Judge Timothy A. Barnes - Opinions / Outlines

Judge Timothy A. Barnes

09 B 17582, 12 A 00799
Upon the Defendants’ motion to dismiss the Chapter 7 trustee’s adversary complaints for failure to state a claim upon which relief may be granted and the statute of limitations contained in 11 U.S.C. § 546(a)(1), held: (i) the commencement of the adversary proceedings on May 11, 2012 was timely as Congress clearly intended to afford a bankruptcy trustee no less than a year to bring avoidance actions, while at the same time limiting the time period to no more than three years; and (ii) an additional year afforded to the trustee runs from the date an interim trustee begins service under section 701, if that appointment occurs within two years of the order for relief and if that interim trustee becomes the permanent trustee by operation of section 702(d).  Motion to dismiss denied.

08 B 10095, 10 A 00998
Upon the Defendant’s motion for summary judgment in the adversary proceeding brought by the Chapter 11 Liquidation Trustee to avoid and recover fraudulent and preferential transfers and disallow claims, held: (i) without evidence supporting an implied contract theory, the Liquidation Trustee could not establish that the transfer was on account of an antecedent debt, an element of the preference avoidance claim; but (ii) for many of the same reasons that the preference avoidance claim fails, genuine factual disputes exists as to whether an indirect benefit defense exists as to the fraudulent transfer avoidance claim.  Motion for summary judgment granted in part and denied in part.

08 B 10095, 10 A 00824
Upon the Defendant’s motion to dismiss the Chapter 11 Liquidation Trustee’s adversary proceeding to avoid alleged fraudulent or preferential transfers, citing Stern-challenges to constitutional grounds and failure to state cause of action on which relief could be granted, held: (i) bankruptcy court, even as non-Article-III court, had constitutional authority to enter final decision on preference avoidance claims; (ii) court also had authority to finally decide fraudulent transfer claims, regardless of whether claims were asserted under bankruptcy fraudulent transfer statute or pursuant to state law in exercise of powers accorded under strong-arm statute; and (iii) allegations in the Liquidation Trustee’s complaint stated plausible claim for relief.  Motion to dismiss denied.

In re Victoria C. Quade
October 10, 2012

12 B 26779
Upon the Judgment Creditor’s motion for relief from automatic stay and the Debtor’s motion to avoid the Judgment Creditor’s  liens as impairing exemption, held: (i) the Debtor’s ownership rights in funds that were in possession of third party were estate property, despite the Judgment Creditor’s prepetition service of state-court turnover order on third party; (ii) any postpetition setoff against judgment without leave of court by the Judgment Creditor of the Debtor’s royalties was void; (iii) conditional grant of motion for stay relief was warranted; (iv) neither res judicata nor Rooker-Feldman doctrine applied to bar the Debtor from claiming exemptions and seeking to avoid judicial liens impairing those exemptions; and (v) any royalties collected by the Judgment Creditor postpetition were estate property in which the Debtor could claim exemption. Motion for relief from stay granted in part and denied in part.  Motion to avoid liens granted.

09 B 39937, 11 A 02196
Upon the Defendants’ motion to dismiss the Chapter 11 Plan Administrator’s adversary proceeding, seeking to avoid and recover as fraudulent transfers lease payments transferred from the Debtor to the Defendant that purportedly were part of fraudulent scheme, held: (i) the Defendants’ interpretation of the interplay between sections 11 U.S.C. §§ 544 and 546 with respect to the statute of limitations to avoid fraudulent transfers was not well founded as the overwhelming majority of opinions in this circuit interpreting such interplay go against the Defendants’ assertions; (ii) that the Debtor may have received “reasonably equivalent value” was not fatal to cause of action to avoid lease payments as actually, and not just constructively, fraudulent transfers; (iii) allegations in complaint did not establish “good faith and for value” defense on face of complaint for purposes of 11 U.S.C. § 548(c); but (iv) the Plan Administrator failed to adequately allege Ponzi-type scheme and to explain how challenged payments were used to further alleged scheme and harm the Debtor’s other creditors.  Motion to dismiss granted.

