Onkyo Europe Electronics GMBH v. Global Technovations Inc. (In Re Global Technovations Inc.)
694 F.3d 705
| 6th Cir. | 2012Background
- GTI purchased OAI from Onkyo for $13 million in cash plus $12 million in three-year promissory notes, via amended Share Purchase Agreement dated August 23, 2000.
- GTI sought to avoid the $12 million obligation and recover its $13 million payment on the theory the sale was a fraudulent transfer under Florida law.
- The bankruptcy court held that OAI was worth $6.9 million at closing, voided GTI’s $12 million obligation, and ordered Onkyo to repay GTI $6.1 million.
- The district court affirmed, rejecting Onkyo’s arguments about value, indirect benefits, and solvency, and applying an appropriate standard of review.
- The court valued indirect benefits as zero and adopted Onkyo’s expert for the note valuation, while considering GTI insolvent as a result of the transfer.
- Stern v. Marshall raised questions about bankruptcy court jurisdiction to award relief following a creditor’s proof of claim, which the panel addressed after full briefing.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether GTI received reasonably equivalent value | GTI argues value was at least 70% of price, considering notes and indirect benefits | Onkyo argues value was less than price and indirect benefits were negligible or non-existent | Bankruptcy court’s value finding upheld; no clear error |
| Value of indirect benefits | GTI contends indirect benefits could push value over 70% | Onkyo contends indirect benefits were substantial or improperly valued | Indirect benefits valued at zero; Fruehauf exception applies; not reversible error |
| Use of hindsight in valuing OAI stock | GTI contends methodology was proper and not tainted by hindsight | Onkyo argues hindsight tainted valuation | Methodology considered proper; no de novo reversal; deferential review as to fact-finding |
| Valuation of GTI's promissory notes | Notes had present value equal to face value ($12 million) | Notes should be discounted or valued lower due to insolvency | Notes valued at $8.6 million by the court; no reversible error despite insolvency finding |
| Stern jurisdiction to award relief | Relief appropriate to offset fraudulent transfer after determining value | Authority limited; potential constitutional issues | Bankruptcy court had jurisdiction under Stern to enter the relief judgment |
Key Cases Cited
- In re Goldberg, 229 B.R. 877 (Bankr. S.D. Fla. 1998) (70% threshold for reasonably equivalent value; indirect benefits not required to be precisely valued)
- In re Wilkinson, 196 F. App’x 337 (6th Cir. 2006) (reasonableness of value determined on totality of circumstances; standard of review)
- In re Fruehauf Trailer Corp., 444 F.3d 203 (3d Cir. 2006) (exception allowing no precise calculation of indirect benefits when values are minimal)
- In re Trafford Distrib. Ctr., 431 B.R. 263 (Bankr. S.D. Fla. 2010) (burden to prove indirect benefits may lie with transferor; standard for indirect benefits)
- Stern v. Marshall, 131 S. Ct. 2594 (2011) (constitutional limits on bankruptcy court jurisdiction; some claims adjudicable with Article III protections)