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394 B.R. 721 Page 8394 B.R. 721, 50 Bankr.Ct.Dec. 192(Cite as: 394 B.R. 721)these transfers to pay $9,882,351 to defendant SovereignBank in satisfaction of its own debts. ( 79, 87.)C. The Post-Petition Bankruptcy SaleAs of the Petition Date, the Pre-Petition Banks and SPMheld secured claims against the debtors in the sum of$161.3 million. ( 51.) The debtors acknowledged theseclaims in the Final Order Authorizing Debtors' Use ofCash Collateral and Granting Adequate Protection Claimsand Liens, dated December 18, 2006 (the "FCCO")(filedin Case No. 06-12737 ECF *729 Doc. # 93) subject to theComm ittee's right to object. [FN6] (Id.) After the PetitionDate, each of the defendants sold their secured claims.(Id.)FN6. The defendants appear to argue that thedebtors' admissions in the FCCO restrict theplaintiff, or at a minimum, impose a higherpleading standard. (Joint Reply Memorandum ofLaw in Further Support of Defendants' Motionsto Dismiss Complaint, dated Mar. 4, 2008, at 19-20)(ECF Doc. # 48.) The FCCO allowed theCommittee to commence this avoidance and recoveryaction notwithstanding the debtors' releaseof the defendants. (FCCO at 22.) Suchclauses are commonly included in cash collateralorders to balance the lender's desire for a release,as the quid pro quo for its consent to the use ofits cash collateral, against the need to protect theinterests of the unsecured creditors, particularlyat an early stage of the case before there is anopportunity to confirm the validity and extent ofthe liens. Here, the Committee's right to challengethe pre-petition transactions between thedebtors and the defendants would be a hollowone if the Committee was hamstrung by the admissionsmade by the debtors in the FCCO. Instead,this adversary proceeding necessarily proceedsas if the debtors never made the admissionsand concessions in the FCCO.On May 21, 2007, all of MFS' remaining assets were soldat an auction. ( 52.) Wilmington Trust Company, theagent for the purchasers of the secured debt, purchasedthe majority of the assets for $38.5 million. (Id.) SuryaCapital purchased the remaining assets for $10.4 million.(Id.)D. This Adversary ProceedingThe Amended Complaint seeks to avoid the fraudulenttransfers and obligations made or incurred by the debtors,and recover their value for the benefit of the unsecuredcreditors. The Amended Complaint is divided into twoparts, and contains the following seven claims for relief:-------------------------------------------------------------------------------Count Defendant(s)Description of Claim(s)-------------------------------------------------------------------------------1 Pre-Petition Banks and Avoiding, under 11 U.S.C. § 544, theSPMobligations incurred by the debtors in theamounts of $44,290,000 to ABN; $12,075,000to HSBC, $9,660,000 to IDB; $5,454,000 toADB; $11,592,000 to BL; $10,475,000 to BOA;$35,838,000 to JPMC; and $32,000,000 to SPM.( 54-60.)-------------------------------------------------------------------------------2 Pre-Petition Banks and Avoiding, under 11 U.S.C. § 548, theSPMobligations incurred by FLI in the amountsof $44,290,000 to ABN; $12,075,000 to HSBC,$9,660,000 to IDB; $5,454,000 to ADB;$11,592,000 to BL; $10,475,000 to BOA;$35,838,000 to JPMC; and $32,000,000 to SPM.( 61-65.)-------------------------------------------------------------------------------3 Pre-Petition Banks and Avoiding, under 11 U.S.C. § 548, theSPMobligations incurred by MFS in the amountsof $16,790,000 to ABN; $2,075,000 to HSBC,$9,660,000 to IDB; $1,521,628 to ADB;© 2009 Thomson Reuters. No Claim to Orig. US Gov. Works.
