338 F.Supp.2d 328 (2004) | Cited 3 times | D. Connecticut | September 24, 2004


Plaintiffs Dirk Epperson and Betty Schneider have brought theabove-captioned action against Entertainment Express, Inc., n/k/aAdvantix, Inc.; Irvin Richter; Hill International, Inc.; and HillArts & Entertainment Systems, Inc., n/k/a HAESI Software, Inc.pursuant to Connecticut's enactment of the Uniform FraudulentTransfer Act ("UFTA"), Conn. Gen. Stat. §§ 52-552a-5521 (WestSupp. 2002). Now pending is Richter's motion to dismiss theclaims against him for want of personal jurisdiction (dkt. # 35),defendants' motion for summary judgment (dkt. # 37), andplaintiffs' motion for summary judgment (dkt. # 68). For thereasons set forth herein, Richter's motion is DENIED,defendants' motion for summary judgment is GRANTED, andplaintiffs' motion for summary judgment is DENIED. I. THE PARTIES

Before engaging in the following prolonged recital of theprocedural background and facts necessary decide the pendingmotions, a brief summary of the parties and claims is provided.Epperson and Schneider, initially as shareholders of PerformingArts Technology, Inc. ("PAT"), entered into a contract to developcomputer software for Artsoft, Inc. ("Artsoft") in 1988. Beforethe contract was completed, PAT dissolved and Epperson andSchneider assumed the obligations under the contract.

Irvin Richter was, at the time of the events giving rise tothis lawsuit, the Chairman and CEO of Hill International, Inc.("Hill"). Hill is an international construction consulting andmanagement firm located in New Jersey. Richter owned 66.7% ofHill's stock, and Richter's sons owned the remainder of the stockin Hill.

In 1987, Richter and Hill acquired a majority interest inArtsoft, which became known as Hill Arts & Entertainment Systems,Inc. ("Hill A&E") in 1990. Richter became the sole shareholder ofHill A&E on May 27, 1992. Hill loaned Hill A&E about $12 million,and became a secured creditor of Hill A&E. On May 31, 1996, HillA&E sold substantially all its assets to Entertainment Express,Inc. ("EE"). Also, on May 31, 1996, Hill A&E changed its name toHAESI Software, Inc. ("HAESI"). Richter, individually and throughanother entity he owned and controlled, held a substantial amount of EE stock during the time of thesale. Hill, as Hill A&E's secured creditor, took possession ofthe proceeds of the asset sale to EE, which later became known asAdvantix, Inc. and then Tickets.com.

On April 23, 1997, following HAESI's sale of assets to EE,Epperson and Schneider obtained a judgment against Hill A&E andHAESI based upon a breach of the software development contract.Epperson and Schneider have been unable to procure satisfactionof this judgment from HAESI, and now seek to void HAESI'stransfer of assets to EE as a fraudulent transfer, and also tovoid certain liens granted by HAESI to Richter and Hill asfraudulent.


The above-captioned lawsuit is one of three lawsuits, two ofwhich remain pending on the undersigned's docket (Epperson v.Entertainment Express, Inc., No. 3:99CV778(DJS) (D. Conn.) andEpperson v. Richter, 3:01CV1798(DJS) (D. Conn.)) relating tomonies due pursuant to a contract entered into in 1988 betweenplaintiffs and Artsoft, defendant HAESI's predecessor ininterest. This court entered a default judgment against Hill A&Eand HAESI in the amount of $422,446.00, plus post-judgmentinterest, in Dirk Epperson and Betty Schneider v. Hill Arts &Entertainment Systems, Inc., No. 3:95CV2131(DJS) (D. Conn.) onApril 23, 1997. The two active cases pending on the undersigned's docket are efforts by plaintiffs to collect thisdefault judgment from other persons and entities. Several motionsare now pending in these two remaining cases. A summary of thelitigation between these parties to date follows.

On October 4, 1995, Dirk Epperson and Betty Schneider(collectively "plaintiffs") filed a lawsuit ("the First Action")against Hill A&E seeking damages for breach of a softwaredevelopment contract. Plaintiffs were the sole shareholders ofPAT, which was a California corporation in the business ofdeveloping and marketing ticketing software for the performingarts industry. On August 2, 1988, PAT entered into a contractwith Artsoft, which was a Delaware corporation with its principalplace of business in Connecticut engaged in the same business.The contract provided that PAT would develop software productsfor Artsoft to either use for its own purposes or sell to others.Further, Artsoft was to pay royalties, in an amount not to exceed$250,000.00, to PAT on products developed pursuant to thecontract and sold during a three-year period following the dateof the first delivery of the software. In 1990, Hill A&E becameArtsoft's successor in interest. Plaintiffs alleged that, despitethe fact that PAT had performed its obligations under thecontract, and that the maximum amount of royalties of $250,000.00was due and owing, Hill A&E had not tendered full payment. Afterdemands for payment, the first of which was dated December 20, 1991, plaintiffs filed suit in 1995.

Shortly after plaintiffs filed the First Action, Hill A&Eunderwent significant changes that altered the course of thislitigation. On May 31, 1996, Hill A&E changed its name to HAESI,sold substantially all of its assets to EE, and received aconvertible note from EE as payment. According to the Secretaryof HAESI at that time, David Richter, HAESI pledged theconvertible note and any other remaining assets to Hill, whichwas a secured creditor with an interest far in excess of thevalue of HAESI's assets. Following this corporate activity,HAESI's counsel withdrew from the case, and HAESI took theposition that it would not hire replacement counsel, as requiredfor a corporation by the Local Rules for the District ofConnecticut.

As a result, HAESI did not meet its obligations as a corporatelitigant in this court. On February 3, 1997 plaintiffs moved forthe entry of default against Hill A&E and HAESI for failure toobtain replacement counsel, failure to respond to discoveryrequests per order of this court, and failure to appear at ahearing on plaintiffs' application for a prejudgment remedy. Thecourt granted this motion by endorsement on February 11, 1997.The court also granted plaintiffs' motion for judgment on April3, 1997, and, on April 23, 1997 entered a default judgmentagainst Hill A&E n/k/a/ HAESI in favor of plaintiffs in the amount of $422,446.00, with post-judgment interest to accrue atthe statutory rate.

