Air Cargo, Inc. Litigation Trust v. i2 Technologies US, Inc. et al

IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF MARYLAND
In re: 	*
AIR CARGO, INC., et al., 	* 	Case No. 04-37512-JS
Debtor 	* 	Chapter 11
* 	* 	* 	* 	* 	* 	* 	* 	* 	* 	* 	* 	*
THE AIR CARGO, INC. LITIGATION 	*
TRUST, by and through its Trustee
MARTIN FLETCHER, 	*
Plaintiff 	*
v. 	* 	Adv. Proc. No. 06-2011-JS
i2 TECHNOLOGIES, INC. and 	*
MERCER MGT. CONSULTING, INC.,
*
Defendants
*
* 	* 	* 	* 	* 	* 	* 	* 	* 	* 	* 	* 	*
MEMORANDUM OPINION DENYING MOTIONS TO DISMISS
AMENDED COMPLAINT
Date signed February 07, 2008
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The instant motions to dismiss came on for hearing before this Court on August
23, 2007. For the following reasons, the motions will be denied.
FINDINGS OF FACT
1. The debtor, Air Cargo, Inc. (“Air Cargo”) was in the business of providing
services to various airlines for the movement of cargo, acting as an agent between the
airlines and freight forwarders in order to facilitate the transfer of cargo by motor
carriers.
2. 	On December 7, 2004, Air Cargo filed the above-captioned Chapter 11
bankruptcy case in this Court.
3. 	On December 22, 2004, Air Cargo filed Schedules A-J [P. 43]. 	The
schedules did not list a claim against either i2 Technologies, Inc. (“i2") or Mercer
Management Consulting, Inc. (“Mercer”).
4. On March 17, 2006, Air Cargo filed a disclosure statement [P. 374]. The
disclosure statement did not identify any claim against i2 or Mercer.
5. 	On May 8, 2006, Air Cargo and the Official Committee of Unsecured
Creditors filed a “Modified Joint Plan of Liquidation” (the “Plan”) [P. 433]. The Plan
did not identify any claim against i2 or Mercer.
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1The Plan conferred the following powers upon the litigation trustee:
The Litigation Trustee shall have the sole right, power and
authority, among other things, to: (a) object to any Claim; (b) file suit or
commence an action or proceeding with respect to any claim or cause of
action of the Debtor and/or the Estate, including, without limitation,
Avoidance Actions, and otherwise prosecute, settle, compromise or
pursue such claim or cause of action; (c) retain and employ professionals
as the Litigation Trustee deems necessary or appropriate to carry out the
terms and purposes of the Plan and on such terms as the Litigation
Trustee deems reasonable; (d) the Litigation Trustee is permitted to
employ professionals that have been previously employed by the Debtor
or the Committee; (e) execute and enter into contracts on behalf of the
Estate or the Litigation Trust as the Litigation Trustee Agent deems
necessary or appropriate to carry out the terms and purposes of the Plan
and on such terms as the Litigation deems reasonable; (f) liquidate all
assets of the Debtor, the Estate and the Litigation Trust to pay the related
Liquidation Expenses; (g) distribute funds to holders of allowed Claims
consistent with the terms of the Plan; (h) file a final report and move to
3
6. 	On May 19, 2006, this Court approved the disclosure statement and
confirmed the Plan by order [P. 440]. The effective date of the Plan was June 14, 2006.
7. The Plan provided for the liquidation of Air Cargo by creating a litigation
trust, the stated purpose of which was to “liquidate all of the assets of the Estate,
including but not limited to prosecution of all claims of the Estate and claims
contributed to the Litigation Trust pursuant to the plan.” Plan, Art I, § 1.34. The Plan
appointed Martin Fletcher, former counsel to the Unsecured Creditors Committee, as
litigation trustee, and authorized him to exercise all of the powers of a Chapter 11
trustee, if one had been appointed. Plan, Art IV, § 4.3. 1
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close the Debtor’s Chapter 11 case; and (I) to take such other and further
actions as may be necessary or appropriate to carry out the terms and
purposes of the Plan.
Plan, § 4.4.
2The clause provided as follows:
8.1 Retention of Jurisdiction. Notwithstanding the Confirmation
of the Plan, the Court will retain jurisdiction until consummation of the
Plan to ensure that the purposes and intent of the Plan are carried out.
The Court’s jurisdiction shall be over any and all disputes and litigation
pending at the time of the Confirmation of the Plan, any controversies
that may arise thereafter, and any controversies that may affect the
Litigation Trustee’s ability to effectuate the consummation of the Plan.
By way of illustration of the jurisdiction retained by the Court, but not
by way of limitation of the same, the Court shall retain jurisdiction in
this case, among other things, for the following purposes:
(a) The classification of the claim of any creditor and the re-
examination of claims which have been allowed for the purposes of
voting, and the determination of such objections as may be filed to the
Claims of creditors. After the Effective Date, only the Litigation Trustee
and the Trucker Trustee may object to claims. The deadline to object to
claims shall be the ninetieth (90th) day after the Effective Date. 	The
failure by the Debtor, Litigation Trustee, the Bank and/or the Committee
to object, or to examine any Claim for purposes of voting, shall not be
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8. The four main assets of the litigation trust included 1) the recovery of a tax
refund; 2) any remaining tangible assets; 3) accounts receivable; and 4) funds
resulting from the anticipated prosecution of avoidance actions, including actions to
avoid and recover fraudulent transfers and preferences. Plan, Art IV, § 4.2.
9. The Plan contained a “retention of jurisdiction” clause, Plan, Art IV, § 8.1.2
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deemed to be a waiver of the right of the Litigation Trustee or Trucker
Trustee to object to or re-examine any Claim in whole or in part.
(b) Except to the extent that the Litigation Trustee chooses to
invoke the jurisdiction of a state court, the determination of all causes of
action, controversies, disputes and conflicts involving, or relating to, the
Debtor or its assets, arising prior to or after the Confirmation Date,
whether or not subject to an action pending as of the Confirmation Date,
between the Debtor, the Litigation Trustee, the Bank and any other party
or parties, including but not limited to, any right of the Litigation Trustee
to recover assets or avoid the Avoidable Transfers pursuant to applicable
provisions of the Bankruptcy Code.
(c) The modification of this Plan after confirmation to correct any
defect, to cure any omission, or to reconcile any inconsistency in this
Plan or in the Order of Confirmation, as may be necessary or otherwise
appropriate to carry out and or/ clarify the intended purposes of the Plan
or the Order of Confirmation.
(d) The allowance of compensation for professional services
rendered to the Estate by the Debtor’s professionals and the Committee’s
professionals, pursuant to §330(a) of the Bankruptcy Code, upon
application for such compensation.
(e) The enforcement and interpretation of the terms and conditions
of this Plan, including any agreement for satisfaction of an Allowed
Claim.
