Richard F. Burkhart v. Genworth Financial, Inc., 275 A.3d 1259

Background

Genworth Financial is the corporate parent of Genworth Life Insurance Company (GLIC), which issued long-term care (LTC) policies; plaintiffs are GLIC LTC policyholders and agents (putative class).
Plaintiffs allege Genworth and affiliates siphoned capital from GLIC (dividends, termination of reinsurance support) as GLIC’s LTC line became unprofitable, impairing GLIC’s ability to pay future claims and commissions.
In an earlier opinion (Burkhart I), the Court held plaintiffs had DUFTA standing as contingent creditors of GLIC for certain claims (but dismissed some dividend claims as time‑barred).
After that decision, GFIH sold valuable Canadian/Australian mortgage‑insurance subsidiaries and distributed proceeds up the corporate chain; plaintiffs amended to add Counts V–VII attacking those distributions as fraudulent transfers.
Defendants moved to dismiss Counts V–VII, arguing (1) plaintiffs are not “creditors” of GFIH because they lack an independent “right to payment,” and (2) the amended claims seek only unwinding/restoration (not a right to payment) so they do not qualify as DUFTA “claims.”
The Court granted the partial motion: Counts V–VII were dismissed because plaintiffs failed to plead a “right to payment” (i.e., creditor status) as required by DUFTA; the Court did not adopt a categorical rule that DUFTA claims can never create creditor status but held these amended counts fail as pleaded.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether a DUFTA claim alone can create “creditor” status to bring a later DUFTA claim against a transferee	A DUFTA claim can make a plaintiff a creditor “by dint” of the statute (UVTA commentary supports narrow circumstances where a DUFTA claim creates creditor status)	DUFTA is remedial; a plaintiff needs an independent right to payment separate from DUFTA to be a “creditor”	Court refused to adopt a categorical prohibition and recognized competing authority, but did not need to definitively resolve the broad question here
Whether plaintiffs pleaded a “claim” (a right to payment) against GFIH so they are “creditors” under DUFTA for Counts V–VII	Counts III–IV make plaintiffs contingent creditors of GFIH and Counts V–VII seek restoration of value—sufficient to establish a DUFTA “claim”	Counts V–VII seek only equitable unwinding/restoration (no monetary right to payment), so plaintiffs lack a DUFTA “claim” and creditor status	Held for Defendants: plaintiffs did not plead a right to payment from GFIH; Counts V–VII fail as a matter of law and are dismissed
Whether DUFTA liability can reach transfers of non‑debtor property (i.e., GFIH’s own assets sold and distributed)	DUFTA permits recovery of proceeds and “other property of the transferee”; subsequent transfers can be independently voidable	Fraudulent‑transfer liability does not attach to transfers by non‑debtors of property that was never debtor’s; exposing non‑debtor transfers would create unbounded liability across affiliates	Court emphasized settled principle that DUFTA does not reach transfers of non‑debtor property; this undercuts plaintiffs’ theory that GFIH’s asset sales are actionable under DUFTA
Whether Count VII (equitable relief under §1307) survives despite briefing/merits issues	Count VII invokes broad equitable powers and should survive if equitable relief is appropriate; defendants waived challenge	Defendants argued Count VII is addressed by same legal defects as Counts V–VI and was not waived	Court rejected waiver argument, held Count VII suffers the same fatal defect and dismissed it, but noted §1307 allows flexible remedies for any surviving DUFTA claims

Key Cases Cited

Burkhart v. Genworth Fin., Inc., 250 A.3d 842 (Del. Ch. 2020) (earlier ruling that plaintiffs had DUFTA standing as contingent creditors for certain claims)
Crystallex Int’l Corp. v. Petróleos de Venezuela, S.A., 879 F.3d 79 (3d Cir. 2018) (DUFTA liability does not attach to transfers by non‑debtors)
Alliant Tax Credit 31, Inc. v. Murphy, 924 F.3d 1134 (11th Cir. 2019) (fraudulent‑transfer actions are remedial and predicated on independent underlying claims)
Kraft Power Corp. v. Merrill, 981 N.E.2d 671 (Mass. 2013) (UFTA depends on an independently valid claim; remedies are not claim‑creating)
Deford v. Soo Line R. Co., 867 F.2d 1080 (8th Cir. 1989) (UFTA is remedial and supplies alternate remedies for preexisting creditor rights)
Wiand v. Lee, 753 F.3d 1194 (11th Cir. 2014) (receiver could recover as creditor where monetary judgment was appropriate)
Nisenzon v. Sadowski, 689 A.2d 1037 (R.I. 1997) (an underlying fraudulent‑transfer claim reduced to money judgment may evidence a right to payment for a subsequent claim)