In light of HAESI's apparently compromised financial status,plaintiffs looked to alternate sources to satisfy the defaultjudgment. On March 12, 1997, plaintiffs amended their originalcomplaint in the First Action to add Advantix, which became thesuccessor in interest to EE, along with Hill and Richter asdefendants. Plaintiffs asserted two new causes of action: thefirst alleged that Hill and Richter were liable for the amount ofthe default judgment because they were the alter-ego of HAESI;and the second alleged that HAESI fraudulently conveyed assets toAdvantix.1 On March 23, 1998, this court dismissedplaintiffs' amended complaint against the new defendants for lackof subject matter jurisdiction. Specifically, the court concludedthat both the plaintiffs and Advantix were citizens of Californiaat the time the amended complaint was filed, and, therefore, theaction lacked complete diversity of citizenship. Further, theCourt concluded that the plaintiffs failed to meet their burdenof establishing that Advantix should not be considered a citizenof California because it was the alter-ego of Richter.

On April 27, 1999, the plaintiff filed the action bearing thedocket number 3:99CV778(DJS) ("the Second Action") asserting two counts: first, alleging that, on May 31, 1996, Hill A&Efraudulently conveyed its assets to EE; and, second, that HillA&E fraudulently granted liens in its property to Richter andHill. In the Second Action, plaintiffs seek an order voiding HillA&E's transfer to EE, thereby allowing them to execute theirjudgment against HAESI f/k/a Hill A&E. Plaintiffs argued that thecourt had subject matter jurisdiction over this claim pursuant tothe court's inherent authority to preserve the integrity of itsown judgments, complete diversity notwithstanding. By decisiondated March 23, 1998, the court, relying upon Peacock v.Thomas, 516 U.S. 349 (1996), held that there was no independentjurisdictional basis to hold defendants against whom judgment hadnot been entered liable for the default judgment against HAESIf/k/a Hill A&E, and dismissed the case. On March 7, 2001, theCourt of Appeals for the Second Circuit reversed the court'sdismissal and remanded the Second Action to the undersigned'sdocket. The Court of Appeals held that, as distinguished fromalter ego cases specifically addressed in Peacock, "fraudulentconveyance actions operate as simple collection mechanisms; theydo not present a substantive theory seeking to establishliability on the part of a new party not otherwise liable," and,therefore, no independent basis for subject matter jurisdictionover plaintiffs' claims against the new defendants was necessary.Epperson v. Entertainment Express, Inc., 242 F.3d 100, 108 (2d Cir. 2001).

On June 30, 1999, plaintiffs filed a lawsuit ("the ThirdAction") in the United States District Court for the District ofNew Jersey against Richter, Hill, and Hill A&E n/k/a HAESI. Thecomplaint in the Third Action alleged that Richter and Hill wereliable for the default judgment against Hill A&E and HAESI on thetheory that HAESI is the alter ego of Richter, Hill, or bothRichter and Hill. Because plaintiffs did not name Advantix as adefendant, diversity was complete, thus avoiding thejurisdictional questions encountered in the Second Action causedby relying upon the court's supplemental enforcementjurisdiction. Defendants moved to dismiss the Third Action or, inthe alternative, to stay the Third Action pending resolution ofthe Second Action. Defendants argued that an important issueasserted by plaintiffs as evidence that HAESI's corporate veilshould be pierced to get to Hill and Richter in the Third Actionwas whether the interests granted by HAESI to Advantix, Richter,and Hill were fraudulent, and that this question would have to beadjudicated in the Second Action. Because the Second Action wasthe first filed, defendants requested a dismissal or the entry ofa stay of the Third Action.

On July 17, 2001, the Honorable Stanley S. Brotman, UnitedStates District Judge, heard argument on defendants' motion todismiss, and suggested that transferring the Third Action to the District of Connecticut may be appropriate. The next day,defendants consented to a transfer of the Third Action to theDistrict of Connecticut, which Judge Brotman ordered on September17, 2001 pursuant to 28 U.S.C. § 1404(a).

Now that the Second and Third Actions have been pending on theundersigned's docket, several dispositive motions have beenfiled. In the Second Action, Richter's motion to dismiss (dkt. #35, filed on September 6, 2001), defendants' motion for summaryjudgment (dkt. # 37, filed on October 5, 2001), and plaintiffs'cross-motion for summary judgment (dkt. # 68, filed on January 7,2002) are pending. In the Third Action, defendants' motion forsummary judgment (dkt. # 52, filed on May 3, 2002) andplaintiffs' cross-motion for summary judgment (dkt. # 59, filedon May 14, 2002) are pending.


As previously indicated, Richter's motion to dismiss (dkt. #35), defendants' motion for summary judgment (dkt. # 37), andplaintiffs' cross-motion for summary judgment (dkt. # 68) arepending in this Second Action. Each is discussed below in turn.


Richter argues that the claims against him should be dismissedbecause this court may not acquire personal jurisdiction overhim. The court finds that Richter has forfeited this defense. Proceedings in the Third Action in the District of New Jerseymandate this result. On September 17, 2001, Judge Brotman enteredan order transferring the Third Action to the District ofConnecticut and specifically premised his order on the fact that"[c]ounsel [] consented to such a transfer. . . ." (Epperson v.Richter, No. 99-3053(SSB), Consent Order to Transfer Pursuant to28 U.S.C. § 1404(a) (D.N.J. Sept. 17, 2001); renumbered3:01CV1798(DJS) (D. Conn.)). The Supreme Court has interpretedthe language set forth in 28 U.S.C. § 1404(a), the statute fromwhich Judge Brotman drew his authority to transfer the matter tothe District of Connecticut on the basis of convenience, torequire that both venue and personal jurisdiction over eachdefendant be proper in the transferee district as a prerequisiteto a transfer. See Hoffman v. Blaski, 363 U.S. 335, 341 & 344(1960), see also Cali v. East Coast Aviation Services, Ltd.,178 F. Supp. 2d 276, 282-83 (E.D.N.Y. 2001). Therefore, JudgeBrotman has specifically found that Richter consented to venueand personal jurisdiction in the District of Connecticut and hasimplicitly found that there was personal jurisdiction overRichter in the District of Connecticut at the time the ThirdAction was filed. See Hoffman, 363 U.S. at 343-44 (holdingthat consent is immaterial to determining whether theprerequisites to applying § 1404(a) have been satisfied).