(f) The determination of the existence of any liens, encumbrances,
or interests of other parties in property of the Estate or the Debtor, and
the extent and priority thereof.
(g) The enforcement of, and the continuation of, the automatic stay
and any similar equitable relief with respect to post-confirmation actions
against the Debtor, the Estate, the Litigation Trustee and/or property of
the Estate.
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(h) Entry of an order concluding and terminating the case.
(I) This Chapter 11 Plan shall be deemed fully administered upon
the payment of any Allowed Claim, in full or in part, including but not
limited to, any payment of post-petition professional fees.
Id.
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10. Between November 23, 2006 and December 1, 2006, the litigation trustee
filed 161 complaints in this Court to void various alleged preferential transfers (Adv.
Proc. Nos. 06-1807 through 06-1918, 06-1939 through 06-1982, 06-1984 and 06-
1985, 06-1988, 06-1990, and 06-1997). On December 5, 2006, the litigation trustee
filed six additional complaints for the turnover of property (Adv. Proc. Nos. 06-2001
through 06-2006).
11. 	On December 6, 2006, the litigation trustee filed the instant adversary
proceeding against i2 and Mercer. On March 9, 2007, the litigation trustee filed a first
amended complaint [P. 6].
12. 	The instant adversary proceeding is unique among the 168 adversary
proceedings because it alone seeks to recover fraudulent conveyances and also asserts
a variety of other state law causes of actions against the defendants.
13. The amended complaint contains the following allegations: In 2002, Air
Cargo began implementing a business plan requiring the deployment and installation
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of a new information technology platform. In March 2002, Air Cargo met with i2 to
discuss a contract for installation of this platform. i2 proposed certain “information
technology architecture” and submitted the proposal to Air Cargo. On July 18, 2002,
Mercer provided a report to Air Cargo and the Carlyle Group which approved the
platform. On August 12, 2002, Air Cargo entered into a written contract with i2. The
information technology which i2 provided was insufficient to meet the needs of Air
Cargo. It is alleged that i2 knew what information technology Air Cargo needed to
carry out its new business strategy, and that i2 and Mercer knew from the beginning
that the platform provided by i2 was insufficient for those purposes.
14. 	Air Cargo paid i2 an initial fee of $3.2 million. 	Additional payments
brought the total amount paid to $5.7 million.
15. 	The amended complaint contains seven counts, for breach of contract
against i2 (Count I), breach of contract against Mercer (Count II), intentional
misrepresentation and fraud against i2 (Count III), negligent misrepresentation against
i2 and Mercer (Count IV), negligence and malpractice against i2 and Mercer (Count
V), avoidance and recovery of fraudulent conveyances from Air Cargo to i2, totaling
“no less than $5.7 million” (Count VI), and the avoidance and recovery of fraudulent
conveyances from Air Cargo to Mercer, totaling “no less than $100,000” (Count VII).
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16. 	On May 4, 2007, i2 filed a motion to dismiss, or in the 	alternative, to
abstain [P. 24], in which it alleged that the bankruptcy court lacks subject matter
jurisdiction because the complaint does not concern “core” matters or matters “related
to” the bankruptcy; that the District of Maryland is not the proper venue for the
complaint; and that the causes of action are barred by judicial estoppel and res
judicata.
17. On June 11, 2007 Mercer filed a motion to dismiss [P.41]. Mercer argued
that the litigation trustee’s claims for breach of contract and negligence must be
dismissed for lack of subject matter jurisdiction. Additionally, Mercer argued that the
litigation trustee’s fraudulent conveyance claim failed as a matter of law, on the
grounds that it lacked a good faith basis, failed to identify an actual creditor that could
bring such a claim under state law, failed to establish the absence of fair consideration,
and failed to allege the fraudulent conveyance with particularity. Mercer also argued
that all the claims against it should be dismissed under the doctrines of judicial
estoppel and res judicata because Air Cargo failed to disclose any claims against
Mercer in its schedules and disclosure statement. Mercer also argued that the claim
for breach of contract must fail because of the failure to allege the existence of a
contractual agreement, any breach thereof, and any damages incurred thereby. Mercer
argued that the negligent misrepresentation claim must fail because the complaint did
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3If the district court has jurisdiction, it may refer the matter to the bankruptcy
court, which is a unit of the district court. 28 U.S.C. § 157; 28 U.S.C. § 151. In the
District of Maryland, as in all U.S. districts, the reference is automatic. 	See Local
District Rule 402, Rules of the United States District Court for the District of
Maryland.
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not plead it with particularity, that Mercer’s statements were only its expression of an
opinion, that Mercer and Air Cargo were equally sophisticated parties, that Mercer did
not make any false statements, that the amended complaint does not allege facts
demonstrating justifiable reliance, that the amended complaint does not allege facts
showing proximate causation, that the negligence claim is a replication of its negligent
misrepresentation claim, that the amended complaint alleges economic losses not
recoverable at law and that it does not properly allege proximate causation of
damages.
CONCLUSIONS OF LAW
Subject Matter Jurisdiction
1. Bankruptcy subject matter jurisdiction is conferred by statute. 28 U.S.C. §
1334(a) provides that the United States district courts “shall have original and
exclusive jurisdiction of all cases under title 11.” 28 U.S.C. § 1334(b) provides that
the United States district courts “shall have original but not exclusive jurisdiction of
all civil proceedings arising under title 11, or arising in or related to cases under title
11.”3 Therefore, in order to be able to hear and determine the instant complaint, this
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Court must first determine whether the complaint states causes of action “arising
under,” “arising in,” or “related to” the underlying bankruptcy case.
2. Controversies “arise in” title 11 when they “have no existence outside of the
bankruptcy.” United States Trustee v. Gryphon at Stone Mansion, Inc., 166 F.3d 552,
555 (3rd Cir.1999). 	Claims “arise under” title 11 if the claims “clearly invoke
substantive rights created by bankruptcy law.” 	Glinka v. Murad (In re Housecraft
Indus. USA, Inc.), 310 F.3d 64, 70 (2d Cir. 2002).
3. The bankruptcy court has “arising under” jurisdiction over claims for the
avoidance and recovery of fraudulent conveyances. See Huffman v. Perkinson (In re
Harbour), 840 F.2d 1165, 1167-68 (4th Cir. 1988). The question remains whether the
Court also has “related to” jurisdiction over state law contract, negligence, negligent
misrepresentation and fraud claims. Alternatively, a question also exists whether this
Court has “related to” jurisdiction over the fraudulent conveyance claims.
4. The Fourth Circuit has adopted the same test for determining “related to”
jurisdiction as has the Third Circuit, stating that “the test for determining whether a
civil proceeding is “related to” bankruptcy is whether the outcome of that proceeding
could conceivably have any effect on the estate being administered in bankruptcy.”
