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Richard Fogel v. Specialty Industries II, LLC et al. (Michael J. Palmieri)

21 B 09761, 22 A 00177
Richard Fogel, chapter 7 trustee (the “Trustee”) for the estate of Michael J. Palmieri (the “Debtor”), filed an adversary complaint against Specialty Industries II, LLC, Karen Witt, and Nicholas R. Recchia, in his capacity as trustee of The Byron Street Land Trust (together, the “Defendants”), seeking to avoid, as fraudulent transfers, the transactions made on and after July 21, 2014 which caused the real property located at 6021 Byron Street in Rosemont, Illinois (the “Byron Property”) to be removed from the Debtor’s bankruptcy estate pursuant to §§ 5(a) and 6 of the Illinois Uniform Fraudulent Transfer Act (the “UFTA”) and § 544 of the Bankruptcy Code. The Defendants moved to dismiss the complaint under Federal Rule of Civil Procedure 12(b)(6). According to the Defendants, a claim under the applicable provisions of the UFTA must be brought within four years after the transfer was made. Because the challenged transfers occurred outside that time period, the Defendants said, the complaint was time barred. The Trustee argued that § 544 allows him to avail himself of the ten-year statute of limitations available to the IRS under the Internal Revenue Code, because the IRS had filed a claim in the Debtor’s bankruptcy case. Agreeing with the majority of courts that have addressed the issue, the Court found that the unambiguous language of the statute allows the Trustee to step into the shoes of the IRS and use the ten-year limitations window available to the IRS in order to avoid the challenged transfers. The Court also found that the Trustee had sufficiently alleged facts to establish a reverse veil-piercing claim at this stage of the litigation. Accordingly, the Court denied the Defendants’ motion to dismiss.

Monday, May 15, 2023