Regardless of whether Judge Brotman's implicit finding in the Third Action that there was personal jurisdiction overRichter in the District of Connecticut controls the result inthis case, the court finds that Richter, through his conduct inthe District of New Jersey before Judge Brotman, has forfeitedhis personal jurisdiction defense in this case. In thissituation, a forfeiture is "the failure to make a timelyassertion of a right. . . ." Hamilton v. Atlas Turner, Inc.,197 F.3d 58, 61 (2d Cir. 1999). When considering whether adefendant has forfeited the defense of lack of personaljurisdiction, despite that defendant's technical compliance withRule 12(h) of the Federal Rules of Civil Procedure, the courtexamines "all of the relevant circumstances." Hamilton,197 F.3d at 61. An objecting party's request that the court takeaction in its favor, without contemporaneously asserting thepersonal jurisdiction defense, may result in a forfeiture of thedefense. See Hamilton, 197 F.3d at 61 (reversing districtcourt's grant of motion to dismiss for lack of personaljurisdiction because defendant had forfeited the defense based,in part, upon defendant's request to transfer the case to theJudicial Panel for Multidistrict Litigation without moving todismiss for lack of personal jurisdiction); Lomaglio Associates,Inc. v. LBK Marketing Corp., 876 F. Supp. 41, 43 (S.D.N.Y. 1995)("If a party requests that the court exercise its power on thatparty's behalf, and the request is not preceded or accompanied byan objection to personal jurisdiction, that party is deemed to havewaived its defense of lack of personal jurisdiction."); cf.Grammenos v. Lemos, 457 F.2d 1067, 1070 (2d Cir. 1972) ("If aparty enters a case, makes no objection to jurisdiction, and asksthe court to act on its behalf in some substantive way, it willbe held to have waived further objection.").

Richter has forfeited his personal jurisdiction defenseconsenting to a transfer of the Third Action to Connecticut forthe sake of convenience without informing the court of hisintention to assert a lack of personal jurisdiction inConnecticut. The record of the proceedings before Judge Brotmanreveals that Richter requested a transfer under the "first filedrule" and eventually consented to transferring the Third Actionto Connecticut without informing Judge Brotman that he had apending objection to personal jurisdiction in Connecticut.Richter has thus placed this court in a difficult predicament:the Second Action was transferred from New Jersey to Connecticutso that it may be heard with the Third Action in the interest ofconvenience. In the Second Action, which was originally filed inConnecticut, Richter contests personal jurisdiction. If the slatewere clean, and Richter's personal jurisdiction defense was wellfounded, one viable option for this court to consider would be totransfer the Second Action to New Jersey, where Richter wouldhave no personal jurisdiction objection, so that plaintiffs' claims could be decided on the merits. On the flipside of the coin, had he been fully apprised of the situation,Judge Brotman presumably would have had misgivings abouttransferring the Third Action to Connecticut at Richter's requestwhen Richter had raised a personal jurisdiction defense beforethis Connecticut court in the Second Action. To re-examine thepropriety of Connecticut as a forum at this stage of thelitigation as a whole would be to countenance an expensive andintolerable jurisdictional carousel.

Although the defense of personal jurisdiction is an importantright, derived from the Due Process Clauses of the Fifth andFourteenth Amendments, Richter's failure to disclose hisobjection in the Second Action to Judge Brotman while JudgeBrotman was considering Richter's request to transfer the ThirdAction to Connecticut constitutes a forfeiture of this defense.Once Richter made use of the judicial process to transfer theThird Action to Connecticut, he forfeited his right to contestthe validity of Connecticut as a forum in the litigation as awhole. Richter's motion to dismiss must therefore be denied.


Both parties have filed motions for summary judgment. for thereasons set forth herein, defendants' motion is GRANTED andplaintiff's motion is DENIED.

1. FACTS Rule 9(c) of the Local Rules of Civil Procedure for theDistrict of Connecticut (now Rule 56) sets forth a procedure toaid the court in identifying factual disputes in motions forsummary judgment. What follows are the undisputed facts set forthin the parties' submissions,2 as well as those facts towhich the non-moving party with respect to each motion has notoffered any evidence in opposition.3

This lawsuit has its genesis in a business deal between twocompeting companies in 1988. The first company was Artsoft, Inc.("Artsoft"). Artsoft was founded by Lawrence Schwartz in 1984 andincorporated in the State of Connecticut. Artsoft maintained itsprincipal place of business in Guilford, Connecticut anddeveloped, installed, and serviced ticketing software used atentertainment and sports venues. On August 7, 1987, Irvin Richter(36 shares), Hill International, Inc.4 ("Hill") (48shares), and William J. Doyle (13 shares), who was the Presidentof Hill, became the owners of Artsoft. On February 27, 1990, a Delaware corporation also named Artsoft purchased all of theshares of the Connecticut Artsoft and became the successor ininterest to the Connecticut Artsoft. Richter (390 shares), Hill(480 shares), and Doyle (130 shares) owned the Delaware Artsoft,which was incorporated on June 30, 1987. Upon purchasing theConnecticut Artsoft, the Delaware Artsoft changed its name toHill Arts & Entertainment Systems, Inc. ("Hill A&E"). On May 27,1992, Richter became the sole owner of Hill A&E.5

The second party to the aforementioned business deal wasPerforming Arts Technology, Inc. ("PAT"). Plaintiffs were thesole shareholders of PAT, which was a California corporation inthe business of developing and marketing ticketing software forthe performing arts industry.

On August 2, 1988, PAT entered into a contract with Artsoft,which provided that PAT would develop software products thatArtsoft would then either use for its own purposes or sell toothers. Specifically, under the contract, PAT would "port"specified Artsoft software to function in a new operatingenvironment and "design and develop a new generation of softwareto replace or supplement some of Artsoft's Existing Software."(Epperson v. Entertainment Express, Inc., No. 3:99CV778(DJS),Dkt. # 67, Ex. B, Ex. A at 1). With respect to the second undertaking set forth in the contract, the parties stated thefollowing: "PAT and Artsoft will work together to design anddevelop this new and advanced version of Artsoft's ExistingSoftware under the direction and control of Artsoft." (Id., Ex.B, Ex. A, ¶ 3.1 at 4). The contract provided that Artsoft wouldown all intellectual property rights to any new program developedpursuant to the contract, and that the development of the newprogram was for the sole benefit of Artsoft. Compensation to PATfor services rendered with respect to the development of newsoftware was in the form of a monthly fee and royalties, in anamount not to exceed $250,000.00, to PAT from the sale of newsoftware products sold during a three-year time period followingthe date of the first delivery of the new software. The contractprovided that, in the event Artsoft defaulted on the royaltypayments, Artsoft would forfeit the "right to use or market anyNew Program containing any PAT work product."6 (Id.,Ex. B, Ex. A, ¶ 14.6 at 14).

Artsoft and PAT also entered into additional businessarrangements. Pursuant to the terms of the August 2, 1988contract, Epperson became Artsoft's Vice President of Developmentby separate contract dated April 1, 1989. Epperson remained an employee of Artsoft and Hill A&E in this capacity until1993.7 Further, PAT and Artsoft entered into aStock/Asset Purchase Agreement, dated August 7, 1988, whereby PATgranted Artsoft the option to purchase all of PAT's stock or allof PAT's assets related to specified lines of business uponpayment of the maximum royalty fee under the August 2, 1988contract. In April of 1990, PAT employees became Artsoftemployees, and Artsoft assumed PAT's customers, supportcontracts, and assets.