Owens-Ill., Inc. v. Rapid Am. Corp. (In re Celotex Corp.), 124 F.3d 619, 625 (4th Cir.
1997) (quoting Pacor, Inc. v. Higgins, 743 F.2d 984, 994 (3rd Cir. 1984).
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5. However, after a Chapter 11 plan has been confirmed, both the Third and
Fourth Circuits have narrowed the expansive reach of bankruptcy jurisdiction. In the
recent case of Valley Historic Ltd. Partnership v. Bank of New York, 486 F.3d 831
(4th Cir. 2007), the Fourth Circuit expounded on the extent of the subject matter
jurisdiction that a bankruptcy court may exercise in a Chapter 11 case after the
confirmation of a plan:
Pacor, Inc. v. Higgins, 743 F.2d 984, 994 (3d Cir.1984)] was
decided in a pre-confirmation context, however, and the Third Circuit
has since examined “related to” jurisdiction from a somewhat different
analytical perspective, in a post-confirmation context. Recognizing that
“[c]ourts have applied varying standards to determine whether ‘related
to’ jurisdiction should be upheld post-confirmation,” it endeavored to
distill the “essential inquiry” or common thread throughout the decisions,
including our decision in Bergstrom. Binder v. Price Waterhouse & Co.
(In re Resorts Int'l, Inc.), 372 F.3d 154, 166 (3d Cir. 2004). In its view,
“the essential inquiry appears to be whether there is a close nexus to the
bankruptcy plan or proceeding sufficient to uphold bankruptcy court
jurisdiction over the matter.” Id. at 166-67. According to the court, for
“related to” jurisdiction to exist at “the post-confirmation stage, the
claim must affect an integral aspect of the bankruptcy process – there
must be a close nexus to the bankruptcy plan or proceeding.” Id. at 167.
Practically speaking, under this inquiry “[m]atters that affect the
interpretation, 	implementation, 	consummation, 	execution, 	or
administration of the confirmed plan will typically have the requisite
close nexus.” Id.
We find the Third Circuit’s “close nexus” requirement to be a
logical corollary of “related to” jurisdiction. Analytically, it insures that
the proceeding serves a bankruptcy administration purpose on the date
the bankruptcy court exercises that jurisdiction. Without such a purpose,
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“related to” jurisdiction would extend beyond the limited jurisdiction
conferred upon bankruptcy courts in the post-confirmation context.
486 F.3d at 836-7. See also Guttman v. Martin (In re Railworks Corp.), 325 B.R. 709,
717 (Bankr. D. Md. 2005) (clause in confirmed Chapter 11 plan reserving claims
sufficiently preserved the right of a liquidation trustee to pursue postconfirmation
avoidance claims.).
6. In Valley Historic, the Fourth Circuit found that the bankruptcy court lacked
subject matter jurisdiction over a post-confirmation lawsuit where the plan did not
provide the debtor the authority to prosecute claims for breach of contract and tortious
interference, and any recovery would not benefit the creditors of the estate. The plan
provided that claims of creditors would be paid exclusively from the debtor’s business
operations and collections of postpetition rents. 	The plan had not only been
confirmed, it had been substantially consummated. Thus, the adversary proceeding
had no “conceivable bankruptcy purpose” because it did not affect the estate or the
payment of claims of any creditors. Id.
7. Unlike the suit in Valley Historic, the instant complaint is the “typical” post-
confirmation adversary proceeding in which Valley Historic acknowledges the “close
nexus” 	is 	present, 	namely 	those 	“[m]atters 	that 	affect 	the 	interpretation,
implementation, consummation, execution, or administration of the confirmed plan
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[that] will typically have the requisite close nexus.” 	Id. (citing In re Resorts, Int’l,
Inc., 372 F.3d 154, 167).
8. The Plan in the instant case provides that all funds ultimately recovered in
any lawsuit brought by the litigation trustee will be devoted to satisfy the claims of
creditors. The amended complaint provides that with interest, the litigation trustee’s
claim against i2 alone could be worth as much as $10 million. 	This would be the
largest single asset of the litigation trust. 	Accordingly, adjudication of this claim
necessarily 	will 	affect 	the 	implementation, 	consummation, 	execution, 	and
administration of the Plan.
9. i2 and Mercer have alleged that there is no longer any subject matter
jurisdiction because after having confirmed a plan and having established a litigation
trust, there is no longer an “estate” for the instant adversary proceeding to have an
effect on. 	However, this Court has held previously that it has subject matter
jurisdiction over a post-confirmation action pursued by a litigation trustee concerning
prepetition fraudulent conveyance and preference claims. In Railworks, 325 B.R. at
723, Judge Derby held that “the implementation of the payment of unsecured creditors
through claims prosecuted by the Litigation Trustee is precisely at issue, and falls
squarely in the realm of limited jurisdiction that a bankruptcy court may hear.” Id..
Thus, even though the estate technically terminated at the time of the confirmation of
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a plan, the bankruptcy court retains subject matter jurisdiction over a post-
confirmation action by a litigation trustee. This holding was left undisturbed by the
Fourth Circuit’s decision in Valley Historic.
10. The facts in Resorts are markedly different from both Railworks and the
instant case. 	See Resorts, 372 F.3d 154. In Resorts, the Third Circuit held that the
bankruptcy court lacked subject matter jurisdiction over a post-confirmation action for
malpractice filed by a litigation trustee against a firm that had rendered accounting and
auditing services to the litigation trust. Resorts, 372 F.3d at 164-70. The malpractice
suit brought in the bankruptcy court seven years after the plan was confirmed alleged
that the accountants erroneously reported that accrued interest on litigation trust
accounts belonged to the debtor and not the trust. Id. at 157. The Third Circuit held
that the bankruptcy court’s post-confirmation “related to” jurisdiction is less likely to
encompass a civil proceeding that involves a litigation trust rather than the estate. Id.
at 169 (finding that “[t]he deliberate act to separate the litigation claims from the
bankruptcy estate weakens the Trustee’s claim that the Litigation Trust has the same
jurisdictional nexus as that of the estate.”). This was because the confirmation of the
plan in Resorts vested all of the property of the estate in the reorganized debtor,
making it technically impossible for an action by the litigation trust to affect the estate,
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as required by Pacor for “related to” jurisdiction to exist. Id. at 165 (citing 11 U.S.C.
§ 1141(b) and NVF Co. v. New Castle County, 276 B.R. 340, 348 (D. Del. 2002)).
