Cohen v. Sikirica
2013 U.S. Dist. LEXIS 27814
| W.D. Pa. | 2013Background
- Appellants Cohen challenged a $488,615.79 liability finding by the Bankruptcy Court regarding transfers to an Entireties Account.
- A 2005 Allegheny County verdict and a 2006 final amended judgment against Cohen and others for about $3.274 million preceded the bankruptcy.
- Trustee filed an adversary proceeding on Oct 11, 2007; amended complaint on Feb 14, 2010 alleging fraudulent transfers from Cohen’s wages.
- Trial occurred Oct 19, 2011; Bankruptcy Court entered mixed judgment on Oct 31, 2012, sustaining actual fraudulent transfer against Appellants but constructive fraudulent transfer against them.
- Court granted relief: affirm in part, vacate in part, and remand for further proceedings consistent with the opinion; issues centered on burden of proof, amount of wages attributed, unexplained expenditures, reasonable equivalent value, and UFTA transfers.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Burden of proof standard | Cohen argued Trustee bears all elements; burden should be fully on Trustee. | Appellants contend burden improperly shifted to them to produce spending evidence. | Correct burden allocation; Court upheld that defendants must produce some evidence of spending. |
| Wages attributable to Cohen | Trustee must prove amount of Cohen’s wages deposited. | Cohen testified all wages deposited into Entireties Account. | Court affirmed finding that over $700,000 of Cohen’s wages were deposited into the account. |
| Unexplained expenditures evidence | Trustee may recover for unexplained expenditures from the Entireties Account. | Some unexplained deposits may be from non-Cohen sources; burden on Trustee to prove linkage. | Trustee proved portion attributable to Cohen; remanded to adjust recoverable amount accordingly. |
| Reasonable equivalent value | Ms. Cohen’s deposits into the Entireties Account provided value to Cohen. | Such deposits do not constitute reasonably equivalent value; emphasis on value received. | Ms. Cohen’s deposits not equal value; transfers were without reasonable equivalent value. |
| Transfer of funds under UFTA | Direct deposits into the Entireties Account constitute transfers under UFTA. | Deposits should not be treated as transfers. | Direct deposits into an Entireties Account constitute transfers under UFTA. |
Key Cases Cited
- In re Titus, 467 B.R. 592 (Bankr.W.D. Pa. 2012) (burden-shifting and allocation in mecharisms of unexplained expenditures; Social Security deposits referenced)
- In re Arbogast (I), 466 B.R. 287 (Bankr.W.D. Pa. 2012) (burden of production regarding use of funds in Entireties accounts)
- In re Arbogast (II), 479 B.R. 661 (Bankr.W.D. Pa. 2012) (affirmation of Arbogast I; burden and standard of proof on defendants)
- In re Meinen, 232 B.R. 827 (Bankr.W.D. Pa. 1999) (Meinen rule predicting Pennsylvania Supreme Court stance on MPAA-era deposits)
- Stinner v. Stinner, 446 A.2d 651 (Pa. Super. Ct. 1982) (discussion on reasonable equivalent value and transfers in joint accounts)
- In re Image Masters, Inc., 421 B.R. 164 (Bankr.E.D. Pa. 2009) (definition/interpretation of reasonable equivalent value in bankruptcy)
- VFB LLC v. Campbell Soup Co., 482 F.3d 624 (3d Cir. 2007) (definition of reasonably equivalent value; focus on net effect on creditors)
- Pension Transfer Corp. v. Beneficiaries Under the Third Amendment to Fruehauf Trailer Corp. Ret. Plan (In re Fruehauf Trailer Corp.), 444 F.3d 203 (3d Cir. 2006) (definition of reasonably equivalent value)