Larson v. Foster (In re Foster), 516 B.R. 537

Larson bought Debtor's insurance business for $425,000 with a covenant not to compete; payments were to be made over about two years.
Larson paid $245,000; Debtor’s liability arises from a separate loan and a Partial Assignment to Stephens entered January 2012.
Stephens filed suit against Larson to collect the balance; Larson asserted fraud, misrepresentation, and breach of contract defenses in a third-party complaint.
Debtor filed bankruptcy; Schedule F listed Stephens’s debt, but not Larson’s claim; Trustee filed a Report of No Distribution which was later withdrawn.
Larson filed an adversary proceeding in December 2012 seeking to avoid the Partial Assignment as a fraudulent transfer; Debtor moved to dismiss for lack of standing and Larson sought retroactive derivative standing.
Bankruptcy Court denied derivative standing and dismissed the complaint; District Court affirmed on appeal, leading to Larson’s challenge to standing and related issues.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Is derivative standing proper here?	Larson argues trustee refused and the claim is colorable.	Trustee did not unjustifiably refuse; action not worthwhile for estate.	Derivative standing denied; not in best interests of estate.
Did the Trustee consent to Larson’s derivative standing?	Consent implied by Trustee’s actions and monitoring.	No formal consent and no formal opposition; consent not shown.	No consent; derivative standing not appropriate.
Is equitable estoppel applicable to override lack of standing?	Estoppel should prevent denial of standing due to timing.	Standing is jurisdictional; estoppel cannot cure lack of standing.	Equitable estoppel does not apply; standing denial valid.

Hartford Underwriters Ins. Co. v. Union Planters Bank, N.A., 530 U.S. 1 (U.S. 2000) (trustee exclusive authority to bring avoidance actions; derivative standing exception cited)
In re Racing Servs., Inc., 540 F.3d 892 (8th Cir. 2008) (four-factor test for derivative standing; trustee refusal; colorability; consent; unjustified refusal)
Ashcroft v. Iqbal, 556 U.S. 662 (S. Ct. 2009) (pleading standards; mere recitals insufficient)
In re Commodore Int’l Ltd., 262 F.3d 96 (2d Cir. 2001) (consent or no formal opposition; best interests of the estate)
In re Racing Servs., Inc. (Second Circuit referenced), 540 F.3d 892 (8th Cir. 2008) (consent/oppose framework and estate-benefit considerations)
In re McGuirk, 414 B.R. 878 (Bankr.N.D.Ga. 2009) (derivative standing inappropriate when benefits to estate are unclear)