11. 	However, the Third Circuit acknowledged that “courts do not usually
apply Pacor’s ‘effect on the bankruptcy estate’ test so literally as to entirely bar post-
confirmation bankruptcy jurisdiction.” Id. See also Geruschat v. Ernst Young LLP
(In re Seven Fields Dev. Corp.), 505 F.3d 237 (3d Cir. 2007) (distinguishing from that
in Resorts a creditor’s post-confirmation suit for pre-confirmation malpractice against
an accounting firm, in holding that it was a core proceeding within the “arising in”
jurisdiction of the bankruptcy court and was therefore not subject to the Pacor “close
nexus” test.) . Accordingly, the Resorts court still looked for a close nexus in order
to find subject matter jurisdiction, and used the existence of a litigation trust as a
factor in determining whether there was such a nexus. 	Therefore, this Court will
similarly look for a close nexus, and consider the existence of the litigation trust as
one factor in its determinations.
12. 	Several determinative factors existed in Resorts that do not exist in the
instant case. One difference is the type of plan that created the litigation trust. The
plan in Resorts was a plan of reorganization; the Plan in the instant case is one of
liquidation. 	Several courts have disagreed on whether there is greater post-
confirmation subject matter jurisdiction over a litigation trust when it is created by a
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plan liquidating the assets of the debtor. See Boston Reg’l Med. Ctr. v. Reynolds (In
re Boston Reg’l Med. Ctr.), 410 F.3d 100, 106 (1st Cir. 2005) (the fact that the debtor
is liquidating “undercuts the primary purposes for parsimoniously policing the
perimeter of post-confirmation jurisdiction: the specter of endless bankruptcy
jurisdiction and a kindred concern about unfairly advantaging reorganized debtors”);
see also Cross Media Mktg. Corp. v. CAB Mktg., Inc. (In re Cross Media Mktg.
Corp.), 367 B.R. 435, 444 (Bankr. S.D. N.Y. Apr. 25, 2007) (finding that the court
had post-confirmation jurisdiction because the plaintiff’s confirmed plan was a
liquidating plan); but see Shandler v. DLJ Merch. Banking. (In re Insilco Techs. Inc.),
330 B.R. 512, 524-25 (D. Del. 2005) (finding that the “jurisdictional statutes apply
without differentiating between liquidating and reorganizing debtors” and therefore
there was no “sufficient basis” for such a distinction.). This Court finds convincing
the rationale of Boston Regional for the existence of the distinction. In that case, the
court stated:
There 	is 	another, 	perhaps 	more 	important, 	reason 	for
distinguishing between liquidating plans and true reorganization plans.
Courts that have limited the scope of post-confirmation jurisdiction have
based their holdings on the conclusion that, once confirmation has
occurred, fewer proceedings are actually related to the underlying
bankruptcy case. 	See, e.g., Resorts Int'l, 372 F.3d at 165-67; In re
Craig’s Stores of Tex., Inc., 266 F.3d 388, 390 (5th Cir.2001). 	That
makes good sense: as the corporation moves on, the connection
attenuates.
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This justification is absent in the case of a liquidating plan.
Typically, a reorganized debtor is attempting to make a go of its
business. 	Thus, its actions (including any involvement in litigation)
redound primarily to that end and only affect the underlying bankruptcy
proceeding in a tangential or derivative way. See Pettibone, 935 F.2d at
122-23. By contrast, a liquidating debtor exists for the singular purpose
of executing an order of the bankruptcy court. Any litigation involving
such a debtor thus relates much more directly to a proceeding under title
11.
Boston Regional, 410 F.3d at 106-07. 	Thus, regardless of whether the same
jurisdictional statutes apply to both liquidating and reorganizing plans, a post-
confirmation civil proceeding is far more likely to be “related to” the underlying
bankruptcy case when the debtor is being liquidated. Accordingly, this Court finds
the fact that Air Cargo is liquidating to be an important factor in assessing the
applicability of Resorts to the instant complaint.
12. 	A second difference between Resorts and the instant case is the type of
claims 	being 	asserted. 	In 	Resorts, 	the 	litigation 	trustee 	asserted 	‘ordinary’
professional negligence and breach of contract claims that arise under state common
law. Resorts, at 170. In the instant case, the litigation trustee has filed claims to avoid
fraudulent conveyances that arise under federal law. See 11 U.S.C. § 548. The proof
of the state law claims for breach of contract, fraud, and negligence will be necessary
in order to prove that the transactions between Air Cargo, i2 and Mercer were in fact
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fraudulent conveyances. The two counts of fraudulent conveyance essentially state
that Air Cargo did not receive fair consideration in exchange for its transfers to i2 and
Mercer. In order to determine whether the products and services supplied by i2 and
Mercer constituted “fair consideration,” it will be necessary to determine whether they
met the terms of the contract and whether they complied with the representations
made by either i2 or Mercer or both. Bankruptcy jurisdiction is more likely to exist
in a post-confirmation setting when an adversary proceeding involves claims brought
under title 11 than when it concerns entirely state law claims. 	See, e.g., Kaye v.
Dupree (In re Avado Brands, Inc.), 358 B.R. 868, 878 (N.D. Tex. 2006) (citing
Gilbane Bldg. Co. v. Air Sys., Inc. (In re Encompass Servs. Corp. ), 337 B.R. 864, 872
(S.D. Tex. 2006) (finding that “whether state law or bankruptcy law applies” is one
of six factors to consider in determining post-confirmation jurisdiction over a
litigation trust).
13. A third difference between Resorts and the instant complaint is the point
in time at which the causes of action arose. In Resorts, the litigation trustee’s claim
for malpractice arose postpetition, while here, the claims arose prepetition. 	Thus,
these claims were once part of the bankruptcy estate, which enhances the jurisdiction
of the bankruptcy court. 	See Railworks, 325 B.R. at 723 (finding that “Resorts is
much unlike the situation here, where the Litigation Trust Claims are pre-petition
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claims that could have been asserted by the debtor-in-possession directly prior to
confirmation of Debtors’ Plan”); see also Premium Escrow Servs., Inc. v. Sanchez (In
re Premium Escrow Servs., Inc.), 342 B.R. 390, 399 (Bankr. D. D.C. 2006)
(differentiating Railworks from Resorts because Railworks involved a prepetition
claim which became property of the estate).
15. The Court also differentiates Resorts on the grounds that any proceeds from
the suit will benefit creditors. 	When the proceeds of a post-confirmation cause of
action will benefit creditors, there is a greater likelihood that a “close nexus” exists.
See Premium Escrow Servs., 342 B.R. at 400 (“The primary concern is whether a
successful recovery by the appointed representative would benefit the debtor’s estate
and particularly the debtor’s unsecured creditors”) (citations omitted); 	Wellington
Apartment, LLC v. Clotworthy (In re Wellington Apartment, LLC), 353 B.R. 465, 470-
71 (Bankr. E.D. Va. 2006); EXDS, Inc. v. CB Richard Ellis, Inc (In re EXDS, Inc.),
352 B.R. 731, 739 (Bankr. D. Del. 2006); Astropower Liquidating Trust v. Xantrex
Tech., Inc. (In re Astropower Liquidating Trust), 335 B.R. 309, 324 (Bankr. D. Del.
