ORDER
MICHAEL E. ROMERO, Bankruptcy Judge.
THIS MATTER comes before the Court on the Motion for Partial Summary Judgment filed by the Defendant, the Plaintiff's Response thereto, and the Defendant's Reply.
JURISDICTION
The Court has jurisdiction over this matter under 28 U.S.C. §§ 1334(a) and (b) and 157(a) and (b). This is a core proceeding under 28 U.S.C. § 157(b)(2)(F) and (H) because it involves an action to recover alleged preferences and fraudulent conveyances.
BACKGROUND FACTS
Debtor Adam Aircraft Industries, Inc. ("Debtor") filed its voluntary Chapter 7 petition on February 15, 2008 (the "Petition Date"). Chapter 7 Trustee Jeffrey Weinman ("Weinman") filed his Complaint in this adversary proceeding on January 15, 2010. The Complaint alleges Defendant Joseph Walker ("Walker") was the president of the Debtor pre-petition. According to the Complaint, on February 2, 2007, after having been requested to resign by the Debtor's board of directors, Walker entered into a Memorandum of Understanding ("MOU") with the Debtor, outlining terms of Walker's separation from the Debtor. These terms were embodied in two Separation Agreements and Releases executed in February and May of 2007 (the "Separation Agreements").
Pursuant to the MOU and the Separation Agreements, the Debtor agreed, inter alia, to refund Walker his deposit for the purchase of an airplane, and to repurchase Walker's stock in the Debtor. On March 20, 2007, the Debtor paid Walker $105,704.11 as a refund for the aircraft purchase. On July 31, 2007, the Debtor paid Walker $100,002.00 to repurchase 16,667 shares of the Debtor's stock.
The Complaint contains the following claims for relief: 1) avoidance and recovery of the payments as fraudulent transfers under 11 U.S.C. §§ 548 and 550,
In his Answer, Walker admits he requested the refund of the $100,000 associated with the aircraft purchase and the payment for repurchase of shares in the Debtor. He also admits he entered into the MOU and the two Separation Agreements, and admits he received $105,704.11 on March 20, 2011, as a refund for the aircraft purchase, and $100,002.00 on July 31, 2007, for repurchase of stock.
However, Walker denies the Debtor received less than reasonably equivalent value for the transfers, and denies the Debtor was insolvent when the transfers were made. He further denies he was an insider or a creditor of the Debtor, and denies the transfers were made on account of antecedent debt owed by the Debtor. Lastly, he denies the transfers enabled him to receive more than he would have received in a Chapter 7 distribution. He also raises the following affirmative defenses: 1) failure to state a claim upon which relief can be granted; 2) waiver and estoppel; 3) contemporaneous exchange for new value; 4) the obligations were incurred in the ordinary course of business; and 5) Walker provided new value to or for the benefit of the Debtor.
WALKER'S MOTION FOR PARTIAL SUMMARY JUDGMENT, TRUSTEE'S RESPONSE, AND WALKER'S REPLY
Walker's Motion for Partial Summary Judgment (the "Motion") asserts Walker resigned as president of the Debtor on February 2, 2007, more than one year prior to the Petition Date. He also alleges he was not present in the Debtor's offices after his resignation, and had no further influence or control over the Debtor's affairs. Therefore, he seeks a ruling he was not an insider, stating such a ruling will narrow the issues for trial.
According to the Trustee's Response, Walker's Motion must be denied for three reasons. First, he asserts the issue of whether a transferee is an insider constitutes a question of fact and is inappropriate for summary judgment. The Trustee claims Walker's affidavits, alone, do not resolve the dispute over whether he was an insider because other evidence suggests Walker maintained an insider relationship after his resignation. Specifically, the Trustee notes Walker continued his friendship with the Debtor's founder, George Adam, and was in contact with the Debtor's human relations department regarding the timing of certain payments in the summer of 2007.
Second, the Trustee maintains the statutory definition of "insider" upon which Walker relies is not the end of the inquiry. Specifically, the Trustee notes case law in the Tenth Circuit indicates qualification as an insider is a question of fact.
Third, the Trustee states there is a split in authority as to when insider status should be determined under § 547. Some courts have found the date of the transfer is the date for determining insider status under § 547(b)(4)(B), but have not allowed a transferee to escape insider status simply by delaying transfers arranged when the transferee was an insider.
In addition, the Trustee further argues the determination of whether Walker was a statutory or non-statutory insider at the moment he received any payment from the Debtor is not relevant to his claims under § 548. Rather, he contends the § 548 claims are based on constructive fraud perpetuated through Walker's written agreements and ongoing relationship with the Debtor.
Walker's Reply states because the Trustee agrees Walker was not an officer or director after February 2, 2007, Walker was not a statutory insider. Further, Walker argues the Trustee has presented no evidence to rebut the affidavits attached to Walker's Motion indicating he had no control or influence over the Debtor after February 2, 2007. Walker asserts the occasional emails sent to him by the human resources department of the Debtor, and telephone conversations from board members regarding the severance offer, simply provided information as to his severance pay and other benefits, and did not represent any sort of insider relationship. He maintains going beyond the statutory definition of "insider" requires control or influence he did not have.
Like the Trustee, he cites the U.S. Medical case, alleging an insider relationship must include power over a debtor's decision making.
DISCUSSION
A. Standard for Summary Judgment
Summary judgment shall be granted "if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law."
B. Standards for Determining "Insider" Status
As Walker and the Trustee have noted, the most recent discussion by the United States Court of Appeals for the Tenth Circuit regarding what constitutes an "insider" appears in the U.S. Medical case. In U.S. Medical, the Tenth Circuit addressed factors for determining whether a party was a "non-statutory" insider.
C. Insider Status Remains a Disputed Question of Fact in This Case
In this case, Walker supports his Motion with two affidavits. According to the Affidavit of George F. Adam, Jr. ("Adam"),
The above evidence strongly suggests Walker indeed does not fall within the statutory definition of "insider" included in § 101(31). However, Walker admits his continuing friendship with Adam following February 2, 2007. In addition, although the exhibits attached to both the Motion and the Response refer to the negotiation and execution of Walker's severance document with the Debtor, no information is presented to indicate whether such negotiations, and subsequent payments under such documents, occurred at arm's length. Therefore, there is insufficient evidence to permit the Court to determine the factual question of whether Walker constitutes a "non-statutory insider" as alleged by the Trustee. Accordingly, this issue continues to constitute a disputed issue of material fact. Thus the Court does not reach the issue of the necessary date of insider status, because it cannot yet determine whether such status exists.
CONCLUSION
Based on the foregoing,
IT IS THEREFORE ORDERED Walker's Motion for Partial Summary Judgment is hereby DENIED.
FootNotes
National Labor Relations Board v. Gordon (In re Gordon), 303 B.R. 645, 650 (Bankr. D. Colo. 2003).
Id. at 1278 (quoting Friedman v. Sheila Plotsky Brokers, Inc. (In re Friedman), 126 B.R. 63, 70 (9
Comment
User Comments