Spradlin v. Beads and Steeds Inns, LLC (In re Howland)

(6th Cir. Jan. 3, 2017)

The Sixth Circuit affirms the bankruptcy court’s dismissal of the trustee’s fraudulent transfer complaint. The trustee alleged the defendant was the recipient of a fraudulent transfer from the debtors, but the transfer was actually made to the defendant by an LLC seperate from the debtors. The trustee failed to allege facts sufficient for the doctrine of substantive consolidation and veil piercing is inappropriate here because Kentucky courts endorse the vicarious liability approach to veil piercing rather than the identity approach. The debtor had no interest in the alleged alter ego’s assets. Opinion below.

Judge: Griffin

Attorneys for Defendant: Stoll Keenon Ogden PLLC, Adam M. Back

Attorneys for Trustee: Bingham Greenebaum Doll LLP, Richard Boydston


Author: Matt Lindblom

Bash v. Textron Financial Corporation (In re Fair Finance Company)

(6th Cir. Aug. 23, 2016)

The Sixth Circuit reverses the dismissal of certain of the trustee’s claims against the defendant entity alleged to have assisted the debtor with a Ponzi scheme. The debtor financial services company had been purchased by two individuals in 2002 and was transformed into a front for the Ponzi scheme. The scheme collapsed in 2009, an involuntary petition was filed against the Debtor, and the trustee brought claims including fraudulent transfer claims against the defendant. The lower court dismissed all claims, but the Sixth Circuit, interpreting Ohio state law, holds that the trustee adequately pled certain claims that should not have been dismissed. Opinion below.

Judge: Davis

Attorneys for Appellant: Baker & Hostetler, Daniel R. Warren, Thomas D. Warren, Joseph F. Hutchinson, David F. Proaño

Attorneys for Appellee: Gibson, Dunn & Crutcher LLP, Mitchell A. Karlan; Bricker & Eckler LLP, James P. Schuck, Kenneth C. Johnson, Quintin F. Lindsmith

2016-08-23 – in re fair finance company

Author: Matt Lindblom

Zeiden v. Griswold (In re Wierzbicki)

(7th Cir. July 27, 2016)

The Seventh Circuit affirms the bankruptcy court’s order finding that the debtor’s prepetition transfer of a farm to the defendant was a fraudulent transfer subject to avoidance. The debtor transferred the farm in exchange for the defendant’s agreement to abandon litigation he had brought against the debtor. The bankruptcy court found that the debtor did not receive reasonably equivalent value in exchange for the farm. Opinion below.

Per Curiam

Defendant: Pro Se

Attorney for Trustee: Brenda L. Zeddun

2016-07-27 – in re wierzbicki

Author: Matt Lindblom

Official Committee of Unsecured Creditors v. T.D. Investments, LLP (In re Great Lakes Quick Lube LP)

(7th Cir. Mar. 11, 2016)

The Seventh Circuit reverses the bankruptcy court’s judgment dismissing the committee’s fraudulent and preferential transfer claims. The committee brought the claims against the debtor’s landlord. The basis of the claims was the debtor’s termination of the leases 52 days before declaring bankruptcy. The court holds that there could have been value available to creditors if the leases remained in effect on the petition date. The committee was not seeking to evict the new tenant, but was merely seeking the value that was allegedly lost. The court remands to the bankruptcy court to determine the value of the transfer and any defenses of the landlord. Opinion below.

Judge: Posner

Attorneys for Committee: Kerkman & Dunn, Evan P. Schmit, Gregory M. Schrieber

Attorneys for Landlord: Hudec Law Offices, S.C., Patrick J. Hudec

2016-03-11 – in re great lakes quick lube

Author: Matt Lindblom

Smith v. SIPI, LLC (In re Smith)

(7th Cir. Jan. 20, 2016)

The Seventh Circuit reverses the district court and affirms the bankruptcy court, holding that a tax sale under Illinois’s interest rate auction system does not necessarily establish a transfer for reasonably equivalent value under 11 U.S.C. § 548(a)(1)(B). Thus, property sold under such system can still be considered fraudulently conveyed. Under this Illinois system, the winning bid amount bears no relationship to the value of the underlying real estate because the lowest bid wins (i.e., bidders bid how little money they are willing to accept in return for payment of the owner’s delinquent taxes). Opinion below.