2005); Michaels v. World Color Press, Inc. (In re LGI, Inc.), 322 B.R. 95, 105 (Bankr.
D. N.J. 2005); see also Valley Historic, 486 F.3d at 837.
14. The argument has been made that the bankruptcy court lacks subject matter
jurisdiction in this case because Air Cargo never listed these claims in its schedules
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or disclosure statement, nor did it reference these claims in the Plan which created the
litigation trust. Several courts have held that specific assignment of the claims in the
Plan is necessary for the bankruptcy court to retain jurisdiction. See Insilco, 330 B.R.
at 525-26 (finding that if the adversary proceeding was “truly so critical to the Plan’s
implementation, it would have been more specifically described in the Disclosure
Statement and Plan so that creditors could have considered its effect when deciding
whether to vote in favor of the Plan” and declining to find subject matter jurisdiction
“based solely upon the Plan’s creation of the Creditor Trust to pursue generally
defined ‘Rights of Action’. . .”); see also In re WRT Energy Corp, 2007 WL 2893426
(Bankr. W.D. La. Sept. 28, 2007) (finding “[w]hen the matter at hand involves the
liquidation of pre-petition claims assigned to the trust by the plan, the nexus is usually
sufficient to confer post-confirmation jurisdiction over the matter”) (emphasis added)
(citations omitted). 	However, even the Insilco case, which contains the strictest
interpretation of post-confirmation subject matter jurisdiction, admits that “general
language... should usually be sufficient to provide notice to creditors of the right to
pursue, post-confirmation, avoidance actions under chapter 5 of the Bankruptcy
Code.” Insilco, 330 B.R. at 526, n. 23. Accordingly, this Court finds that the general
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4i2's motion to dismiss acknowledged that its objections to venue were
dependent on this Court not having jurisdiction. See i2’s motion to dismiss, ¶ 16 (“In
this case, assuming the matters are non-core and not related to the Bankruptcy Case,
the only possible basis for federal jurisdiction over the claims brought herein would
be, if applicable, diversity jurisdiction. 	Other than the location of the Bankruptcy
Case, the Plaintiff has pled no facts which would justify venue in this District.”).
Because this Court has subject matter jurisdiction, venue is appropriate in this district.
21
language contained in the Joint Plan of Liquidation suffices to keep the claims against
i2 and Mercer within the bankruptcy court's jurisdiction. 4
Judicial Estoppel
16. This Court has previously addressed the doctrine of judicial estoppel in the
context of a confirmed plan of reorganization that failed to list a claim. 	See
Usinternetworking, Inc. v. Gen. Growth Mgt. (In re Usinternetworking, Inc.), 310 B.R.
274, 281 (Bankr. D. Md. 2004). In that case, Judge Derby wrote that:
“To be invoked, the doctrine of judicial estoppel requires four elements
to be present: ‘(1) the party to be estopped must be advancing an
assertion that is inconsistent with a position taken during previous
litigation; (2) the position must be one of fact, rather than law or legal
theory; (3) the prior position must have been accepted by the court in the
first proceeding; and (4) the party to be estopped must have acted
intentionally, not inadvertently’.” 	Id., citing Havird Oil Co., Inc. v.
Marathon Oil Co., Inc., 149 F.3d 283, 292 (4th Cir.1998).
Id. Judge Derby then granted summary judgment to the defendants, holding that the
evidentiary record showed no genuine dispute that all four elements were met. Id. at
284.
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22
17. The litigation trustee distinguishes USinternetworking in three important
ways. First, Usinternetworking involved a motion of summary judgment and not a
12(b)(6) motion to dismiss. Therefore, in that case there was an evidentiary record.
Second, the adversary proceeding in USinternetworking was filed against a creditor
of the reorganized debtor, so the claim might have been excluded from the plan in
order to secure the vote of that creditor. Here, neither i2 nor Mercer was a creditor
and therefore neither was entitled to vote on the Plan. Third, in Usinternetworking,
the plan was one of reorganization, whereas in the instant case the debtor no longer
exists and has assigned all of its assets to the Litigation Trust. Therefore, the debtor
in USinternetworking had a motivation to conceal the claim from creditors, whereas
in this case, the motive is not so clear-cut.
18. 	Mercer and i2 each cite the same cases to assert that judicial estoppel
applies to a claim not scheduled in bankruptcy, but none of the cited cases addresses
the issue of why a liquidating company would not schedule a claim. All of the cited
cases deal with either individual debtors in Chapter 7 or reorganized corporations in
Chapter 11. See Barger v. City of Cartersville, Ga., 348 F.3d 1289 (11th Cir. 2003)
(individual); Hamilton v. State Farm Fire & Cas. Co., 270 F.3d 778 (9th Cir. 2001)
(same); Burnes v. Pemco Aeroplex, Inc., 291 F.3d 1282 (11th Cir. 2002) (same);
Krystal Cadillac-Oldsmobile GMC Truck, Inc. v. Gen. Motors Corp., 337 F.3d 314
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23
(3d Cir. 2003) (reorganizing corporation); Payless Wholesales Distribs. v. Alberto
Culver (P.R.), Inc., 989 F.2d 570 (1st Cir. 1993) (reorganized debtor).
19. As both of these entities exist after bankruptcy, both have a motivation to
conceal claims from the Court. The motivation of a liquidating entity is less clear, and
accordingly cannot be resolved on a 12(b)(6) motion to dismiss. Accordingly, the
Court declines to dismiss on the grounds of judicial estoppel.
Res Judicata
20. i2 and Mercer also seek to dismiss all claims based upon the doctrine of res
judicata. This doctrine bars the relitigation of claims when a prior action was a (1)
final judgment on the merits; (2) between the same parties; (3) concerning the same
causes of action. 	First Union Commercial Corp. v. Nelson, Mullins, Riley &
Scarborough (In re Varat Enters., Inc.), 81 F.3d 1310, 1315 (4th Cir. 1996).
21. Both defendants cited opinions which dismissed claims against creditors
based upon res judicata when a confirmed plan did not list those claims. See D&K
Props. Crystal Lake v. Mutual Life Ins. Co. of N.Y., 112 F.3d 257 (7th Cir. 1997);
Kelley v. South Bay Bank (In re Kelley), 199 B.R. 698 (B.A.P. 9th Cir. 1996).
However, in the instant case, neither defendant was a creditor of Air Cargo. Because
neither had any right to vote on the plan, neither were detrimentally affected by the
omission of the claim. Accordingly, the confirmed Plan does not act as res judicata
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5Federal Rule of Civil Procedure 12(b)(6)provides as follows:
(b) Every defense, in law or fact, to a claim for relief in any pleading,
whether a claim, counterclaim, cross-claim, or third-party claim, shall be
asserted in the responsive pleading thereto if one is required, except that the
following defenses may at the option of the pleader be made by motion. . .