With respect to the development of a marketable product, thebusiness arrangement between Artsoft and PAT was successful. Thenew program referred to in the August 2, 1988 contract was infact developed and named Artsoft/SQL and Sportsoft/SQL. Eppersonclaims that Artsoft and later HAESI successfully marketed thissoftware for years, and that the rights to the software weretransferred to EE on May 31, 1996.

Once the software had been developed, however, payment underthe contract was not tendered when due. Plaintiffs alleged that,despite the fact that PAT had performed its obligations under thecontract, and that the maximum amount of royalties of $250,000.00was due and owing, Hill A&E had not tendered fullpayment.8 According to plaintiffs, Hill A&E had paid $76,250.00. Plaintiffsthen sued Hill A&E on October 4, 1995 in this court for theunpaid balance, late fees, costs, and attorneys' fees, and thiscourt entered a default judgment against Hill A&E in the amountof $422,446.00 on April 23, 1997.

Even though plaintiffs had obtained a default judgment againstHill A&E and HAESI, they were unable to recover the amount of thejudgment because, through a series of corporate transactions,HAESI did not have the assets to satisfy plaintiffs' judgment.Three entities owned or controlled by Richter were involved inthe transactions that left HAESI f/k/a Hill A&E unable to satisfyplaintiffs' default judgment: HAESI; Hill; and EntertainmentExpress, Inc. ("EE").

The first entity was HAESI. As stated previously, as of May 27,1992, Richter was the sole shareholder of Hill A&E. As of May 31,1996, Richter was also the sole director of Hill A&E. LawrenceSchwartz was the President of Hill A&E, James Cassano was theVice Chairman, David Richter was the Secretary, and Stanley Glosswas the Controller.

The second entity was Hill. Hill is a professional servicesfirm in the business of providing construction consulting andconstruction management services to governmental entities, institutions, and the private sector. As of 2001, Richter owned66.7% of Hill, and, at all times pertinent to this lawsuit,Richter controlled Hill. Richter was also the Chairman, CEO, andDirector of Hill. James Cassano was the Senior Vice President ofHill.

The third entity was EE. Prior to May 28, 1996, Richter owned4.5 million shares of EE stock, and Schwartz and James Cassanoeach owned 1 million shares of EE stock. As of May 28, 1996, EErepurchased all of its outstanding stock and sold 80% of itsstock to R4 holdings, of which Richter owns an interest notspecified in the record, and 10% each to both Cassano andSchwartz. On May 31, 1996, EE's corporate leadership was asfollows: Richter, Director; Cassano, Chairman, CEO, and Director;Lawrence Schwartz, President and Director; and David Richter,Vice President, General Counsel, and Secretary.

The first transaction affecting HAESI's ability to satisfyplaintiffs' default judgment was a loan from Richter to Hill A&E.On November 26, 1991, Hill A&E made a Promissory Note payable toRichter with the principal amount of $1,100,000.00. The note waspayable on demand, with an interest rate at the prime rate as setby Commerce Bank, N.A. plus 1.5%. Also on November 26, 1991, HillA&E executed a security agreement in all Hill A&E's personalproperty as collateral for the promissory note. UCC-1 financingstatements with respect to Richter's security interest were filed in Connecticut on December 5, 1991, in New Jersey on December 10,1991, and in California on October 24, 1994. The securityagreement and the UCC-1 statements cited the following propertyas subject to the security interest granted to Richter: all "Accounts," "Contracts," "Contract Rights," "Chattel Paper," "Instruments," "Documents," "General Intangibles," "Inventory," "Equipment," and "Fixtures," as each term is defined in the Uniform Commercial Code as enacted in the State of New Jersey, all deposits and bank accounts, all other personal property, tangible or intangible, all books and records relating to the foregoing, and all proceeds and products thereof and substitutions, additions, and accessions thereto, now existing or hereafter acquired, wherever located.(Epperson v. Entertainment Express, Inc., No. 3:99CV778(DJS),Richter Dec., Dkt. # 71, Ex. 4 at 1). Richter states that, as ofApril 30, 1996, the balance due on the note was $682,344.40.

The second transaction affecting HAESI's ability to satisfyplaintiffs' default judgment was a loan from Hill to Hill A&E. OnApril 1, 1994, Hill A&E and Hill entered into a Loan and SecurityAgreement. In this agreement, the parties stated the following:"[Hill A&E] has borrowed from [Hill] for several years on a lineof credit. [Hill A&E] and [Hill] wish to renew this Line ofCredit Loan in the amount of $12,000,000 for another five yearperiod." (Id., Ex. 7 at 1). The agreement further states that [Hill] shall establish for [Hill A&E] a $12,000,000 line of credit ("Line of Credit Loan") pursuant to which advances have been made and, in [Hill's] discretion, additional advances for the payment of obligations of [Hill A&E] may be made by [Hill] and for payment of interest on this Line of Credit Loan may be made from time to time up to a maximum aggregate outstanding principal balance of Twelve Million ($12,000,000.00) Dollars. The Line of Credit Loan shall accrue at the rate of Seven (7%) per anum.(Id., Ex. 7 at 2). The agreement further provided that Hillwould take a security interest in "collateral," which is definedas "all Accounts Receivable, Equipment, Inventory, ContractRights and General Intangibles of Borrowers and Guaranty, all ofthe foregoing whether now owned or hereafter acquired" (id.,Ex. 7 at 2), "now owned or hereafter acquired by [Hill A&E andall cash and non-cash proceeds thereof and proceeds of proceeds,"(id., Ex. 7 at 3). Hill A&E made a Replacement Line of CreditNote payable to Hill on April 1, 1994. UCC-1 statements withrespect to Hill's security interest were filed in Connecticut onJune 7, 1994, New Jersey on June 8, 1994, and California onOctober 18, 1994. Both statements set forth the followingproperty as subject to the security interest: All "Accounts", "Contracts", "Contract Rights", "Chattel Paper", "Instruments", "Documents", "General Intangibles", "Inventory", "Equipment", and "Fixtures" as each term is defined in the Uniform Commercial Code as enacted in the State of New Jersey, all deposits and bank accounts, all other personal property, tangible or intangible, all books and records relating to the foregoing and all proceeds and products thereof and substitutions, additions and accessions thereto, now existing or hereafter acquired, wherever located.(Id., Ex. 9 & 10).

