Laughlin v. Nouveau Body & Tan - The Appellate Record

Case: 09-10622 Document: 00511064454 Page: 4 Date Filed: 03/29/2010No. 09-10622In an oral ruling, the bankruptcy court determined that, following Drye v.United States, 528 U.S. 49 (1999), Laughlin’s renunciation of his interest in hisfather’s estate was a fraudulent transfer under § 727(a)(2). Specifically, thebankruptcy court concluded that Laughlin “had the power to channel [hisinheritance interest]” and he thus transferred that interest by renouncing hisinheritance; that Laughlin had the intent to delay, hinder, or defraud hiscreditors when he made the transfer; and that Laughlin’s intent in transferring2this interest was sufficient to deny discharge under § 727(a)(2).Laughlin appealed the denial of his discharge under § 727(a)(2). Thedistrict court determined that the bankruptcy court had not erred in making itsfactual findings, agreed with the bankruptcy court that “federal law applies indefining ‘transfer’ and ‘property’” under § 727(a)(2), and concluded that thebankruptcy court appropriately denied discharge under § 727(a)(2). Laughlintimely appealed to this court.II. DISCUSSIONA. Standard of Review2The bankruptcy court made this determination despite finding that Laughlin’s intentto transfer his interest in his father’s estate to his mother was “credible.” The bankruptcycourt reasoned that because Laughlin’s inheritance interest included a significant number ofshares of LPI and because Laughlin controlled LPI and was manipulating it to reduce itsexposure to creditors (by, inter alia, changing his and his wife’s salaries), Laughlin hadrenounced his interest in his father’s estate with the intent to hinder and delay Nouveau. Thebankruptcy court reviewed indicators of fraud and found that Laughlin received noconsideration for his renunciation, that the “transfer” was made to a family member, thatLaughlin did not retain control or use of the property after its transfer, that Laughlin was inbad financial shape at the time of the renunciation, that Laughlin had not been credible in histestimony generally, and that the pattern and general chronology of the events suggestedfraud. On this point, the court recounted how Laughlin had manipulated LPI and his role inthe company, and that Laughlin had taken these actions shortly following the judgmentsentered in favor of Nouveau. The court also referenced Louisiana case law and noted that itwould be “difficult” and costly for Nouveau to petition the Louisiana state courts to undoLaughlin’s renunciation and that this also suggested that Laughlin transferred property withthe intent to hinder, delay, or defraud his creditors.4