454 B.R. 38
Bankr. S.D.N.Y.2011Background
- Debtors CarCo and affiliated Chrysler entities filed Chapter 11; Liquidation Trust prosecutes adversary claims against Daimler entities for constructive fraudulent transfers.
- Second Amended Complaint alleges integrated restructuring and Cerberus sale yielded inadequately valued consideration to CarCo in the overall transaction.
- Court previously dismissed First Amended Complaint and required repleading to include value and insolvency considerations; Second Amended Complaint expands values but still alleges shortfall.
- Court treated restructuring as a single integrated transaction and required attribution of value to all elements of consideration and to solvency analysis.
- Daimler moved to dismiss Nov. 16, 2010; hearing held Mar. 8, 2011; Judge Gonzalez grants motion to dismiss with prejudice.
- Valuation contested across several components: Motors, credit facilities, tax benefits, ancillary agreements, intercompany receivable, and headquarters property.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Trust plausibly alleges reasonably equivalent value or fair consideration | Trust asserts undervalued Motors, credit facilities, tax benefits, and ancillary agreements. | Daimler contends Trust undervalues assets and omits value from multiple elements; insolvency analysis flawed. | Counts dismissed; arguments implausible; overall value not plausibly understated. |
| Value of Motors in the overall transaction | Motors valued at $450 million reflecting postulated immediate termination of S&D; could be replicated cheaply. | Motors' value supported by long-standing relationships, inventory, and intercompany leverage; termination impracticable. | Motors value rejected as implausible; near-term termination not plausible. |
| Value of credit facilities provided to CarCo | Credit facilities had little quantifiable value to CarCo. | Availability of $12 billion in financing provided substantial value, including facilitating VEBA and PBGC outcomes. | Credit facilities accorded value; not eliminated from consideration; overall value not plausibly understated. |
| Valuation of headquarters property and other assets | Headquarters valued at up to $700 million; suggests substantial additional value. | Mortgage financing indicates market value closer to $325 million; higher values not credible. | Headquarters valuation not plausible at claimed levels; offset by other asset values but still dismisses claims. |
Key Cases Cited
- Mellon Bank v. Office Comm. of Unsecured Creditors (In re RM.L., Inc.), 92 F.3d 139 (3d Cir.1996) (value of access to credit can constitute value in fraudulent transfer analysis)
- Mellon Bank v. Metro Communications, 945 F.2d 635 (3d Cir.1991) (reasonably equivalent value standard in fraudulent conveyance cases)
- MFS/Sun Life Trust-High Yield Series v. Van Dusen Airport Servs. Co., 910 F. Supp. 913 (S.D.N.Y.1995) (reasonableness of value; indirect benefits may count as value)
- In re State Street Bank & Trust Co., 403 F.3d 43 (2d Cir.2005) (good faith and fair consideration under NY law; precedent on constructive fraud)