Subsequent to Hill A&E and Hill's agreement, Richter recorded asubordination of his security interest to that of Hill. On September 8, 1994, Richter filed a UCC-3 Statement ofSubordination in New Jersey, which certified that he hadsubordinated his security interest in Hill A&E's property toHill's security interest. Richter's October 24, 1994 UCC-1statement, which was filed in California, also indicated thatHill's interest was superior to Richter's. On October 31, 1994,Richter filed a UCC-3 statement of subordination in Connecticutreflecting the same.

Hill A&E accounted for the loan from Hill in two different wayson Hill A&E's balance sheets. According to defendants, Hill A&Elisted funds received from Hill as loans on Hill A&E's 1989,1990, and 1991 balance sheets. According to defendants, however, [i]n 1992, because Hill A&E was seeking investors, and new investors will not agree to have their investments [] subordinated to secured debt, Richter considered requesting Hill to convert its debt to preferred stock. Hill A&E's balance sheets were changed to reflect what the balance sheets would have looked like had new investors been found. No new investors were found, and Hill did not convert its debt to preferred stock. In 1995, Arthur Anderson audited Hill A&E's financial statements and required that the Hill loans be listed on Hill A&E's balance sheets as a Note. Hill A&E issued new balance sheets for 1993, 1994, and 1995 listing the Hill loans as long term debt and Notes.(Epperson v. Entertainment Express, Inc., No. 3:99CV778(DJS),Dkt. # 71, Resp. to ¶ 110 at 22-23). During 1993 through 1995,Stanley Gloss classified the funds in question from Hill as "Debtto Parent Incurred" on Hill A&E's Cash Flow statements. (SeeEpperson v. Entertainment Express, Inc., No. 3:99CV778(DJS),Dkt. # 75, ¶ 11 at 3). Whatever the reason therefor, it is undisputedthat Hill A&E's 1993 through 1995 balance sheets classified fundsreceived from Hill as capitalization rather than a loan prior tobeing audited by Arthur Andersen in 1995.

The parties' submissions to the court in the Second and ThirdActions chronicle the troubled financial condition of Hill A&Efrom roughly 1990 through 1996. The record indicates thatSchwartz, the founder of Artsoft and President of Hill A&E, wasin frequent correspondence with Richter, the sole director andshareholder of Artsoft, regarding Hill A&E's financial condition.Specifically, the parties have submitted a substantial amount ofcorrespondence between Schwartz, Richter, and other officers ofHill A&E and Hill detailing, among other things, Hill A&E's cashflow problems, disagreements regarding the authorization of HillA&E's expenditures, Hill A&E's requests for additional capital,disagreements regarding Schwartz's authority to enter intocontracts on behalf of Hill A&E, resolving inter-companyreimbursement issues between Hill A&E and Hill, keeping HillA&E's creditors at bay, including some instances where theparticular obligation at issue was guaranteed by Hill, andlayoffs caused by Hill A&E's financial condition. The record alsoreveals that, towards the end of this time period, Hill A&E,Hill, and Richter were exploring new options regarding the futureof Hill A&E. The third transaction affecting HAESI's ability to satisfyplaintiffs' default judgment was Hill A&E's sale of its assets toEE. On May 31, 1996, Hill A&E sold substantially all of itsassets9 to EE, and changed its name to "HAESI". Paymentwas in the form of a convertible note to HAESI from EE in theamount of $3,000,000.00, with interest to accrue at a rate of 8%per year. The principal was due on May 31, 2001. Interest on theconvertible note was to be paid annually on May 31 of each year,the first payment of which was to be paid in stock, and eachpayment thereafter in either stock or cash, at EE's discretion.The convertible note gave the holder the right to convert anyamount of the principal balance thereof into EE common stock.

As HAESI's secured creditors, Hill and Richter took liens onthe convertible note as proceeds from the asset sale. As of thedate of the sale, Hill A&E owed Hill $8,402,909.18 in principaland $3,782,000.00 in interest pursuant to the April 1, 1994 LoanSecurity Agreement. Hill A&E also owed Richter $682,344.00 atthis time, which was also secured. As a condition of the assetsale to EE, both Hill and Richter released their securityinterests on the assets transferred to EE, and substituted the convertible note, and any payments made thereunder, as collateralfor their loans to HAESI. Hill and Richter subsequently filedUCC-1 statements in New Jersey listing the following collateralas subject to their respective security interests: Debtor's interest in the $3,000,000 Convertible Promissory Note ("Note") from entertainment Express, Inc. to Debtor dated May 31, 1996; all shares of stock hereafter acquired by Debtor as interest or upon conversion of the Note; all interest, dividends and distributions payable with respect to the foregoing (whether or not the same constitute general intangibles); and all proceeds of the foregoing.(Epperson v. Entertainment Express, Inc., No. 3:99CV778(DJS),Richter Dec., Dkt. # 41, Exs. 20 & 21). Hill, which is located inNew Jersey, took possession of the convertible note following theasset sale, and payments under the convertible note were made toHill. Hill then foreclosed on the note on November 11, 1996.

According to defendants, the purpose of selling HAESI's assetswas to create a new entity with unencumbered assets so that aninfusion of venture capital could be obtained and EE could enterinto a ticket transaction business rather than strictly asoftware development and licensing business. In April of 1996,EE,10 Hill A&E, and Ventana Global, Ltd. entered into anagreement whereby EE would acquire Hill A&E's assets, includingthe software developed pursuant to the August 2, 1988 contractbetween PAT and Artsoft. Further, pursuant to this agreement, Ventana would obtain venture capital for EE and assist in areorganization of EE's corporate finance structure in order tofacilitate an initial public offering. Thus, Richter and Hilleffectively converted their interest in Hill A&E from secureddebt to equity in a new entity.


A motion for summary judgment may be granted "if the pleadings,depositions, answers to interrogatories, and admissions on file,together with the affidavits, if any, show that there is nogenuine issue of material fact and that the moving party isentitled to judgment as a matter of law." Fed.R. Civ. P. 56(c).Summary judgment is appropriate if, after discovery, thenonmoving party "has failed to make a sufficient showing on anessential element of [its] case with respect to which [it] hasthe burden of proof." Celotex Corp. v. Catrett, 477 U.S. 317,323 (1986). "The burden is on the moving party `to demonstratethe absence of any material factual issue genuinely in dispute.'"American Int'l Group, Inc. v. London Am. Int'l Corp.,664 F.2d 348, 351 (2d Cir. 1981) (quoting Heyman v. Commerce & Indus.Ins. Co., 524 F.2d 1317, 1319-20 (2d Cir. 1975)). A disputeconcerning a material fact is genuine "`if evidence is such thata reasonable jury could return a verdict for the nonmovingparty.'" Aldrich v. Randolph Cent. Sch. Dist., 963 F.2d 520,523 (2d Cir. 1992) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)). The court must view allinferences and ambiguities in a light most favorable to thenonmoving party. See Bryant v. Maffucci, 923 F.2d 979, 982(2d Cir. 1991). "Only when reasonable minds could not differ asto the import of the evidence is summary judgment proper." Id.


