Bash v. Textron Financial Corp.
483 B.R. 630
N.D. Ohio2012Background
- Adversary proceeding stemming from the Fair Finance bankruptcy; Textron and Fortress moved to dismiss and were opposed by the Trustee; the court partially rejects Textron’s and Fortress’s R&Rs and enters a mixed ruling on Fortress claims; Textron is dismissed from the case; the Trustee’s claims include fraudulent transfer, constructive fraudulent transfer, post-petition transfers, aiding/abetting and state-law claims; disputes center on whether refinancings and related transactions constituted transfers or alter-ego/constructive schemes; the court analyzes whether the debtor and related entities were alter egos and whether the Ponzi scheme presumption applies to intent in transfers; the Ohio law issues include whether aiding/abetting claims are viable and whether in pari delicto bars certain claims; the court addresses treble-damages under ORC 2307.61 and finds lack of proper pleading.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Textron refinance created a transfer for purposes of § 548/544 | Trustee contends the Refinance was not a true novation and the lien was not a valid secured base | Textron argues repayments under a perfected security interest are not transfers | Textron entitled to dismissal; no transfer occurred under the refinance |
| Whether the aiding/abetting and related tort claims under Ohio law are cognizable | Trustee relies on Aetna/Restatement theories to plead aiding/abetting | Ohio does not recognize torts of aiding/abetting and absence of proper pleading | Aiding/abetting claims barred by DeVries Dairy and unsupported under Ohio law |
| Whether the in pari delicto doctrine bars the conspiracy claim | Trustee seeks to avoid the debtor’s fraud; argues exceptions may apply | Textron argues debtor’s and insiders’ conduct bars claims under in pari delicto | Conspiracy claim dismissed under in pari delicto and sole actor/adverse interest analysis |
| Whether Fortress’s avoidance claims survive and whether alter ego/recharacterization supports them | Trustee alleges alter ego and collateral disregard; Fortress knew of fraud | Fortress challenges sufficiency and seeks dismissal on several grounds | Avoidance claims survive to the extent pled; certain state-law claims dismissed; claims remain pending (counts 2,4,5,6,7,8,18,20,21) with others dismissed or limited |
| Whether treble damages under ORC 2307.61 are available | Treble damages sought for alleged theft/fraud | Statutory elements not satisfied; no willful damage/theft pleaded | Treble damages not entitleable; claim dismissed |
Key Cases Cited
- Terlecky v. Hurd (In re Dublin Securities), 133 F.3d 377 (6th Cir.1997) (in pari delicto may bar claims at pleading stage; sole actor/adverse interest doctrines apply)
- Melamed v. Lake Cnty. Nat'l Bank, 727 F.2d 1399 (6th Cir.1984) (payments under a valid security interest do not diminish debtor assets for fraudulent transfer)
- DeVries Dairy, L.L.C. v. White Eagle Coop. Assn., Inc., 132 Ohio St.3d 516, 974 N.E.2d 1194 (Ohio 2012) (Ohio does not recognize tortious acts in concert under Restatement § 876 for this context)