Papas v. Buchwald Capital Advisors, LLC, No. 12-2434 (6th Cir. 2013)
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Greektown, the owner of a Detroit casino, and affiliates filed for Chapter 11 bankruptcy. The bankruptcy court confirmed a reorganization plan and named a trustee. Before the plan became effective, the bankruptcy court authorized unsecured creditors to file a fraudulent transfer action under 11 U.S.C. 544 and 550 and the Michigan Uniform Fraudulent Transfer Act, alleging that Greektown incurred $185 million dollars of debt and simultaneously transferred approximately $177 million to several transferees, including the Tribe. The complaint alleged that the Tribe directly received $6 million and that $145 million transferred to others indirectly benefitted the Tribe because the Michigan Gaming Control Board had required the Tribe to pay this amount to those others if Greektown failed to do so. The Trustee and the Tribe later agreed to a settlement, under which the Tribe would pay $2.75 million and relinquish approximately $2.58 million in claims it had filed, conditioned upon the bankruptcy court’s entering a bar on further claims “arising out of or reasonably flowing from” either the fraudulent transfer proceeding or the allegedly fraudulent transfers themselves. The district court approved the settlement and entered the bar order over objections. Finding the order overly broad, the Sixth Circuit remanded for the court to consider whether the outcome of the actions covered by the bar order would affect the bankruptcy estate.
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