394 B.R. 721 Page 9394 B.R. 721, 50 Bankr.Ct.Dec. 192(Cite as: 394 B.R. 721)$4,592,000 to BL; $5,075,000 to BOA;$22,338,000 to JPMC; and $32,000,000 to SPM.( 66-70.)-------------------------------------------------------------------------------4 Pre-Petition Banks and Avoiding the liens securing the fraudulentSPMobligations alleged in Counts I through III,and recovering the value of the collateralreceived by the defendants from the debtorsunder 11 U.S.C. § 550. ( 71-75.)-------------------------------------------------------------------------------5 ABN, IDB, HSBC and Avoiding, under 11 U.S.C. § 544, the transfersSovereign Bankin the amounts of $14,025,784 to HSBC,$8,364,265 to ABN, $5,946,592 to IDB and$9,882,351 to Sovereign Bank. ( 76-83.)-------------------------------------------------------------------------------6 ABN, IDB, HSBC and Avoiding, under 11 U.S.C. § 548, the transfersSovereign Bankin the amounts of $14,025,784 to HSBC,$8,364,265 to ABN, $5,946,592 to IDB and$9,882,351 to Sovereign Bank. ( 84-92.)-------------------------------------------------------------------------------7 ABN, IDB, HSBC and Recovering, under 11 U.S.C. § 550(a), theSovereign Bankvalue of the payments made by the FortgangAffiliates to defendants ABN, IDB, HSBC andSovereign Bank, in amounts to be determinedat trial. ( 93-98.)-------------------------------------------------------------------------------*730 E. The Motions to DismissEach defendant moved separately to dismiss the Complaint.[FN7] The plaintiff concedes that the first fourclaims for relief depend upon a "collapsing" theory underwhich the Pre-Petition Banks and SPM should be heldliable for the reconveyance of the loan proceeds or gold tothe Fortgang Affiliates. (See Memorandum of Law in Oppositionto Defendants Motions to Dismiss the Complaintin its Entirety and with Prejudice, dated Feb. 4, 2008("Opposition Memo "), at 39-40)(ECF Doc. # 47.) Thedefendants (other than Sovereign Bank) argue that theplaintiffs have failed to plead the necessary elements tocollapse the transactions. The defendants implicated in thelast three claims point to several pleading deficiencies,and also contend that the plaintiff cannot avoid and recoverthe subsequent transferors unless it avoids the initialtransfer to the Fortgang Affiliates.FN7. See note 1 supra.DISCUSSIONOn a motion to dismiss a complaint under Fed.R.Civ.P.12(b)(6), a court must "accept all factual allegations in thecomplaint as true," Tellabs, Inc. v. Makor Issues &Rights, Ltd., --- U.S. ----, 127 S.Ct. 2499, 2509, 168L.Ed.2d 179 (2007); accord Leatherman v. TarrantCounty Narcotics Intelligence & Coordination Unit, 507U.S. 163, 164, 113 S.Ct. 1160, 122 L.Ed.2d 517 (1993),even if the allegations are doubtful in fact. Bell Atl. Corp.v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 1965, 167L.Ed.2d 929 (2007). The factual allegations must neverthelessbe plausible, In re Elevator Antitrust Litig., 502F.3d 47, 50 (2d Cir.2007); Iqbal v. Hasty, 490 F.3d 143,157-58 (2d Cir.2007), cert. granted sub nom. Ashcroft v.Iqbal, --- U.S. ----, 128 S.Ct. 2931, 171 L.Ed.2d 863(2008), and "raise a right to relief above the speculativelevel." Bell Atl. Corp., 127 S.Ct. at 1965; accord ATSICommcns., Inc. v. Shaar Fund, Ltd., 493 F.3d 87, 98 (2dCir.2007). "[L]abels and conclusions, and a formulaicrecitation of the elements of a cause of action will notdo." Bell Atl. Corp., 127 S.Ct. at 1965; accord PaycomBilling Servs. v. Mastercard Intl., Inc., 467 F.3d 283, 289(2d Cir.2006)("we do not 'permit conclusory statements tosubstitute for minimally sufficient factual allegations.'")(quoting Furlong, M.D. v. Long Island Coll. Hosp., 710F.2d 922, 927 (2d Cir.1983)); Amron v. Morgan StanleyInv. Advisors Inc., 464 F.3d 338, 344 (2d Cir.2006)("baldassertions and conclusions of law will not suffice" to de-© 2009 Thomson Reuters. No Claim to Orig. US Gov. Works.
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Nassau Academy of LawCLE Live Class
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McKinney's Debtor and Creditor Law
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BAKER & HOSTETLER LLP45 Rockefeller
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usiness of defendant Bernard L. Mad
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BACKGROUND, THE TRUSTEE, AND STANDI
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Madoff who received fraudulent tran
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FRAUDULENT TRANFERENCESRonald M. Te
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Nursing home case_ Transfer of pers
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Sections 548 and 544 work in concer
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U.S. Supreme CourtBFP v. Resolution
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example, from net 15 to COD; or cha
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Bankruptcy Code Section§ 548. Frau
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Ron Terenzi is a founding partner a
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