Plaintiffs assert claims under Connecticut's11enactment of the Uniform Fraudulent Transfer Act, Conn. Gen.Stat. §§ 52-552a-5521 (West Supp. 2002).12 In the FirstCause of Action set forth in the Complaint, plaintiffs seek toset aside HAESI's May 31, 1996 sale of its assets to EE. In theSecond Cause of Action, plaintiffs seek avoidance of the lienspurportedly encumbering HAESI's, then known as Hill A&E, assetsprior to the transfer to EE. For the reasons set forth herein,defendants are entitled to judgment as a matter of law on bothcauses of action because the property transferred to EE did notconsist of "assets" as that term is defined in UFTA, andplaintiffs may not challenge the validity of the securityinterests in the property transferred to EE, or received from EEas proceeds, under the governing statute of repose.

a. UFTA Definition of "Asset"

Defendants argue that plaintiffs cannot prevail on their claimto set aside HAESI's May 31, 1996 transfer of its assets to EE.Because plaintiffs' claim arose prior to the challenged transfer,the following are considered fraudulent transfers pursuant to theUFTA: A transfer made or obligation incurred by a debtor is fraudulent as to a creditor, if the creditor's claim arose before the transfer was made or the obligation was incurred and if the debtor made the transfer or incurred the obligation: (1) With actual intent to hinder, delay or defraud any creditor of the debtor; or (2) without receiving a reasonably equivalent value in exchange for the transfer or obligation, and the debtor (A) was engaged or was about to engage in a business or a transaction for which the remaining assets of the debtor were unreasonably small in relation to the business or transaction, or (B) intended to incur, or believed or reasonably should have believed that he would incur, debts beyond his ability to pay as they became due[,]Conn. Gen. Stat. § 52-552e(a); and

A transfer made or obligation incurred by a debtor is fraudulent as to a creditor whose claim arose before the transfer was made or the obligation was incurred if the debtor made the transfer or incurred the obligation without receiving a reasonably equivalent value in exchange for the transfer or obligation and the debtor was insolvent at that time or the debtor became insolvent as a result of the transfer or obligation[,]Conn. Gen. Stat. § 52-552f(a). The party who seeks to set asidethe transaction bears the burden of proving, by clear andconvincing evidence, that the transaction was fraudulent. SeeDietter v. Dietter, 54 Conn. App. 481, 488 (1999); Tessitorev. Tessitore, 31 Conn. App. 40, 42 (1993).

The UFTA gives the court broad authority to remedy fraud. "Agrantor has an interest in property fraudulently conveyed whichmay be reached by attachment." Olin Corp. v. Castells,180 Conn. 49, 52 (1980). In an action alleging a fraudulent transfer,the creditor may pursue the following remedies: (1) Avoidance of the transfer or obligation to the extent necessary to satisfy the creditor's claim; (2) an attachment or other provisional remedy against the asset transferred or other property of the transferee in accordance with the procedure prescribed by chapter 903a; (3) 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 property, (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.Conn. Gen. Stat. § 52-552h (footnote omitted).

Because Hill A&E's property, and any property transferred toHAESI on May 31, 1996, specifically the convertible note, wasencumbered by security interests that exceeded the value of theproperty, plaintiffs may not pursue a remedy under UFTA. A"transfer" is defined under the UFTA as "every mode, direct orindirect, absolute or conditional, voluntary or involuntary, ofdisposing of or parting with an asset or an interest in an asset,and includes payment of money, release, lease and creation of alien or other encumbrance." Conn. Gen. Stat. § 52-552b(12). TheUFTA defines the term "asset" as property of a debtor, but the term does not include: (A) Propertyto the extent it is encumbered by a valid lien, (B) property tothe extent it is generally exempt under nonbankruptcy law, or (C)an interest in property held in tenancy by the entireties to theextent it is not subject to process by a creditor holding a claimagainst only one tenant.

Conn. Gen. Stat. § 52-552b(2). Further, a "lien" is "a chargeagainst or an interest in property to secure payment of a debt orperformance of an obligation, and includes a security interestcreated by agreement, a judicial lien obtained by legal orequitable process or proceedings, a common law lien or astatutory lien," Conn. Gen. Stat. § 52-552b(8), and a "validlien" is "a lien that is effective against the holder of ajudicial lien subsequently obtained by legal or equitable processor proceedings," Conn. Gen. Stat. § 52-552b(13). Therefore, ifthere is a "valid lien" on property that exceeds the value of theproperty, the property cannot be considered an "asset," and therecan be no "transfer" under the UFTA.

Hill and Richter had perfected security interests well inexcess of the value of both Hill A&E's property and theconvertible note payable to HAESI, which was substituted ascollateral after Hill A&E transferred its assets to EE. Thesesecurity interests are "valid liens" that exceeded the value ofthe collateral, thereby precluding either Hill A&E's property orthe convertible note from meeting UFTA's definition of "asset."As such, the May 31, 1996 sale cannot, as a matter of law, be considered a "transfer" subject to UFTA. See Dietter,54 Conn. App. at 494.

Plaintiffs have failed to produce any evidence to refutedefendants' claim that the property sought in the complaint is an"asset" under UFTA. Instead, they dispute, in conclusory fashion,the validity of the supporting documentation regarding Hill's andRichter's liens. Because plaintiffs cannot, as a matter of law,meet their evidentiary burden, judgment must enter in favor ofthe defendants on this claim. See Celotex Corp. v. Catrett,477 U.S. 317, 333 n. 3 (1986) (Brennan, J. dissenting) ("Once themoving party has attacked whatever record evidence — if any — thenonmoving party purports to rely upon, the burden of productionshifts to the nonmoving party, who must either (1) rehabilitatethe evidence attacked in the moving party's papers, (2) produceadditional evidence showing the existence of a genuine issue fortrial as provided in Rule 56(e), or (3) submit an affidavitexplaining why further discovery is necessary as provided in Rule56(f)."); see generally 11 Moore's Federal Practice §56.11(7)(c) (Matthew Bender 3d ed. 1997) ("Just as woefully weakfact disputes do not preclude summary judgment, mere assertionscan not preclude summary judgment since assertions have lessprobative value than facts."). b. Statute of Repose

Having failed to offer sufficient evidence that Hill's andRichter's liens did not actually exist, plaintiffs furthercontend that the court should find that Hill's and Richter'sliens were unenforceable and therefore were not "valid liens,"which would allow plaintiffs to demonstrate that the propertytransferred to HAESI from EE was an "asset."13Specifically, plaintiffs argue that Hill A&E's granting ofsecurity interests to Hill and Richter in its property werefraudulent transfers. In support of this argument, plaintiffscite the fact that Hill and Richter directed Hill A&E toreclassify the $8 million loaned to Hill A&E as capital, only tolater direct that Hill A&E again reclassify the $8 million asdebt, purportedly to thwart plaintiffs' collection efforts.

