466 B.R. 1
Bankr. C.D. Cal.2012Background
- CDDH offered Units at $40,000 each; Friedman purchased $450,000 worth, acquiring 1.2797% LP interest via joinder.
- Bidner resigned as president; Friedman withdrew under a Withdrawal Agreement and received a $450,000 refund on Jan 18, 2005.
- CCD H later converted to a LLC (Aug 2008); Diamond, as Chapter 7 Trustee, filed adversary motion to avoid/recoup the Transfer.
- Diamond asserts the Transfer as a fraudulent transfer under CUFTA/DUFTA, turnover, unjust enrichment, and unlawful distribution.
- Friedman seeks summary judgment arguing the claims are time-barred under Delaware DRULPA § 17-607(c) and related law.
- Court applies Delaware law (choice-of-law) due to DRULPA framework and RESTATEMENT-based federal choice rules; Delaware law governs the nonbankruptcy claims as to distributions.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether choice-of-law requires Delaware law for nonbankruptcy claims | Diamond argues California law governs due to tort-sounding claims | Friedman argues LP Agreement selects Delaware law | Delaware law governs nonbankruptcy claims under DRULPA and Restatement analysis |
| Whether §17-607(c) is a statute of repose that bars plaintiff's claims | Diamond contends tolling could apply to DUFTA claims | Friedman asserts §17-607(c) bars claims after 3 years | §17-607(c) is a statute of repose; its 3-year bar applies and forecloses claims pre-dating it |
| Whether the Transfer was a 'distribution' under §17-607 | Diamond disputes characterization as a distribution | Friedman maintains it is a legitimate distribution under DRULPA | The $450,000 refund to Friedman was a 'distribution' under §17-607 |
| Whether DUFTA/§544(b) and §548 claims are timely despite the 3-year repose | Diamond argues tolling or longer limitations apply | Friedman contends three-year repose defeats timeliness | §17-607(c) trumps DUFTA; §548 claims are time-barred; summary judgment for Friedman on these claims |
Key Cases Cited
- Stern v. Marshall, 131 S. Ct. 2594 (U.S. 2011) (fraudulent transfer actions are akin to contract-based actions in bankruptcy)
- United States v. Neidorf, 522 F.2d 916 (9th Cir. 1975) (fraudulent transfer actions not torts for limitations purposes)
- Freeman v. Williamson, 383 Ill. App. 3d 933 (Ill. App. 2008) (§17-607(c) is a statute of repose; tolling not allowed)
- In re Lindsay, 59 F.3d 942 (9th Cir. 1995) (federal choice-of-law rules apply in bankruptcy)
- In re Gibson, 234 B.R. 776 (Bankr.N.D. Cal. 1999) (Restatement-based approach to choice-of-law in bankruptcy)