2016-01-20 – in re smith

Author: Matt Lindblom


Brandt v. Hammond (In re Equipment Acquisition Resources, Inc.)

(7th Cir. October 13, 2015)

The Seventh Circuit affirms the bankruptcy court’s order granting summary judgment to the casino defendant. The Chapter 11 plan administrator sought to avoid and recover fraudulent transfers made to the casino. The debtor had made about $8 million in fraudulent transfers to its owner, who then used the funds at the casino. The casino asserted the good faith defense in 11 U.S.C. § 550(b)(1). The casino did not have knowledge of the voidability of the transfer avoided and acted in good faith in accepting the funds for value given. Opinion below.

2015-10-13 – brandt v horseshoe hammond

Author: Matt Lindblom

Walro v. Lee (In re Lee)

(Bankr. S.D. Ind. June 16, 2015)

The bankruptcy court held that certain transfers of real property and shares of stock were fraudulent transfers. The debtor had transferred the property to his wife without receiving adequate consideration. The court orders that the trustee is entitled to recover title to the real property and a money judgment against the defendant. Opinion below.

2015-06-16 – walro v lee
2015-06-16 – walro v lee judgment

Author: Matt Lindblom

Brown v. Raygoza (In re Addington)

(Bankr. E.D. Ky. May 27, 2015)

The bankruptcy court holds that the debtor made a fraudulent transfer to his sister when he sold her $150,000 worth of mineral rights for $20,000 prepetition. The court discusses the evidence at trial that established the value of the mineral rights, and then awards to the trustee the value of the property transferred. Opinion below.

2015-05-27 – brown v raygoza

Author: Matt Lindblom

Listecki v. Official Committee of Unsecured Creditors

(7th Cir. Mar. 10, 2015)

The Seventh Circuit holds that the Religious Freedom Restoration Act and the First Amendment do not bar application of the bankruptcy code’s fraudulent transfer and preferential transfer provisions to the archdiocese’s prepetition transfer of $55 million to a trust for maintaining cemeteries. Because the creditor’s committee does not act under “color of law” and does not constitute the “government” for purposes of the Act, the committee may proceed with its avoidance action against the debtor archdiocese. The Free Exercise Clause also does not bar application of those provisions because they are generally and neutrally applicable, further a compelling governmental interest, and are narrowly tailored. Opinion below.

2015-03-09 – listecki v official committee of unsecured creditors

Author: Matt Lindblom

Wells v. Lorenz (In re Lorenz)

(Bankr. N.D. Ind. Nov. 6, 2014)

The bankruptcy court denies the debtor’s motion to dismiss the complaint seeking to declare a particular debt nondischargeable under 11 U.S.C. § 523(a)(2) and denial of the discharge generally under § 727(a)(2). The plaintiff alleged that the debtor misrepresented his ownership interest in certain property. The debtor argued this was a statement of financial condition and that because it was not in writing it could not support a denial of discharge under § 523(a)(2). The bankruptcy court holds that statements related to an interest in property are not statements of financial condition, and the alleged misrepresentation was sufficient to state a claim under § 523(a)(2). The plaintiff also alleged the debtor was the alter ego of his corporation, and that the debtor caused the corporation to transfer property without consideration to another entity. The debtor argued the plaintiff failed to state a claim under § 727(a)(2) because the property transferred was not property of the debtor. The bankruptcy court held that a claim was properly stated because the plaintiff alleged the corporation was the alter ego of the debtor and thus the property was alleged to be property of the debtor. Opinion below.

2014-11-06 – wells v lorenz