Defendants claim that plaintiffs cannot bring a cause of actionto attack the security interests in Hill A&E's property grantedto Hill and Richter in 1994 because any such action is barred byUFTA's statute of repose. Section 52-552j of the ConnecticutGeneral Statutes provides the following: A cause of action with respect to a fraudulent transfer or obligation under sections 52-552a to 52-552l, inclusive, is extinguished unless action is brought: (1) Under subdivision (1) of subsection (a) of section 52-552e, within four years after the transfer was made or the obligation was incurred or, if later, within one year after the transfer or obligation was or could reasonably have been discovered by the claimant; (2) under subdivision (2) of subsection (a) of section 52-552e or subsection (a) of section 52-552f, within four years after the transfer was made or the obligation was incurred; or (3) under subsection (b) of section 52-552f, within one year after the transfer was made or the obligation was incurred.Conn. Gen. Stat. § 52-552j. This statute of repose sets forthdifferent time bars applicable to different types of claims.First, in claims alleging constructive fraud, a claim must bebrought within four years of the date of the transfer. SeeConn. Gen. Stat. § 52-552j(2). Second, in a case where there hasbeen "actual intent to hinder, delay or defraud any creditor ofthe debtor," Conn. Gen. Stat. § 52-552e(a)(1), a cause of actionmust be brought either within four years from the date oftransfer or within one year from the date the transfer "couldreasonably have been discovered by the claimant." Conn. Gen.Stat. § 52-552j(1). Third, a cause of action alleging apreferential transfer must be brought within one year of thetransfer. See Conn. Gen. Stat. § 52-552j(3).

Because plaintiffs allege actual fraud, (see Compl., ¶ 9(a)),subsection (3) applies to their claims. Hill A&E granted Richtera security interest in substantially all of its property onNovember 26, 1991 and Hill a security interest in the sameproperty on April 1, 1994. Plaintiffs commenced this lawsuit onApril 27, 1999, thereby exceeding the permissible time period to challenge the validity of the security interests. Further,plaintiffs cannot avail themselves of the provision granting anadditional one year from the time when they should have been ableto learn of the granting of the security interests. Hill's andRichter's security interests in Hill A&E's property wereperfected by filing UCC-1 statements, which are public records,the last of which pertaining to Hill A&E's property was filed onOctober 31, 1994.14 Hill A&E has been the target ofplaintiffs' litigation from the time the First Action was filedin 1995. The existence of security interests in property that maybe used to satisfy a judgment against Hill A&E was a matter ofpublic record since at least October 31, 1994. Therefore,plaintiffs could not, as a matter of law, have been preventedfrom discovering the existence of the security interests.

c. Fraudulent Concealment

Plaintiffs cannot, as a matter of law, prevail on their claimthat defendants fraudulently concealed the existence of a causeof action against defendants. Plaintiffs seek the protectionprovided by Section 52-595 of the Connecticut General Statutes,which provides the following:

If any person, liable to an action by another, fraudulently conceals from him the existence of the cause of suchaction, such cause of action shall be deemed to accrue againstsuch person so liable therefor at the time when the personentitled to sue thereon first discovers its existence.

Conn. Gen. Stat. § 52-595. In order to prove fraudulentconcealment, the party asserting the claim must demonstrate thefollowing: (1) a defendant's actual awareness, rather than imputed knowledge, of the facts necessary to establish the plaintiffs' cause of action; (2) that defendant's intentional concealment of these facts from the plaintiffs; and (3) that defendant's concealment of the facts for the purpose of obtaining delay on the plaintiffs' part in filing a complaint on their cause of action.Bartone v. Robert L. Day Co., Inc., 232 Conn. 527, 533 (1995).Plaintiffs must prove these elements by clear and convincingevidence. See Fichera v. Mine Hill Corp., 207 Conn. 204, 215(1988).

Defendants contend that, because Section 52-552j is a statuteof repose, Section 52-595 does not apply to toll the limitationperiod. "The effect of the statute of repose is that, onoccasion, a party's cause of action will be barred even beforethe action began to accrue." Daily v. New Britain Mach. Co.,200 Conn. 562, 582 (1986). The Connecticut Supreme Court hasstated the following: Undoubtedly, statutes of repose differ in some respects from statutes of limitation. "While statutes of limitation are sometimes called `statutes of repose,' the former bars right of action unless it is filed within a specified period of time after injury occurs, while `statute[s] of repose' [terminate] any right of action after a specific time has elapsed, regardless of whether there has as yet been an injury." Black's Law Dictionary (6th Ed. 1990) p. 927. . . .Baxter v. Sturm, Ruger and Co., Inc., 230 Conn. 335, 341 (1994)(alterations in original). Because Section 52-595 speaks in termsof the accrual of a cause of action, which is immaterial to astatute of repose, defendants contend that Section 52-595 may notbe used to toll the time period for filing a claim under Section52-552j.

Given the Connecticut Supreme Court's reluctance to draw adistinction between statutes of repose and statutes of limitationexpressed in Baxter, and its mandate to broadly apply Section52-595, the court finds that plaintiffs may request the reliefafforded by Section 52-595 despite the fact that Section 52-552jis a statute of repose. In Baxter, the Connecticut SupremeCourt declined to definitively distinguish between statutes ofrepose and statutes of limitations for the purpose of determiningwhether a statute of repose should be treated as a "substantive"provision of law rather than "procedural". See id. at 344-45("In our view, the fact that a statute of repose may bar a claimbefore the cause of action has accrued does not form a basis todistinguish it from a statute of limitation for choice of lawpurposes."). Further, the Connecticut Supreme Court has held that"the exception contained in § 52-595 constitutes a clear andunambiguous general exception to any statute of limitations that does not specifically preclude its application." Connell v.Coldwell, 214 Conn. 242, 246 n. 4 (1990). In Connell, theConnecticut Supreme Court held that Section 52-595 applied to thestatute of repose portion of Section 52-584, and rejected anargument similar to that advanced by defendants. See id. Whenconsidered together, these two holdings indicate that theConnecticut Supreme Court would not draw the distinctionsuggested by defendants, and this court declines to do so here.

