Advanced Telecommunication Network Inc v. Flaster/Greenberg, PC
6:18-cv-01186
M.D. Fla.Sep 17, 2018Background
- ATN paid $1.35 million to Flaster/Greenberg for attorney fees tied to litigation in which Flaster represented former shareholder Daniel Allen against co-shareholder Gary Carpenter (settlement in 1999). The settlement also involved $6.25 million to the Allens.
- ATN later filed Chapter 11; the reorganized debtor (controlled by Damian Freeman) pursues avoidance of the $1.35 million payment as fraudulent under the Bankruptcy Code and New Jersey law (Counts II–VII).
- Flaster moved for summary judgment arguing ATN received "reasonably equivalent value" because ATN’s 1991 Bylaws obligated indemnification of Allen for legal fees, and the Settlement Agreement acknowledged ATN’s indemnification obligation.
- ATN counters that (1) any indemnification was limited or nonexistent if fees were "unreasonable" or "unreasonably incurred," and (2) Flaster previously challenged the Bylaws’ validity (estoppel/inconsistent position argument).
- The bankruptcy court found factual disputes about whether ATN had an indemnification obligation and whether the fees were reasonably incurred; those disputes preclude summary judgment for Flaster and warrant denial of the motion (recommended to the District Court).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the $1.35M payment is an avoidable fraudulent transfer (lack of reasonably equivalent value) | Payment is avoidable because ATN received no reasonably equivalent value if no indemnification obligation existed or fees were unreasonable | Payment provided reasonably equivalent value because it satisfied ATN’s contractual indemnification obligation under the Bylaws and Settlement Agreement | Denied summary judgment: factual disputes about indemnification and reasonableness preclude deciding as a matter of law |
| Whether ATN was contractually obligated under its Bylaws to indemnify Allen for the fees paid | Bylaws did not create an obligation to pay fees that were unreasonable or unrelated to Allen’s corporate role | Bylaws and Settlement Agreement acknowledge and create an enforceable indemnification obligation to cover Allen’s fees | Denied summary judgment: whether fees related to indemnifiable corporate service vs. shareholder activity is a fact question for the finder of fact |
| Whether fees were "reasonably incurred" (thereby qualifying for indemnification/valuing the transfer) | Fees were unreasonable or unconnected to indemnifiable conduct, so ATN received no value | Fees were incurred defending Allen and thus reasonable and indemnifiable | Denied summary judgment: reasonableness is a fact-intensive inquiry requiring trial evidence |
| Whether defendants are estopped or barred from invoking the Bylaws because of prior inconsistent litigation positions | Flaster previously argued the Bylaws were invalid; they should not now rely on them | A law firm’s litigation positions for a client do not bind the firm; deposition testimony supports adoption of the Bylaws | Denied summary judgment: estoppel/inconsistency raises factual disputes unsuitable for summary disposition |
Key Cases Cited
- VFB LLC v. Campbell Soup Co., 482 F.3d 624 (3d Cir.) (reasonably equivalent value described as getting roughly the value given)
- In re Teltronics, Inc., 540 B.R. 481 (Bankr. M.D. Fla.) (valuation factors and fact-specific nature of reasonably equivalent value analysis)
- In re Universal Health Care Grp., Inc., 560 B.R. 594 (Bankr. M.D. Fla.) (factors to consider in reasonably equivalent value inquiries)
- Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (Sup. Ct.) (summary judgment standard)
- In re Advanced Telecomm. Network, Inc., 490 F.3d 1325 (11th Cir.) (background appellate history of the underlying disputes)