Fresh Acquisitions, LLC
21-30721
Bankr. N.D. Tex.Jun 18, 2025Background
- The Fresh Acquisitions, LLC bankruptcy (Chapter 11) resulted in a liquidation trust administered by David Gonzales as Liquidating Trustee (LT).
- The LT initiated multiple adversary proceedings to pursue claims, including fraudulent transfers and mismanagement against 22 defendants.
- Substantial legal fees accrued in these actions, soon surpassing projected budgets with little creditor recovery to date.
- During litigation, the LT entered a $2.325 million litigation funding agreement (LFA) with Litchfield Ventures, substantially benefiting the funder if litigation succeeds.
- The LFA was not disclosed to the court or creditors prior to execution and was only mentioned in a buried sentence in an unrelated filing, well after its execution.
- The court discovered the LFA at a status conference, raising transparency, authority, and oversight concerns around its terms and the LT’s authority.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Authority to Enter LFA Without Court/Creditor Approval | LT claims post-confirmation control | Creditors/defendants deny LT’s unilateral | LT must show cause for authority; court uneasy |
| Requirement to Disclose Litigation Funding | LT asserts no obligation to disclose | Creditors/court argue bankruptcy requires it | Court orders full disclosure on main docket |
| Reasonableness/Market Terms of LFA | LT claims terms are reasonable/market | Creditors/court question excessive cost/terms | To be determined—LT must justify at hearing |
| Impact on Creditor Recoveries and Settlement | LT argues LFA helps sustain litigation | Creditors assert LFA hinders settlements | Court skeptical—considers LFA potentially void |
Key Cases Cited
- In re Bryson, 131 F.3d 601 (7th Cir. 1997) (explained judicial responsibility to scrutinize litigation decisions and sanction improper expenses in bankruptcy)
- In re Cohoes Indus. Terminal, Inc., 931 F.2d 222 (2d Cir. 1991) (trustee’s litigation judgment subject to court oversight; sanctions for suits not benefiting the estate)
- Maxwell v. KPMG, LLP, 520 F.3d 713 (7th Cir. 2008) (judges must monitor litigation decisions by trustees; not all litigation is justified if not likely to benefit estate)