Defendants also contend that plaintiffs cannot meet theirburden of proving fraudulent concealment. Because defendantscould not, as a matter of law, have concealed the existence ofthe security interests in favor of Hill and Richter in light ofthe UCC-1 filings, defendants are entitled to judgment as amatter of law on plaintiffs' fraudulent concealment claim.Plaintiffs contend that they could not have discovered theexistence of a cause of action until Hill A&E producedinformation regarding the reclassification of Hill's infusion ofcapital into Hill A&E to that of a loan from Hill to Hill A&E,which is referenced in the April 1, 1994 Loan and SecurityAgreement entered into between Hill and Hill A&E. Plaintiffsargue that defendants fraudulently concealed this information byposing an improper objection to plaintiffs' discovery requestsserved on March 22, 1996 and failing to respond to plaintiffspost-judgment interrogatories served on March 19, 1998. Plaintiffs' position is untenable. Plaintiffs' purport to statea cause of action setting aside Hill's and Richter's securityinterests in Hill A&E's property. The "cause of such action", asreferred to in Section 52-595 as that which must be concealed, istherefore the grants of the security interests. Richter'ssecurity interest was granted on November 26, 1991 while Hill'ssecurity interest was granted on April 1, 1994. As previouslydiscussed herein, Richter's and Hill's security interests in HillA&E's property were perfected by filing UCC-1 statements, whichare public records, in Connecticut on December 5, 1991 and June7, 1994, respectively. Hill A&E's grants of security interests toHill and Richter are the events that trigger the statute ofrepose, and are the events that defendants must have concealed inorder for plaintiffs to prevail. Because of the public filingsmemorializing these transactions, defendants could not haveconcealed the existence of the security interests fromplaintiffs. Were the court to hold otherwise, the emphasis, forthe purpose of applying Section 52-595, would be placedinappropriately upon discovery of the evidence in support of aclaim that a transfer was fraudulent and not of the transferitself, which is the event that triggers the four-year reposeperiod set forth in Section 52-552j.

Further, plaintiffs' claim to have discovered the "cause ofsuch action" in March of 2001 is not credible because plaintiffs filed the instant action challenging the validity of the Hill andRichter security interests on April 27, 1999. If plaintiffs couldhave filed an action on April 27, 1999 without the benefit of theinformation discovered in March of 2001, there is no reason whyplaintiffs could not have filed an action within the limitationperiod, which expired on April 1, 1998, or almost one full yearafter plaintiffs obtained a default judgment against Hill A&E.Plaintiffs' filing this action two years before allegedlydiscovering the "cause of [plaintiffs'] action" belies theimportance of the evidence discovered in March of 2001, andsupports the conclusion that the "cause of such action" was thegrant of Hill's and Richter's security interests.

Because the "cause of [plaintiffs'] action" was, as of October31, 1994, a matter of public record, defendants could not haveconcealed the "cause of [plaintiffs'] action" from plaintiffs.Therefore, plaintiffs cannot, as a matter of law, meet theirburden of proving fraudulent concealment pursuant to Section52-595, and there is no basis to toll the statute of reposeapplicable to plaintiffs' claims.15 IV. CONCLUSION

For the reasons set forth herein, defendants are entitled tojudgment as a matter of law with respect to both of plaintiffs'claims. Because the property plaintiffs claim Hill A&Efraudulently transferred was encumbered by liens exceeding thevalue of the property, the property is not an "asset," and thetransfer cannot be challenged under the UFTA. In addition,plaintiffs cannot challenge the validity of the liens on thesubject property because their claims are barred by theapplicable statute of repose. Richter's motion to dismiss (dkt. #35) is DENIED; defendants' motion for summary judgment (dkt. #37) is GRANTED; and plaintiffs' motion for summary judgment(dkt. # 68) is DENIED. Judgment shall enter in favor of thedefendants on all counts forthwith. The Clerk of the Court shallclose this file.

So ordered.

1. The amended complaint re-asserted the original two countsagainst HAESI. The April 23, 1997 default judgment was enteredupon these counts.

2. The court does not reject any affidavits filed in supportof the pending motions, and notes the parties arguments insupport thereof in assigning weight to the statements set forthin the challenged affidavits.

3. The court takes judicial notice of the record in the ThirdAction.

4. In 2001, Richter owned 66.7% of Hill's shares of stock. Atall pertinent times, Richter exercised control over Hill'saffairs. (See Epperson v. Entertainment Express, Inc., No.3:99CV778(DJS), Dkt. # 71, § A., ¶ 6).

5. Richter purchased Hill's shares of Hill A&E on July 1,1991.

6. Plaintiffs did not invoke this remedy when they filed suitin this court on October 4, 1995. At all relevant times in theFirst Action, plaintiffs sought only unpaid sums due and owing.

7. Epperson testified that he left Hill A&E because Hill A&Ewas scaling back its software development, which was Epperson'sprimary area of expertise.

8. On June 19, 1989, PAT and Artsoft entered into an Amendmentto Custom Software Development Agreement. This amendment alteredthe fee schedule with respect to the development of the newsoftware by eliminating the monthly fee and providing for a cashadvance of $40,000.00 towards the payment of the maximum royaltyfee.

9. A fairness evaluation, dated May 31, 1996 and conducted byHoward, Lawson & Co. at the request and for the benefit of Hill,valued Hill A&E's assets at $2.3 million as of April 30, 1996.(See Epperson v. Entertainment Express, Inc., No.3:99CV778(DJS), Sullivan Aff., Dkt. # 63, Ex. R at 1). As ofApril 30, 1996, according to the fairness opinion, Hill A&E'sliabilities totaled $13.2 million. (See id.).

10. EE was incorporated under the laws of the State ofDelaware on January 29, 1995.

11. Defendant argues that Connecticut law applies toplaintiffs' claims. Plaintiffs have not taken a position on thisissue. Based upon defendants' arguments, the court finds thatConnecticut law applies to plaintiffs' claims.

12. UFTA applies to all transactions occurring after October1, 1991, the date of its enactment in Connecticut. See Dietterv. Dietter, 54 Conn. App. 481, 486-87 (1999).

13. Plaintiffs argument that Richter's and Hill's securityinterests are simply void is not persuasive. Plaintiffs have notcited any persuasive authority indicating that the court shoulddeem Richter's and Hill's security interests null and void.

14. The original security interest in Hill A&E's propertycovered proceeds from the sale of the property, and thereforecovered the convertible note. As such, the date of perfecting anysecurity interest granted specifically in the convertible note isof no moment.

15. Plaintiffs have not met their burden of proving thatdefendants are estopped from claiming that Richter's and Hill'ssecurity interests are not valid.

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