LLC Managers Beware: Get Involved With Member Distributions By an Insolvent LLC and You May Be Personally Liable

Vieira v. Harris (In re JK Harris & Co., LLC), 512 B.R. 562 (Bankr. D. S.C. 2012)

A chapter 7 trustee sued a manager of three limited liability company (LLC) debtors for breach of fiduciary duty and to hold the manager personally liable for distributions made to members, including himself. Continue reading

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Fraudulent Transfer: A Case Where Strong Arm Powers Were “An Inch Too Short”

Casey v. Rotenberg (In re Kenny G Enterprises, LLC), 512 B.R. 628 (C.D. Cal. 2014)

A Chapter 11 trustee sought to avoid a transfer of property under Section 544 of the Bankruptcy Code that occurred after (1) the bankruptcy petition was filed and (2) a chapter 11 plan of reorganization was confirmed. The defendants moved to dismiss on the basis that Section 544 applies only to prepetition transfers. The bankruptcy court denied the motion, and the defendants appealed. Continue reading

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Lease Termination: Do You Really Mean It?

In re 2408 W. Kennedy, LLC, 512 B.R. 708 (Bankr. M.D. Fla. 2014)

A commercial landlord sought relief from the automatic stay so that it could complete prepetition eviction proceedings against the debtor. The debtor objected, arguing that it had a right to assume the lease. The case turned on whether the landlord effectively terminated the lease prepetition. Continue reading

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Post-Petition Interest: Not Very Predictable

Prudential Ins. Co. of Am. v. SW Boston Hotel Venture, LLC (In re SW Boston Hotel Venture, LLC), 748 F.3d. 393 (1st Cir. 2014)

A senior mortgagee battled the debtor and a junior mortgagee over its entitlement to post-petition interest: If and when did it become oversecured and thus entitled to interest? Was it entitled to interest at the default rate? Should the interest be compounded? Continue reading

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Mortgage Enforcement: Dot Those “i”s and Cross Those “t”s – Or Else

In re Demers, 511 B.R. 233 (Bankr. D. R.I. 2014)

A chapter 13 debtor objected to the portion of a mortgagee’s claim consisting of expenses related to foreclosure of its mortgage. She argued that since the mortgagee failed to comply with notice requirements under the mortgage, the foreclosure expenses were not valid. Continue reading

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Property Tax Foreclosure: Tax Authority May Have to Pay for Equity in Property

Clinton County Treasurer v. Wolinsky, 511 B.R. 34 (N.D.N.Y. 2014)

A chapter 7 trustee sought to avoid a property tax foreclosure as a fraudulent transfer and then to recover damages from the foreclosing county. The bankruptcy court agreed that the transfer was a fraudulent conveyance, but awarded only about half of the damages requested by the trustee. Both the county treasurer and the trustee appealed. Continue reading

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Affiliate Transfer: Fraudulent Conveyance or Unwinding Resulting Trust?

Anderson v. Architectural Glass Constr., Inc. (In re Pfister), 749 F.3d 294 (4th Cir. 2014) –

A chapter 7 trustee sought to set aside as a a debtor’s transfer of her interest in property held jointly with her husband to her husband’s corporation as a constructive fraudulent conveyance. The bankruptcy court agreed that it was a fraudulent transfer; the district court reversed; and the 4th Circuit reversed in part, vacated in part and remanded for further proceedings. Continue reading

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