IN RE RYAN

MEMORANDUM DECISION REGARDING MOTION FOR SUMMARY JUDGMENT

DENNIS MONTALI, Bankruptcy Judge.

Defendants Lawrence J. Chazen, individually and as trustee of the Lawrence J. Chazen Revocable Trust (collectively "Chazen"), move for summary judgment against Plaintiffs Nicklos Ciolino, Charles Ciolino, Daniel Delorenzi, Robert Aguilar, and Stephen

Daniele (collectively the "Ciolino Parties") on their alleged independent claim for conspiracy/aiding and abetting against Chazen. Because there are no genuine issues of material fact in dispute, and Chazen is entitled to summary judgment as a matter of law, the Court hereby GRANTS Chazen's motion.

I. FACTS1

This case has a long and contentious history. However, for the purposes of this motion, the Court briefly recites only the relevant facts. On January 28, 2005, the Ciolino Parties filed a First Amended Complaint to Set Aside or Annul Fraudulent Transfers and for Damages against several defendants, including Chazen, in the Superior Court of the State of California, County of San Mateo. The Ciolino Parties alleged that debtor John A. Ryan made a number of fraudulent transfers of his assets to the other defendants, and further asserted that all defendants, including Chazen, conspired and/or aided and abetted in the wrongful conduct to accomplish the transfers. After debtors John A. and Danielle T. Ryan ("Debtors") filed their voluntary petition under Chapter 112 on September 7, 2005, the state court fraudulent transfer action was removed to this Court on October 4, 2005, commencing the instant adversary proceeding. The matter did not proceed beyond initial disclosures, and Ms. E. Lynn Schoenmann was appointed as Chapter 11 trustee ("Trustee") of the Debtors' bankruptcy estate on February 14, 2006.

On September 9, 2007, pursuant to Rule 7024, the Trustee filed a Motion and Complaint to Intervene in the adversary proceeding brought by the Ciolino Parties to recover or avoid the alleged fraudulent transfers by Debtors under section 544(b), and Cal. Civ. Code §§ 3439.04(A), 3439.04(B), and 3439.05. The Ciolino Parties were not named in the Trustee's moving papers. This Court granted Trustee's motion on October 17, 2007.

After the parties initially stated they would maintain a status quo while awaiting the result of another matter on appeal from this Court to the Ninth Circuit, Chazen apparently changed course and filed a Motion for Summary Judgment on August 19, 2008. During certain discovery disputes, the Ciolino Parties maintained they hold a claim, independent from Intervener-Plaintiff Trustee, against Chazen for conspiracy/aiding and abetting of the fraudulent transfers. In the motion, Chazen asserted that the Ciolino Parties did not retain the conspiracy aspect of their fraudulent transfer claim because: (1) California law does not recognize conspiracy as an independent cause of action; and (2) there was no evidence of a conspiracy between Chazen and the Debtors. A hearing on Chazen's motion was set for September 16, 2008.

Trustee filed a Rule 7056(f) motion on September 2, 2008, seeking additional discovery against Chazen and Debtor John Ryan, which served as a timely opposition to Chazen's motion. This Court granted Trustee's motion on September 12, 2008, and the summary judgment hearing was rescheduled for December 19, 2008.

The Ciolino Parties did not file a timely opposition to Chazen's motion. On September 24, 2008, counsel for the Ciolino Parties filed a Declaration in Support of Joinder in Trustee's 56(f) Motion, for Leave to File Opposition to Chazen's Motion for Summary Judgment, and Request for Hearing on Chazen's Motion for Summary Judgment on December 19, 2008. Chazen filed a Response to the declaration on September 25, 2008. Upon consideration of the pleadings filed by both parties, this Court denied the Ciolino Parties' counsel's declaration, and took under advisement whether as a matter of law Chazen was entitled to summary judgment on the Ciolino Parties's claim for conspiracy/aiding and abetting.

II. ISSUE

Do the Ciolino Parties have an independent claim for conspiracy/aiding and abetting against Chazen?

III. DISCUSSION

A. Summary Judgment Standard

Summary judgment is properly granted when there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Rule 7056(c).

B. Violation Of California's Uniform Fraudulent Transfer Act Is Tortious Conduct Which Supports A Claim For Conspiracy or Aiding And Abetting.

