Call 855-808-4530 or email [email protected] to receive your discount on a new subscription.
Although not always straightforward or consistent, federal and state laws regarding the recovery of fraudulent conveyances are well developed. However, when the transaction flows through several transferees, the analysis can quickly become complicated. In a recent decision, the U.S. Court of Appeals for the Third Circuit employed such an analysis and ordered the unwinding of a transaction involving transfers which passed through multiple related parties. See, Kartzman v. Latoc (In re the Mall at the Galaxy), Case No. 23-1906 (3rd Cir. Aug. 7, 2024). This nonprecedential decision presents interesting facts arising from a loan essentially among "friends" and their businesses. The appeal itself arose out of a bankruptcy court decision involving the Mall at the Galaxy, Inc. The mall had incurred liabilities related to a $2 million loan made by a real estate company (Latoc) to a group of rubber recycling companies (the "PermaLife" entities). Despite its insolvency at the time, the mall repaid Latoc $592,875.03 before entering bankruptcy.
The trustee of the mall's Chapter 7 estate filed a complaint seeking to avoid these loan payments as a fraudulent transfer under 11 U.S.C. Sections 548(a)(1)(B) and 544(b)(1). The Bankruptcy Court and the district court both found that the mall did not receive reasonably equivalent value in exchange for the $2 million loan from Latoc, and that the transfers among Latoc, the mall, and PermaLife should be collapsed and construed as a single, integrated transaction. The Third Circuit ultimately affirmed the lower court decision.
The relationship among the three businesses arose from a friendship among Martin Sergi (the president and treasurer of the mall, and equity holder in PermaLife) and Raffaele and Dibo Attar (also equity holders in PermaLife). In 2007, a fire damaged PermaLife causing its financial decline. At that time, Rafael Attar served as the president of Latoc and director of one of the PermaLife entities. PermaLife initially obtained a secured loan from an unrelated entity, but that loan had strings attached: PermaLife was forbidden from receiving a loan from any "Attar-affiliated entity." Therefore, in an effort to get a loan that was not technically from an Attar-affiliated entity (i.e., Latoc), Sergi and Dibo agreed that Latoc would lend $2 million to the mall, and the mall would repay the loan to Latoc with interest. Once the loan was memorialized, Latoc deposited the $2 million into the mall's bank account, which then transferred the proceeds from the mall to PermaLife. In exchange, the mall allegedly received equity interests in two PermaLife subsidiaries, though nothing was ever memorialized or reduced to writing. During the relevant period (2007-2009), the mall was insolvent.
ENJOY UNLIMITED ACCESS TO THE SINGLE SOURCE OF OBJECTIVE LEGAL ANALYSIS, PRACTICAL INSIGHTS, AND NEWS IN ENTERTAINMENT LAW.
Already a have an account? Sign In Now Log In Now
For enterprise-wide or corporate acess, please contact Customer Service at [email protected] or 877-256-2473
End of year collections are crucial for law firms because they allow them to maximize their revenue for the year, impacting profitability, partner distributions and bonus calculations by ensuring outstanding invoices are paid before the year closes, which is especially important for meeting financial targets and managing cash flow throughout the firm.
Law firms and companies in the professional services space must recognize that clients are conducting extensive online research before making contact. Prospective buyers are no longer waiting for meetings with partners or business development professionals to understand the firm's offerings. Instead, they are seeking out information on their own, and they want to do it quickly and efficiently.
Through a balanced approach that combines incentives with accountability, firms can navigate the complexities of returning to the office while maintaining productivity and morale.
The paradigm of legal administrative support within law firms has undergone a remarkable transformation over the last decade. But this begs the question: are the changes to administrative support successful, and do law firms feel they are sufficiently prepared to meet future business needs?
Counsel should include in its analysis of a case the taxability of the anticipated and sought after damages as the tax effect could be substantial.