(6) failure to state a claim upon which relief can be granted .
Id.
24
to prevent the litigation trustee from pursuing claims against the defendants , because
there is no substantial identity of the parties.
The Rule 12(b)(6) motions
22. 	The motions to dismiss were brought pursuant to Federal Rule of Civil
Procedure 12(b)(6), made applicable herein by Federal Rule of Bankruptcy Procedure
7012(b).5
23. 	When ruling on a Rule 12(b)(6) motion, the Court accepts as true all
well-pleaded allegations in the complaint, including all reasonable inferences that may
be drawn from them, in the light most favorable to the plaintiff. Hemelt v. Pontier (In
re Pontier), 165 B.R. 797, 798-99 (Bankr. D. Md. 1994). “[A] complaint should not
be dismissed ‘merely because the court doubts that the plaintiff will ultimately prevail;
so long as a plaintiff colorably states facts which, if proven, would entitle him to
relief, the motion to dismiss should not be granted’.” Advanced Health-Care Services,
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6 The one case which raised the issue in the District of Maryland is not
conclusive. See Nat'l Mortgage Warehouse, LLC v. Trikeriotis, 201 F. Supp. 2d. 499
(D. Md. 2002). 	In that case, a 	mortgage company sought to recover fraudulent
25
Inc. v. Radford Community Hospital, 910 F.2d 139, 145 n.8 (4th Cir. 1990), quoting
Adams v. Bain, 697 F.2d 1213, 1216 (4th Cir. 1982).
24. However, “while a complaint attacked by a Rule 12(b)(6) motion to dismiss
does not need detailed factual allegations, a plaintiff’s obligation to provide the
‘grounds’ of his ‘entitlement to relief’ requires more than labels and conclusions and
a formulaic recitation of a cause of action’s elements will not do.” Bell Atlantic Corp.
v. Twombly, — U.S. —, 127 S.Ct. 1955, 1964-65, 167 L. Ed.2d. 929 (May 21, 2007).
The pleadings must plausibly suggest that the plaintiff is entitled to relief. Id at 1966.
25. While Federal Rule of Civil Procedure 8 requires only a “short and plain
statement of the claim showing the pleader is entitled to relief,” Federal Rule of Civil
Procedure 9(b) requires the circumstances of a claim to be “plead with particularity.”
The latter rule applies “[i]n all averments of fraud or mistake.”
26. 	Therefore, it must be determined whether the constructive fraudulent
conveyance claims must be pled under the lenient standard of Rule 8, or under the
heightened pleading standards of Rule 9(b).
27. 	The applicability of Fed. R. Civ. P. 9(b) to constructive fraudulent
conveyance claims has not been decided in the Fourth Circuit. 6
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conveyances under theories of actual and constructive fraud. 	Id. at 501. When the
transferee of the conveyance sought to dismiss the claims pursuant to Rule 12(b)(6),
District Judge Blake applied Rule 9(b) and decided that the pleading met the
heightened standard. 	However, in Trikeriotis, it was necessary to apply Rule 9(b)
because the plaintiff mortgage company had alleged actual fraud. Once it was decided
that the pleading met the heightened pleading standard, it was unnecessary to
determine which pleading standard to apply to the constructive fraudulent conveyance
claims. Accordingly, Trikeriotis did not determine which pleading standard applies
in the instant case.
7One line of cases holds that heightened pleading standards apply. See Kranz
v. Koenig, 240 F.R.D. 453, 455-56 (D. Minn. 2007) (dismissing claim of constructive
fraudulent conveyance with leave to amend for failure to comply with 9(b)) ; see also
Gen. Elec. Capital Corp. v. Lease Resolution Corp., 128 F.3d 1074, 1078-79 (7th Cir.
1997) (applying Rule 9(b) and finding the complaint to be well-pled). 	A larger,
second line of cases differentiates between actual and constructively fraudulent
conveyance claims, and only applies Rule 9(b) to complaints that allege actual fraud.
See Official Comm. of Unsecured Creditors of Verestar, Inc. v. Am. Tower Corp. (In
re Verestar, Inc.), 343 B.R. 444, 460 (Bankr. S.D. N.Y. 2006) (citing In re White
Metal Rolling & Stamping Corp., 222 B.R. 417, 428-29 (Bankr. S.D. N.Y. 1998))
(Rule 9(b) does not “apply to claims of constructive fraudulent conveyance... because
they are based on the transferor’s financial condition and the sufficiency of the
consideration provided by the transferee, not on fraud.”); see also Sec. Investor
Protection Corp. v. Stratton Oakmont, Inc. (In re Stratton Oakmont, Inc.), 234 B.R.
293, 319 (Bankr. S.D. N.Y. 1999) (same); China Resource Prods. (U.S.A.) Ltd v.
Fayda Int’l., Inc., 788 F. Supp. 815, 819 (D. Del. 1992) (not applying 9(b) to action
under Delaware Fraudulent Conveyance Act which did not allege actual fraud); Van-
Am. Ins. Co. v. Schiappa, 191 F.R.D. 537, 542 (S.D. Ohio 2000) (not applying Rule
9(b) 	to 	fraudulent 	conveyance 	claims 	because 	Ohio 	constructive 	fraudulent
conveyance claims “are not at all similar to claims for common law fraud”).
26
28. 	The applicability of Rule 9(b) to constructively fraudulent claims has
divided other courts.7
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8Moreover, the cases have consistently held that heightened pleading standards
are relaxed in cases pursued by a third party trustee rather than the debtor. See Miller
v. Dutil (In re Total Containment), 335 B.R. 589, 600-01 (Bankr. E.D. Pa. 2005);
Official Comm. of Asbestos Claimants of G-I Holding, Inc. v. Heyman, 277 B.R. 20,
36 (S.D. N.Y. 2002); U.S. Trust Co. v. Raritan River Steel Co. (In re Am. Spring Bed
Mfg. Co.), 153 B.R. 365, 374-75 (Bankr. D. Mass. 1993); 10 Collier on Bankruptcy,
¶ 7009.03, at 7009-4 (15th ed. rev.2005). These holdings are based on the trustee’s
“inevitable lack of knowledge concerning acts of fraud previously committed against
the debtor, a third party.” See, e.g., Heyman, 277 B.R. at 36-7, quoting Schwartz v.
Kursman (In re Harry Levin, Inc. t/a Levin's Furniture), 175 B.R. 560, 567-68 (Bankr.
E.D. Pa.1994) (quoting L. King, 9 Collier on Bankruptcy ¶ 7009.05, at 7009-5 (15th
ed.1994)). Although the litigation trustee is not a case trustee, the rationale applies
to him as well. See Pardo v. Gonzaba (In re APF Co., 308 B.R. 183, 188 (Bankr. D.
