New Bankruptcy Opinion: James R. Zazzali, as Trustee of the DBSI Estate Litigation Trust created by operation of the Second Amended Joint Chapter 11 Plan of Liquidation v. Douglas L. Swenson, et al. (Bankruptcy Court for the District of Delaware)

 

Full Text of Opinion:

UNITED STATES BANKRUPTCY COURT
DISTRICT OF DELAWARE
JUDGE PETER J. WALSH 824 MARKET STREET
WILMINGTON , DE 19801
(302 ) 252-2925
January 13, 2012
Jami B. Nimeroff Natasha M. Songonuga
BROWN STONE NIMEROFF LLC Christopher Viceconte
901 N. Market Street GIBBONS P.C.
Suite 1300 1000 N. West Street
Wilmington, DE 19801 Suite 1200
Wilmington, DE 19801-1058
Monte N. Stewart
Craig G. Taylor Michael F. Quinn
BELNAP STEWART TAYLOR & Christopher Walsh
MORRIS PLLC GIBBONS P.C.
12550 W. Explorer Drive One Gateway Center
Suite 100 Newark, NJ 07102-5310
Boise, Idaho 83713
Counsel for Plaintiff,
Curtis D. McKenzie James R. Zazzali, Trustee
McKENZIE LAW OFFICES PLLC for the DBSI Estate
412 W. Franklin Street Litigation Trust
Boise, Idaho 83702
Counsel for Defendants
Thomas Var Reeve, Charles Hassard,
John Mayeron and Gary Bringhurst
Re: James R. Zazzali, as Trustee of the DBSI Estate Litigation
Trust created by operation of the Second Amended Joint Chapter
11 Plan of Liquidation v. Douglas L. Swenson, et al.
Adv. Proc. No. 10-54649
Dear Counsel:
Pursuant to 28 U.S.C. § 157(b)(3), this is the Court’s
determination as to whether the above captioned proceeding is a
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core proceeding. For the reasons briefly set forth below, I find
that it is a core proceeding.
Three Defendants, namely, Thomas Var Reeve, Charles
Hassard and John Mayeron, assert that only some of the counts are
core proceedings. Defendant Gary Bringhurst filed a joinder in
which he simply seeks a determination as to whether the proceeding
is core or non-core. Plaintiff Trustee has filed responses
asserting that all the counts of the Second Amended Complaint are
core proceedings. (The relevant motion pleadings are Docs. ## 130,
134, 144, 145 and 146.)
The Second Amended Complaint (Doc. # 33) asserts nine
counts as follows: (1) actual fraudulent transfer pursuant to 11
U.S.C. §§ 548(a)(1)(A), 550(a), and 551; (2) constructively
fraudulent transfers pursuant to 11 U.S.C. §§ 548(a)(1)(B), 550(a),
and 551; (3) constructively fraudulent transfers pursuant to 11
U.S.C. §§ 548(b), 550(a), and 551; (4) actual fraudulent transfers
pursuant to Idaho Code Ann. §§ 55-913(a), 55-916, and 55-917; (5)
constructively fraudulent transfers pursuant to Idaho Code Ann. §§
55-913(b), 55-916, and 55-917 and 11 U.S.C. §§ 544(b), 550, and
551; (6) constructively fraudulent transfers pursuant to Idaho Code
Ann. §§ 55-914(1), 55-916, and 55-917 and 11 U.S.C. §§ 544(b), 550
and 551; (7) transfers to defraud creditors pursuant to Idaho Code
Ann. § 55-906 and 11 U.S.C. §§ 544(b), 550, and 551; (8) unjust
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enrichment, and (9) disallowance of claims pursuant to 11 U.S.C. §
502(d).
With respect to the counts based on 11 U.S.C. § 548, I
find that these counts clearly fall within 28 U.S.C. §
157(b)(2)(H). These counts are founded solely on bankruptcy law.
With respect to the counts based on 11 U.S.C. §
544(b)(1), it is not so obvious that these are core proceedings
since, in part, they rely upon “applicable law” other than the
Bankruptcy Code. Nevertheless, it clearly falls within the
language of 28 U.S.C. § 157(b)(2)(H). Since the Supreme Court’s
ruling in Stern v. Marshall, ___ U.S. ___, 131 S.Ct. 2594, 180 L.
Ed. 2d 475 (2011), there has been considerable debate among the
courts as to whether a § 544(b)(1) cause of action is a core
proceeding. I am persuaded by the analysis of the Stern decision
undertaken by the Court in In re REFCO, INC., 2011 WL 5974532
(Bankr. S.D.N.Y. 2011) that it is and I therefore determine that 11
U.S.C. §§ 544(b)(1) counts are core proceedings.
The unjust enrichment count is premised on the bankruptcy
law counts and I therefore conclude that it is likewise a core
proceeding.
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Finally, it is obvious that the 11 U.S.C. § 502(d) count
is a core proceeding based as it is in no place but the Bankruptcy
Code.
Very truly yours,
Peter J. Walsh
PJW:ipm
UNITED STATES BANKRUPTCY COURT
DISTRICT OF DELAWARE
In re: ) Chapter 11
)
DBSI, INC., et al. ) Case No. 08-12687(PJW)
)
Debtors. ) Jointly Administered
_______________________________ )
JAMES R. ZAZZALI, as Trustee of )
the DBSI Estate Litigation )
Trust created by operation of )
the Second Amended Joint )
Chapter 11 Plan of Liquidation, )
)
Plaintiff, )
)
v. ) Adv. Proc. No. 10-54649(PJW)
)
DOUGLAS L. SWENSON, et al., ) Re Docket Nos. 130, 134, 144,
) 145 and 146
)
Defendants. )
ORDER
For the reasons set forth in the Court’s letter ruling of
this date, the Court determines that the above captioned proceeding
is a core proceeding.
Peter J. Walsh
United States Bankruptcy Judge
Dated: January 13, 2012