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

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

(E.D. Ky. June 7, 2016)

The district court affirms the bankruptcy court’s orders holding the trustee failed to state a claim for substantive consolidation and could not proceed on a reverse veil piercing theory under Kentucky law. 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 a Kentucky LLC separate from the debtors. Because Kentucky courts have not recognized reverse veil piercing, the district court declines to apply it to disregard the separate existence of the debtors and the LLC. The court also agrees with the bankruptcy court that the trustee failed to allege facts sufficient to apply substantive consolidation. Opinion below.

Judge: Caldwell

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

Attorneys for Trustee: Bingham Greenebaum Doll LLP, James R. Irving, Richard Boydston

2016-06-07 – in re howland

Author: Matt Lindblom