Some jurisdictions hold that a violation of the fraudulent transfer law does not constitute an independent tort. Therefore, if civil conspiracy under state law requires an independent tort, then a conspiracy claim cannot be maintained in those jurisdictions where a violation of the fraudulent transfer laws does not constitute a tort. However, California courts have held that a fraudulent transfer is tortious conduct, and an act for which fellow conspirators can be held liable in connection therewith. Filip v. Bucurenciu, 129 Cal.App.4th 825, 837 (3d. Dist. 2005)("In fraudulently transferring property, tortious conduct occurred."); See In re B.L. Jennings, Inc., 373 B.R. 742 (Bankr. M.D. Fla. 2007)(violation of California's Uniform Fraudulent Transfer Act is tortious conduct that will support a conspiracy claim, relying on Filip decision).

Here, in their state court action, the Ciolino Parties pled" Conspiracy/Aiding and Abetting." California courts recognize that conspiracy and aiding and abetting are closely allied forms of liability. Janken v. GM Hughes Elec.s, 46 Cal.App.4th 55, 78 (2d. Dist. 1996)("A conspiracy generally requires agreement plus an overt act causing damage. Aiding and abetting requires not agreement, but simply assistance. The common basis for liability for both conspiracy and aiding and abetting, however, is concerted wrongful action."). Therefore, the Court treats the Ciolino Parties' claim for conspiracy/aiding and abetting as one in the same.

C. California Law Does Not Recognize A Cause Of Action For Civil Conspiracy Or Aiding and Abetting.

Under California law, there is no separate and distinct tort cause of action for civil conspiracy. Allied Equip. Corp. v. Litton Saudi Arabia Ltd., 7 Cal.4th 503, 510-511 (1994). See Filip at 837 (under California law, civil conspiracy is not a cause of action but rather a theory of joint liability imposed on persons who, although not committing a tort themselves, share with the immediate tortfeasors a common plan or design in its perpetration); and see Wyatt v. Union Mortgage Co., 24 Cal.3d 773, 784 (1979)(holding same).

In other words, the gravamen or gist of the action for a civil conspiracy is not the conspiracy itself, but the underlying tort which, absent the conspiracy, would give rise to a right of action. Therefore, without the existence of an underlying tort, a claim for conspiracy or aiding and abetting cannot stand.

D. Because Trustee Succeeded To The Underlying Tort Of Fraudulent Transfer, The Ciolino Parties Have No Independent Claim for Conspiracy/Aiding And Abetting.

Where a trustee has been appointed, she or he assumes complete control of litigation concerning the bankruptcy estate. Meyer v. Fleming, 327 U.S. 161, 165-166 (1946)(trustee has the authority and discretion to initiate an action, pursue an action previously initiated, intervene, settle or dismiss).

Section 5443 commonly referred to as the "strong arm clause," allows a trustee to prosecute fraudulent transfer actions under state law that could have been prosecuted by one of the debtor's actual unsecured creditors.4 Although the Ciolino Parties are presumably the creditors with grounds to avoid the alleged fraudulent transfers against all defendants under California's UFTA, the commencement of the bankruptcy case gave the Trustee the right under section 544(b) to pursue that action to the exclusion of all creditors. See In re Berg, 376 B.R. 303, 311 (Bankr. D. Kan. 2007)(citing In re Integrated Agri, Inc., 313 B.R. 419, 427 (Bankr. C.D. Ill. 2004); and see Matter of Leonard, 125 F.3d 543 (7th Cir. 1997)(creditor who filed a prepetition UFTA suit against defendant who then filed Chapter 7, which suit was removed to bankruptcy court by the Chapter 7 trustee, had no continuing rights or interest in the suit).

Therefore, once Debtors filed their petition, the Trustee stepped into the shoes of the Ciolino Parties and was given the exclusive power to avoid the allegedly fraudulent transfers under California law against the defendants.

Even though the Ciolino Parties are no longer asserting the fraudulent transfer action, they continue to maintain that they have an independent claim for conspiracy/aiding and abetting. They do not. Because the Trustee succeeded to the cause of action to avoid the allegedly fraudulent transfers under section 544(b) and Cal. Civ. Code § 3439 et. seq., there is no underlying tort to support the conspiracy/aiding and abetting claim. Without the underlying tort of fraudulent transfer, under California law the Ciolino Parties have no independent claim against defendant Chazen for a conspiracy to commit, or aid and abet in, the tortious act of fraudulent transfer. See Filip supra.

Accordingly, as a matter of law, the Ciolino Parties have no independent claim for conspiracy or aiding and abetting against defendant Chazen, and Chazen is entitled to summary judgment.5

IV. CONCLUSION

Therefore, based on the foregoing reasons, the Court GRANTS Chazen's Motion for Summary Judgment. A separate Order to that effect is being issued concurrently with this Memorandum Decision.