Friedmeyer v. Breath of Life O2, LLC (In re Breath of Life Home Medical Equipment and Respiratory Services, Inc.)

(Bankr. S.D. Ind. Mar. 20, 2017)

The bankruptcy court denies the defendants’ motion to dismiss, with the exception of one claim for equitable subordination against one of the defendants. The complaint filed by the trustee asserted counts for veil piercing, fraud and fraudulent transfer, preference avoidance, breach of fiduciary duty, and a demand for accounting and turnover. Opinion below.

Judge: Moberly

Attorney for Trustee: Mark A. Warsco

Attorneys for Defendants: Alerding Castor Hewitt LLP, Michael J. Alerding, Julia E. Dimick, Mitchell Alan Greene, Anthony Frederick Roach; Abraham Murphy

2017-03-20 – in re breath of life home medical

Author: Matt Lindblom

Lee v. The William R. Lee Irrevocable Trust (In re Lee)

(S.D. Ind. Feb. 17, 2017)

The district court affirms the bankruptcy court’s judgment in favor of the plaintiff trust. The bankruptcy court held that the trust could pierce the corporate veil and hold the debtor personally liable to the trust. The district court analyzes Indiana law on veil piercing and finds no error. Opinion below.

Judge: Young

Attorney for Debtor: Goering Law LLC, Wilmer E. Goering, II

Attorney for Plaintiff: Kroger Gardis & Regas LLP, David E. Wright

2017-02-17-in-re-lee

Author: Matt Lindblom

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

2017-01-03-in-re-howland

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

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

(Bankr. E.D. Ky. Aug. 22, 2014)

The bankruptcy court dismisses the trustee’s fraudulent transfer complaint based on a reverse veil piercing theory, which has not been adopted (or rejected) by Kentucky courts. The trustee’s complaint was filed against a limited liability company that purchased real property from the debtors’ entity for $800,000 (it had been purchased for $1.6 million a few years before this sale). Such a claim would require the debtors and their entity to be treated as the same. Even if Kentucky courts recognized reverse veil piercing, Kentucky law treats veil piercing as an equitable remedy, not as a claim itself. For these reasons, the bankruptcy court dismisses the complaint with leave for the trustee to amend (the trustee suggested at oral argument that substantive consolidation would also allow for the relief requested in the original complaint). Opinion below.

2014-08-22 – in re howland