Del. 2004) (construing 9(b) liberally when a “Creditor’s Trust” asserted a claim for
a fraudulent transfer). The litigation trustee in the instant case possesses many of the
same powers as a bankruptcy trustee. Accordingly, this Court finds that even if Rule
9(b) applies, the pleading standard will be construed liberally because the action is
being pursued by a litigation trustee. For these reasons, the Court declines to apply
the heightened pleading standards of Federal 	Rule of Civil Procedure 9(b) to the
instant fraudulent conveyance claims.
27
29. This Court finds persuasive the line of cases that hold that Rule 9(b) does
not apply where constructive fraud is alleged. In a complaint to avoid a constructively
fraudulent conveyance, there is no requirement to prove any misrepresentation or
intent to defraud on the part of the transferor. 	See Van-Am., 191 F.R.D. at 542.
Rather, the complaint must simply allege that the transferee did not receive fair
consideration.8
30. Finally, this Court finds that even were the heightened pleading standards
of Rule 9(b) to be applied here, the complaint satisfies those standards. In Gen. Elec.
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9Mercer cites three cases for the proposition that the complaint should be
dismissed for failure to allege an actual secured creditor: the Tryit case, the Anton
Motors case, and In re Derivium Capital, LLC, No. 05-15042, 2006 Bankr. LEXIS
3592 (Bankr. D. S.C. Dec 22, 2006). Whatever the precedential value of these cases,
they are easily distinguishable. 	In Tryit, the trustee went through an entire trial
28
Capital Corp., supra, in which the Seventh Circuit held that Rule 9(b) was applicable
to an action to recover constructive fraudulent conveyances, it also held that the
plaintiff must merely describe events surrounding the conveyance and the reasons it
was not made for reasonably equivalent value. 	Gen. Elec. Capital Corp., 128 F.3d
at 1080. This the litigation trustee has done.
31. Mercer also contended that the litigation trustee’s fraudulent conveyance
claim must be dismissed because it fails to identify an actual creditor that could have
brought this action under state law. Section 544(b)(1) provides that “the trustee may
avoid any transfer of an interest of the debtor in property . . . that is voidable under
applicable law by a creditor holding an unsecured claim that is allowable under
section 502 of this title. . . ” Accordingly, courts have held that a trustee seeking to
avoid a fraudulent conveyance must identify an actual unsecured creditor that could
do so under §544(b)(1). See Tryit Enters. v. Gen Elec. Capital Corp., 121 B.R. 217,
221 (S.D. Tex. 1990); see also Field v. Grand Ltd. P’ship (In re Anton Motors, Inc.),
No. 90-4262, 1995 Bankr. LEXIS 1220, at *11 (Bankr. D. Md. 1995) (Derby, J.)
(unpublished).9
Case 06-02011 Doc 62 Filed 02/07/08 Page 28 of 36

without proving the existence of an “actual unsecured creditor .” Tryit, 121 B.R. at
221. This is different from the instant case where this Court has before it a 12(b)(6)
motion to dismiss, to which the liberal pleading standards of Rule 8 apply. 	The
holding in Derivium Capital is dicta, and it is unclear whether the trustee’s complaint
failed to mention the existence of any unsecured creditor or simply failed to specify
one in particular. Finally, in Anton Motors, the Court found that the “Trustee failed
to allege in its Amended Complaint the existence of an actual creditor holding an
allowable unsecured claim who could have brought this action under State law.”
Anton Motors, at *11 (emphasis added). This differs from the instant case where the
litigation trustee has alleged the existence of an actual unsecured creditor without
actually identifying one.
29
32. 	The litigation trustee has alleged that “[o]ne or more of Air Cargo’s
unsecured creditors was a creditor of Air Cargo holding an allowed claim under § 502
of the Bankruptcy Code at the time of Mercer’s receipt of the Mercer transfers.”
Amended Complaint, ¶ 88. Assuming that Section 544(b)(1) requires that a litigation
trustee (and not just a trustee) identify an actual unsecured creditor, this Court finds
that the litigation trustee has properly done so for purposes of a Rule 12(b)(6) motion
to dismiss. 	Applying the liberal notice pleading standards of Rule 8, the Court
declines to dismiss the fraudulent conveyance claim on this ground.
33. Mercer also argued that the complaint failed to allege the absence of fair
consideration offered in exchange for the money which the debtor allegedly tendered
to Mercer through the Carlyle Group. Mercer argued that the payment satisfied a pre-
existing obligation, namely the payment of an antecedent debt. The litigation trustee
responded that “because the Mercer services had no value, there did not exist an
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10Other bankruptcy courts have held, often in the context of Ponzi schemes, that
a claim for fraudulent conveyance can exist when the service rendered to the
transferor provided no legal value. 	See, e.g., Dicello v. Jenkins (In re Int’l Loan
Network, Inc.), 160 B.R. 1, 12 (Bankr. D. D.C. 1993) (applying Maryland Uniform
Fraudulent Conveyance Act); but see In re Universal Clearing House, 60 B.R. 985,
998 (D. Utah 1986). 	In Int’l Loan, Judge Teel held that services provided by
recruiters for a Ponzi scheme could not possibly constitute “reasonably equivalent
value” to the payments for such services, because the services were of no value and
actually increased the liabilities of the company which paid for them. Int’l Loan, 160
B.R. at 14.
30
antecedent debt that was satisfied by the transfer of the Debtor’s property.” Plaintiff’s
Opposition to Mercer Management Consulting, Inc.’s Motion to Dismiss at 26.
34. The litigation trustee must show that the services provided by i2 and Mercer
were so valueless that the forgiveness of debt for those services could not be
considered to have “reasonably equivalent value” to the amounts which Air Cargo
paid for them. 	However, the Court finds the complaint sufficient to overcome the
motion to dismiss. The complaint alleges that the services of both Mercer and i2 were
not only valueless, they actually harmed the debtor. 	Accordingly, the Complaint
sufficiently alleges the absence of reasonably equivalent value. 10
35. Mercer argued that the complaint does not state sufficient grounds to allege
a breach of contract against Mercer, in that it does not allege the existence of a
contract, facts indicating that Air Cargo was a third-party beneficiary, a breach of any
contractual obligation and damages. However, the litigation trustee has alleged that
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11 In a previously unpublished opinion, the U.S. District Court for the District
of Maryland (Chasanow, D.J.) has held that the heightened pleading standard applies.
Orteck Int'l, Inc. v. Transpacific Tire & Wheel, Inc., 2006 U.S. Dist. LEXIS 67702 at
*68- *69 (D. Md. 2006). 	In addition, one published District of Maryland case
implicitly applied Rule 9(b) to a negligent misrepresentation claim. 	Giannaris v.
