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an 'injury in fact' that is 'real and immediate' and not merely 'conjectural or hypothetical,' (2) the injury is fairly traceable to the defendant's conduct, and (3) a favorable federal court decision is likely to redress the injury." The court found the first factor for injury in fact was met because the disbursing agent's deepening insolvency theory, if proven, would show that the debtor became insolvent and its estate was reduced by the funds that were either fraudulently transferred or given as impermissible dividends. The court found the second factor was met because the disbursing agent claimed that the debtor's decline was "directly related" the defendants' wrongdoings. The final factor was met because if the disbursing agent was successful in the litigation, the court could avoid the transfers and return the funds to the debtor's estate.
viii. In re Plusfunds Group, Inc., 492 B.R. 202 (Bankr. S.D.N.Y. 2013)
Issue: Whether trustee of trust established pursuant to a Chapter 11 plan showed cause under 11 U.S.C. § 350(b) to reopen the bankruptcy case to extend the term of the trust so that the trustee would have sufficient time to prosecute pending state court litigation.
Holding: The bankruptcy court held that the trustee of the trust established pursuant to a Chapter 11 plan failed to show cause to reopen the case in order to extend the trust term to prosecute pending state court litigation. The trustee argued under Section 350(b) that that the case should be reopened to administer assets of the estate. However, the court found that such assets must not have been known when the case was closed, and the actions pending in state court had been pending years before the closing. Furthermore, the trust agreement provided alternatives to the trustee prosecuting the state court litigation. The trustee also argued that the case should be reopened for "other cause," which the court found included analyzing several factors and putting substance over technicalities. The court applied the following six factors that it had used in determining other cause: "(1) the length of time that the case was closed, (2) whether a non-bankruptcy forum has jurisdiction to determine the issue which is the basis for reopening the case, (3) whether prior litigation in the bankruptcy court determined that a state court would be the appropriate forum, (4) whether any parties would suffer prejudice should the court grant or deny the motion to reopen, (5) the extent of the benefit by reopening, and (6) whether it is clear at the outset that no relief would be forthcoming by granting the motion to reopen." The court found that there was another forum that could determine trust issues, the trustee failed to show prejudice if the court did not reopen the case, and there was no benefit in reopening the case. The court concluded that the bankruptcy case should remain closed.
x. Ivey, Bamum & O'Mara v. Bear, Stearns & Co., Inc. (In re Stanwich Financial Services Corp.), 488 B.R. 829 (D. Conn. 2013)
Issue: Whether, under the Wagoner rule, the liquidating agent under a confirmed plan had standing to bring fraudulent transfer claims against the debtor's financial and legal advisors.
©2014 William L. Norton III