09 B 39937, 11 A 02239
Upon the Defendant’s motion to dismiss the Chapter 11 Plan Administrator’s adversary proceeding, seeking to avoid and recover as fraudulent transfers lease payments transferred from Debtor to Defendant that purportedly were part of fraudulent scheme, held: (i) the claims in the Amended Complaint clearly provided the elements of a Ponzi-type scheme and thus provided a theory out of which a constructive trust may arise under Illinois law; and (ii) while the in pari delicto doctrine may be available in the context of a claim for constructive trust, there are no allegations in the count in question that the Plan Administrator also participated in the alleged fraud, only that such a fraud existed.  Motion to dismiss denied.

09 B 39937, 11 A 02218
Upon the Defendant’s motion to dismiss the Chapter 11 Plan Administrator’s adversary proceeding, seeking to avoid and recover as fraudulent transfers lease payments transferred from the Debtor to the Defendant that purportedly were part of fraudulent scheme, held: (i) allegations in complaint did not establish “good faith and for value” defense on face of complaint for purposes of 11 U.S.C. § 548(c); (ii) the Plan Administrator did not have to identify a specific unsecured “triggering creditor” that was in existence at time of challenged transfers in order to state cause of action to avoid transfers as actually fraudulent to creditors under Illinois law, in exercise of 11 U.S.C. § 544(b) strong-arm powers due to scores of unsecured claimants; but (iii) the Plan Administrator failed to adequately allege Ponzi-type scheme and to explain how challenged payments were used to further alleged scheme and harm the Debtor’s other creditors.  Motion to dismiss granted.

09 B 39937, 11 A 02231
Upon the Defendant’s motion to dismiss the Chapter 11 Plan Administrator’s adversary proceeding, seeking to avoid and recover as fraudulent transfers lease payments transferred from the Debtor to the Defendant that purportedly were part of fraudulent scheme, held: (i) allegations in complaint did not establish “good faith and for value” defense on face of complaint for purposes of 11 U.S.C. § 548(c); (ii) the Plan Administrator did not have to identify a specific unsecured “triggering creditor” that was in existence at time of challenged transfers in order to state cause of action to avoid transfers as actually fraudulent to creditors under Illinois law, in exercise of 11 U.S.C. § 544(b) strong-arm powers due to scores of unsecured claimants; but (iii) the Plan Administrator failed to adequately allege Ponzi-type scheme and to explain how challenged payments were used to further alleged scheme and harm the Debtor’s other creditors.  Motion to dismiss granted.

09 B 39937, 11 A 02582
Upon the Defendant’s motion to dismiss the Chapter 11 Plan Administrator’s adversary proceeding, seeking to avoid and recover as fraudulent transfers lease payments transferred from the Debtor to the Defendant that purportedly were part of fraudulent scheme, held: (i) the Plan Administrator did not have to identify a specific unsecured “triggering creditor” that was in existence at time of challenged transfers in order to state cause of action to avoid transfers as actually fraudulent to creditors under Illinois law, in exercise of 11 U.S.C. § 544(b) strong-arm powers due to scores of unsecured claimants; but (ii) the Plan Administrator failed to adequately allege Ponzi-type scheme and to explain how challenged payments were used to further alleged scheme and harm the Debtor’s other creditors.  Motion to dismiss granted.

09 B 39937, 11 A 02227
Upon the Defendant’s motion to dismiss the Chapter 11 Plan Administrator’s adversary proceeding, seeking to avoid and recover as fraudulent transfers lease payments transferred from the Debtor to the Defendant that purportedly were part of fraudulent scheme, held: (i) that the Debtor may have received “reasonably equivalent value” was not fatal to cause of action to avoid lease payments as actually, and not just constructively, fraudulent transfers; but (ii) the Plan Administrator failed to adequately allege Ponzi-type scheme and to explain how challenged payments were used to further alleged scheme and harm the Debtor’s other creditors.  Motion to dismiss granted.

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