In re: Allen, No. 13-3543 (3d Cir. 2014)
Annotate this CaseIn 1999 ATN fraudulently transferred $6 million to its former owners, including Allen, in a shareholder litigation settlement. ATN avoided the transfer and obtained a recovery order in its separate Florida bankruptcy proceedings. Allen transferred the money to a Cook Islands asset protection trust, filed for bankruptcy in New Jersey, and argued that the funds were never recovered and were property of his estate subject to an automatic stay. After a remand, the Florida Bankruptcy Court avoided the transfers to Allen; entered a $6 million judgment in favor of ATN on its fraudulent transfer claims; and ordered Allen to repatriate the money, provide an accounting, and freeze any other use or transfer of the money. Allen did not comply. ATN filed an adversary proceeding in Allen’s bankruptcy. The New Jersey Bankruptcy Court denied relief, finding that, because ATN had not recovered tangible possession of the funds, they were not property of ATN’s bankruptcy estate, but property of Allen’s estate and subject to the automatic stay and were not held by Allen in constructive trust for ATN. The district court affirmed. The Third Circuit reversed, holding that where a debtor avoids a fraudulent transfer and obtains a recovery order (11 U.S.C. 550) it has sufficiently “recovered” those funds such that they are part of that debtor’s estate.
The court issued a subsequent related opinion or order on September 29, 2014.
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