 2016, a final judgment was obtained against the Strip Club in the underlying litigation for $675,000.

On September 17, 2012, during the underlying litigation, the Strip Club entered into a contract to sell all of its assets. Upon the sale, the assets were distributed to the shareholders. The sale rendered the Strip Club insolvent.

On September 6, 2019, seven years after the sale, Elliot Legal was brought in to represent Plaintiff, and the Court granted Plaintiff’s Motion to Commence Proceedings Supplementary over the objection of Third-Party Defendants.

The initial thrust of the Third-Party Defendants’ argument was that the Impleader Complaint should be dismissed in its entirety because it violated the statute of limitations for fraudulent transfer claims pursuant to chapter 726, the Uniform Fraudulent Transfer Act (“UFTA”).  The action was admittedly brought outside the statute of limitations for a UFTA action. Further, the caselaw on the statute of limitations for proceedings supplementary (Fla. Stat.  sec. 56.29) had been muddied by changes to the statute in 2014 and 2016 and a 2020 Fourth DCA case interpreting the new statute.

Plaintiff would survive multiple motions to dismiss.  This resulted in the Third-Party Defendants amending their tactics to expand the scope of inquiry and attempting to relitigate and raise issues present in the underlying litigation.  It was during discovery practice that this approach was ended.

Third-Party Defendants sought discovery under their expansive theory of defense. In ruling on Plaintiff’s Motion for Protective Order, the Court recited Elliot Legal’s reasoning for limiting the scope of discovery.  Shortly thereafter, Elliot Legal would discover and present the facts and theory for individual liability of a principal of one of the Third-Party Defendants.  Settlement soon followed and the Plaintiff recovered against the principals of the Strip Club.

The lesson learned from the case is that it is possible to recover on a fraudulent transfer for the life of a judgment, in the present case, 20 years.


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