John A. Larson, III v. Cindy Foster, 516 B.R. 537

Cindy M. Foster (Debtor) sold her Allstate agent business to John A. Larson, III under a purchase agreement (April 26, 2010) for $425,000 payable in installments; Larson paid only $245,000 and later alleged breach of the non-compete.
Bruce L. Stephens sued Foster on a promissory note and obtained a $174,547.42 judgment; Foster executed a Partial Assignment (Jan. 24, 2012) assigning certain remedies against Larson to Stephens.
Stephens sued Larson to collect under the Partial Assignment; Larson counterclaimed in state court for fraud, misrepresentation, and breach of contract.
Foster filed Chapter 7 bankruptcy (Sept. 6, 2012); she did not list the Larson receivable or the Partial Assignment on schedules. Trustee Charles Riske initially reported no distribution, later withdrew that report.
Larson filed an adversary complaint (Dec. 10, 2012) seeking to avoid the Partial Assignment as a fraudulent transfer under 11 U.S.C. § 548 and sought derivative standing to pursue the avoidance claim on behalf of the estate.
The Bankruptcy Court denied Larson retroactive derivative standing, found the Trustee was justified in not pursuing the claim, and dismissed Larson’s complaint; Larson appealed.

Issue	Plaintiff's Argument (Larson)	Defendant's Argument (Debtor/Trustee)	Held
Whether Trustee unjustifiably refused to pursue avoidance	Larson: informed Trustee, Trustee delayed; discharge threatened claim, so Larson filed to preserve it	Trustee: did not refuse, requested more information and cost-benefit justified non‑pursuit	Court: Trustee was justified; no unjustified refusal, denied derivative standing
Whether Trustee consented or failed to formally oppose Larson’s suit (permitting derivative suit)	Larson: Trustee appeared/monitored and thus effectively did not oppose	Trustee/Debtor: no affirmative consent; formal objection to retroactive standing shows opposition	Court: No consent; absence of formal opposition standard not met; derivative standing denied
Whether equitable estoppel bars raising lack of standing late in litigation	Larson: standing objections raised late; estoppel should prevent challenge	Debtor/Trustee: standing was raised earlier in answer; standing is jurisdictional and may be challenged anytime	Court: Equitable estoppel inapplicable; standing is jurisdictional; dismissal required

Hartford Underwriters Ins. Co. v. Union Planters Bank, N.A., 530 U.S. 1 (U.S. 2000) (trustee generally has exclusive authority to bring avoidance actions)
Ashcroft v. Iqbal, 556 U.S. 662 (U.S. 2009) (complaint must state a plausible claim)
In re Racing Servs., Inc., 540 F.3d 892 (8th Cir. 2008) (four‑factor test and standards for granting derivative standing)
In re Commodore Int’l Ltd., 262 F.3d 96 (2d Cir. 2001) (creditor may proceed derivatively when trustee consents; suit must be necessary and beneficial)
Official Comm. of Unsecured Creditors of Cybergenics Corp. v. Chinery, 330 F.3d 548 (3d Cir. 2003) (discussing limits on creditor derivative suits)
First Nat’l Bank v. Pontow, 111 F.3d 604 (8th Cir. 1997) (standard of review for bankruptcy findings)
Miller v. Farmers Home Admin. (In re Miller), 16 F.3d 240 (8th Cir. 1994) (standard of review authority)
Warth v. Seldin, 422 U.S. 490 (U.S. 1975) (standing implicates subject‑matter jurisdiction)