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obligors, the Bankruptcy Code provides no guidance concerning the priority of the lien in relation to other interest in the property involved. Despite this lack of direction, bankruptcy courts look to the intent of these sections to determine the priority of liens. As a result, many courts find that if recovered property was the subject of a properly perfected security interest at the time of the original avoided transfer, the secured lien would reattach once the property is restored to the estate. John Hancock Life Ins. Co. v. Jankowski (In re Hospitality Inv. Corp.), 283 B.R. 451, 453 (Bankr. E.D. Mich. 2002). Thus, the lien created in favor of an avoided transferee/obligee would be below the reattached secured lien. However, since neither section 548 nor section 550 provides any guidance regarding the priority of the liens vis-a-vis other interest, the Seventh Circuit concluded that bankruptcy courts must look to state law to determine whether the avoided interest has a higher priority than other interests. In re FBN Food Servs., Inc., 82 F.3d 1387 (7th Cir. 1996). Accordingly, the lien created as a result of the avoidance may be able to prime other interests. Compare FBN Food, 82 F.3d 1387 (concluding that creditors would have priority over the recipients of avoided transfers because a debt holder beats a non-debt holder every time) with Bash v. Lepelley (In re Lepelley), 233 B.R. 802, 809-10 (Bankr. N.D. Ohio 1999) (finding that the avoided lien does not take priority over properly executed liens, but does take priority over other debts). Thus, to determine the priority of a lien created pursuant to section 548 or 550, it is important to look at the applicable state law or the equities surrounding the competing interests. See id.; 5 Alan N. Resnick & Henry J. Sommer, Collier on Bankruptcy P 550.06, at 550-30-31 (15th ed. Rev. 2006).
1. Introduction.
As set forth below, in addition to the plan drafting issues, a number of recent decisions have outlined the procedural traps in pleading. These decisions provide fodder for careful
consideration and use by litigants on both sides of the adversary proceeding.
Without question, in civil practice, the courts and commentators alike recognize that the standard for pleading under Rule 8 of the Federal Rules of Civil Procedures has been clarified by the Supreme Court's decisions in Twombly, Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) and Iqbal, Ashcroft v. Iqbal, 129 S. Ct. 1937 (2009). A number of recent decisions have recognized the change in the pleading standard under Rule 8 and have applied that changed standard to dismiss a number of preference and fraudulent transfer complaints as being deficient (typically with the leave to amend the complaint to add the requisite detail). Trustees and committees should be aware of the new pleading requirements and the impact of those requirements especially in the context of multiple
