493 B.R. 460
Bankr. M.D. Penn.2013Background
- Debtor was an LLC providing industrial appraisal/auction services; Loeser was managing director and sole member, married to Britton; neither filed a proof of claim in bankruptcy.
- Trustee filed an adversary on Jan. 13, 2013 seeking avoidance of pre-petition transfers totaling about $96,524 to Defendants.
- Alleged transfers included eight owner draws by Loeser totaling $57,024.04 and ten checks to Britton totaling $39,500; some payments alleged to be for Defendants’ creditors.
- Amended Complaint asserted insiders status and transfers were made with actual intent to hinder, delay, or defraud creditors, under §548(a)(1)(A) and PUFTA (12 Pa.C.S. §§5104, 5105).
- Counts II and IV asserted constructive fraud under §548(a)(1)(B) and PUFTA §5105; Count III asserted PUFTA actual fraud under §5104.
- Defendants moved to dismiss under Rule 12(b)(1) and (6) arguing lack of constitutional authority after Stern v. Marshall; Trustee argued jurisdiction under core bankruptcy provisions and public rights exception.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the bankruptcy court may enter final judgment on a fraudulent transfer claim. | Trustee asserts core bankruptcy power to decide under §544/§548. | Defendants contend Stern prevents final Article I determination absent consent. | The court cannot enter a final order; it cannot adjudicate core fraudulent transfer claims without consent. |
| Whether the court may issue proposed findings of fact and conclusions of law in this matter. | Court has authority to issue findings in core matters. | Not explicitly authorized for core matters without final judgment. | Court may issue proposed findings and conclusions to be reviewed de novo by district court. |
| Whether Counts I and II state plausible claims under §548(a)(1)(A) and (B). | Allegations show actual and constructive fraud sufficient to avoid transfers. | Dismissal arguments premised on insolvency timing and other gaps. | Counts I and II survive; plausible claims sufficient to proceed. |
| Whether Counts III and IV state plausible PUFTA claims. | PUFTA provisions mirror bankruptcy constructs and badges of fraud support actual/constructive fraud. | Insolvency proofs and insider transfers require stronger showing. | Counts III and IV survive; plausible PUFTA claims. |
| Whether the Trustee must prove insolvency for PUFTA §5105 constructive fraud. | PUFTA §5105 requires value received and insolvency or resulting insolvency in some form. | Plaintiff has plausibly alleged insolvency-related elements; Count IV viable. |
Key Cases Cited
- Stern v. Marshall, 131 S. Ct. 2594 (U.S. 2011) (constitutional limits on final judgments in core matters; consent required for Article I final orders)
- Granfinanciera, S.A. v. Nordberg, 492 U.S. 33 (U.S. 1989) (seventh amendment; public rights exception and nature of fraudulent transfer actions)
- In re Bellingham Ins. Agency, Inc., 702 F.3d 553 (9th Cir. 2012) (bankruptcy court authority to decide core matters vs. non-core; findings of fact/conclusions of law)
- In re Valley Bldg. & Const. Corp., 435 B.R. 276 (Bankr.E.D. Pa. 2010) (PUFTA vs. §548; badges of fraud analysis for actual fraud)
- In re Parco Merged Media Corp., 489 B.R. 323 (D. Me. 2013) (implied authority of bankruptcy court to issue findings in core proceedings)
- In re Lyondell Chemical Co., 467 B.R. 712 (S.D.N.Y. 2012) (discussion of Stern/Granfinanciera lines and public rights)