- No. 11-1858, Slip Op. (2d Cir. Apr. 4, 2014)
- Post-confirmation trust was judicially estopped from claiming that funds transferred to a cash management system were property of the debtors because the schedules and other documents filed by the debtors in bankruptcy court treated the cash management system as property of a subsidiary.
- Procedural context:
- Appeal from judgment of the United States District Court for the Southern District of New York granting summary judgment to appellee Goldman Sachs & Co. and dismissing Adelphia Recovery Trust’s fraudulent conveyance claims. Affirmed.
- • Adelphia Communications Corp. (“Adelphia”) and its subsidiaries filed for chapter 11 bankruptcy in 2002 due in part to fraud by its shareholders, members of the Rigas family. • In 2003, Adelphia filed fraudulent conveyance suits against several investment banks, including Goldman, Sachs & Co. (“Goldman”). The suit against Goldman concerned a multi-million loan by Goldman to an entity owned by the Rigas family, which was secured by Adelphia stock. When the fraud was exposed and Adelphia’s stock price decreased, Goldman made margin calls on the loan. The Rigases then allegedly caused Adelphia to make cash payments of $63 million to cover the margin calls. • The complaint alleged that the funds came from a concentration account that contained most of the funds in the cash management system through which the cash of Adelphia and its subsidiaries was managed. The concentration account was controlled by a subsidiary of Adelphia, Adelphia Cablevision LLC (“Adelphia Cablevision”). It alleged that Rigases caused Adelphia to direct that the funds be paid to Goldman. • Adelphia’s schedules filed with the bankruptcy court treated the concentration account as property owned by one of Adelphia’s subsidiaries, either ACC Operations, Inc. or Adelphia Cablevision. • Adelphia’s plan of reorganization created the Adelphia Recovery Trust to pursue recoveries for the benefit of unsecured creditors not made whole by the plan. • Upon confirmation of the plan, the Adelphia Recovery Trust continued the suit against Goldman. The district court dismissed the action on the ground that the payments were made by Adelphia Cablevision and so the recovery trust did not have standing to sue.
- Winter, Walker, Cabranes
In re Jesslyn Anderson
Summarizing by Bradley Pearce
3220 in the system
1 Being Processed