In Re Longview Aluminum, L.L.C.
657 F.3d 507
7th Cir.2011Background
- Longview Aluminum, L.L.C. filed Chapter 11; trustee sued Dominic Forte to recover transfers made within one year prior to filing.
- Forte, a Longview member, had long sought access to Longview’s records, which was restricted by a majority written consent in August 2002.
- On November 7, 2002, Forte and others settled a related suit: Forte would leave the Board in exchange for $400,000 plus fees; Longview paid $200,000 that day and later $15,000 for fees.
- Longview filed for bankruptcy on March 4, 2003; trustee sought to avoid the $200,000 transfer as a preferential insider transfer within one year of filing.
- The bankruptcy court held Forte an insider under 11 U.S.C. § 101(31) and voided the $200,000 transfer; the district court affirmed; Forte appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Is Forte an insider under §101(31)(B) for transfers within a year? | Forte is not an insider; his status was diminished after suspension of access. | Forte remains an insider due to his member/board rights and ongoing control despite limits on access. | Yes; Forte is an insider; district court affirmed. |
| May insider status be expanded beyond enumerated categories to LLC members? | Insider status must fit enumerated categories; LLC members are not per se insiders. | Insider status can extend by similarity to enumerated roles or through close relation in LLCs. | Insider status can be expanded to include LLC members; similarity approach applied. |
| Did Forte retain meaningful control after August 2002, supporting insider status? | Temporary suspension removed meaningful control before the transfer. | No formal removal from member status; Forte retained voting rights and Board position. | Forte retained insider status; control was not removed. |
Key Cases Cited
- In re Krehl, 86 F.3d 737, 86 F.3d 737 (7th Cir. 1996) (insider expansion to analogous positions; non-exhaustive list)
- In re Barman, 237 B.R. 342, 237 B.R. 342 (Bankr. E.D. Mich. 1999) (LLC members can be insiders; analogous control)
- In re Pearson, No. 1:10-bk-00946MDF, 2010 WL 3956762, 2010 WL 3956762 (Bankr. M.D. Pa. 2010) (members as insiders; ownership and management rights)
- In re Die Fliedermaus LLC, 323 B.R. 101, 323 B.R. 101 (Bankr. S.D.N.Y. 2005) (LLC members presumed in control; insider analysis)