Cheng, 	219 F. Supp. 2d 687, 695 n. 5 (D. Md. 2002) (allowing certain claims for
negligent 	misrepresentation but applying 9(b) to disallow catch-all allegation that
“[d]efendants made false statements ‘otherwise with respect to the investment and the
operation of the Business’.”).
31
Air Cargo was the “intended beneficiary” of an oral contract for consulting services
between the Carlyle Group and Mercer; that this contract was breached when i2 failed
to provide a working technology solution for Air Cargo’s known new business model
and that as a result of Mercer’s breach, Air Cargo suffered damages. 	Amended
Complaint, ¶ 45. Accordingly, the litigation trustee has met his burden of pleading
a breach of contract claim.
36. This Court will apply the heightened pleading standards of Rule 9(b) to the
claim for negligent misrepresentation, but will construe the rule liberally because the
action was brought by a third party, namely, the litigation trustee. 11
37. 	By itself, the claim against Mercer for negligent misrepresentation falls
woefully short of satisfying even a liberal interpretation of Rule 9(b). The litigation
trustee had the duty of pleading “the time, place, and contents of the false
representations, as well as the identity of the person making the misrepresentation and
what he obtained thereby.” Harrison v. Westinghouse Savannah River Co., 176 F.3d
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32
776, 783-84 (4th Cir. 1999), citing 5 Charles Alan Wright and Arthur R. Miller,
Federal Practice and Procedure: Civil § 1297, at 590 (2d ed. 1990). The complaint
states simply that Mercer “negligently made false and incorrect representations
without exercising due care regarding, among other things, the feasibility of
implementing the technology solutions proposed, the impact such a solution would
have on Air Cargo’s business, the timing for implementation, and the usefulness of
the end product.” Amended Complaint, ¶ 63. It does not allege the “time, place, and
contents of the false representations” and alleges only that the misrepresentations were
made by Mercer, not by any individual. However, the litigation trustee argued that
by attaching Mercer’s agreement with the Carlyle Group as Exhibit A to its motion
to dismiss, Mercer provided the particularized facts needed to make the claim viable.
38. Generally, extrinsic evidence should not be considered in deciding a Rule
12(b)(6) motion. 	However, the Fourth Circuit has held “that when a defendant
attaches a document to its motion to dismiss, ‘a court may consider it in determining
whether to dismiss the complaint [if] it was integral to and explicitly relied on in the
complaint and [if] the plaintiffs do not challenge its authenticity’.” Am. Chiropractic
Ass’n v. Trigon Healthcare, Inc., 367 F.3d 212, 234 (4th Cir. 2004), citing Phillips v.
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12
In American Chiropractic Association, the defendant was seeking to introduce
an exhibit in order to use it against the plaintiff, whereas here, the plaintiff is seeking
to use the defendant’s exhibit against the defendant. 	The Court reasons that if the
defendant’s exhibit can be used offensively in a 12(b)(6) motion, it can also be used
against the defendant.
33
LCI Int'l Inc., 190 F.3d 609, 618 (4th Cir.1999). 12 Therefore, the Court must
determine whether the defendant’s Exhibit A satisfies the plaintiff’s liberally-
construed, heightened pleading burden.
39. Mercer’s Exhibit A to the memorandum [P. 42] in support of its motion to
dismiss, entitled “IT Systems Due Diligence,” is a 25-page report which the cover
page declares was prepared by Mercer Management Consulting on July 18, 2002 in
Lexington, Massachusetts for the Carlyle Group in Washington, D.C.. 	The report
defines Mercer’s task as evaluating “the proposed IT architecture approach and
supporting software.” Report at 4. It includes a number of statements praising i2's
proposed 	information 	technology 	system 	software, 	and 	recommends 	the
implementation of i2’s proposal. The report states that “The IT architecture currently
being considered by ACI is robust and provides adequate scalability to increase
transaction capacity in the future if required. 	Further, the proposed IT strategy
provides the necessary technology backbone to enter different freight transportation
markets without having to make changes to the IT infrastructure. 	The planned IT
strategy will provide the basis for ACI achieving its business objectives.” 	Id. The
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34
litigation trustee alleged that the debtor relied upon this statement to its detriment, and
incorporated it into Count IV (Negligent Misrepresentation). Amended Complaint at
18, 62. Thus, the litigation trustee has specified at least one statement that might be
held to be a negligent misrepresentation, and through the report, has named the time
and place that the statement was made. Accordingly, the litigation trustee has satisfied
Rule 9(b) in this regard.
40. Mercer also asserted that the negligent misrepresentation claim must fail
because Mercer only made predictions and expressions of opinion, Mercer states that
it made no false statements in the report, and that the claim does not sufficiently allege
justifiable reliance. 	Because each of these arguments raises plausible factual
questions, dismissal on a Rule 12(b)(6) motion is not appropriate. See Twombly, 127
S. Ct. at 1960.
41. The Court also finds against Mercer on its argument that the negligence
count is unnecessarily duplicative of the negligent misrepresentation count. Under
Maryland law, when the gravamen of a count alleging negligence is the negligent use
of words, the proper action is for negligent misrepresentation. Village of Cross Keys,
Inc. v. U.S. Gypsum Co., 315 Md. 741, 754, 556 A.2d 1126, 1132 (1989). However,
when a complaint alleges negligent words and other additional negligent conduct,
separate counts are appropriate. Meyer v. Berkshire Life Ins. Co., 372 F.3d 261, 263
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35
(4th Cir. 2004). 	The litigation trustee argued that Mercer was negligent in its
performance of services as well as in the preparation of its report. This is largely a
question of fact and not a proper issue to decide on a motion to dismiss, as opposed
to a motion for summary judgment or after a trial. 	For the same reason, Mercer’s
other defenses to the count of negligence, namely the non-recoverability of economic
losses and the lack of proximate cause, must fail.
WHEREFORE, the motions to dismiss will be DENIED.
ORDER ACCORDINGLY.
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36
cc. 	John F. Carlton, Esquire
Stephen B. Gerald, Esquire
Kevin G. Hroblak, Esquire
Whiteford, Taylor & Preston L. L. P.
7 Saint Paul Street, Suite 1400
Baltimore, Maryland 21202
Counsel to the Litigation Trustee
Sedica Sawez, Esquire
Rosenberg Martin Greenberg, LLP
25 South Charles Street, Suite 2115
Baltimore, Maryland 21201
Counsel to i2 Technologies US, Inc.
Joel I. Sher, Esquire
Shapiro Sher Guinot & Sandler
36 S. Charles Street, Suite 2000
Baltimore, Maryland 21201
Counsel to Mercer Management Consulting, Inc.
Office of the United States Trustee
U.S. Courthouse, Suite 2625
101 W. Lombard Street
Baltimore, Maryland 21201
Case 06-02011 Doc 62 Filed 02/07/08 Page 36 of 36