Atna Liquidating Trust, v. AFCO Premium Credit, LLC, Adversary Proceeding No. 17-01558-JGR (Avoidance of alleged fraudulent transfers under 11 U.S.C. § 544(b) and applicable state fraudulent transfer law; avoidance of constructive fraudulent transfers under 11 U.S.C. § 548(a)(1)(b); and unjust enrichment.)
Atna Resources, Inc. and six related companies filed for relief under Chapter 11 of the Bankruptcy Code. Before and at the time of the filings, only two of the related companies were operational and generated revenue, Briggs operating the Briggs mine, and Atna operating the Pinson mine. The affiliated Debtors utilized a centralized cash account (“CCA”) maintained by Canyon Resources Corporation (“Canyon”), headquartered in Golden, Colorado.
The Debtors’ Joint Chapter 11 Plan of Reorganization was confirmed on November 29, 2016. The Plan provided for the formation of a Liquidating Trust for the purposes of administering the assets transferred to the Liquidating Trust, resolving disputed claims, pursuing the retained causes of action, and making distributions to the beneficiaries provided for under the plan. By its simplest terms, assets belonging to each respective Debtor estate were to be transferred to the Liquidating Trust, then disbursed to the creditors of the same respective Debtor estate.
The Trustee’s Amended Complaint seeks to avoid the payments made to AFCO Premium Credit, LLC (“AFCO”) by Canyon as constructively fraudulent. AFCO entered into a series of insurance premium financing agreements with the affiliated Debtors’ Canadian parent company, Atna Resources, Ltd. (“Atna”) to finance insurance covering the related companies.
The theory being advanced was the comprehensive insurance covered all the affiliated companies, while only Pinson and Briggs were generating revenues to fund the CCA. Funds in the CCA paid to AFCO that did not directly benefit Pinson or Briggs could be recovered as constructively fraudulent.
In a prior related Adversary Proceeding, Atna Liquidating Trust v. Elwood Staffing Services, Inc. (“ESS”), Adv. Proc. No. 17-01160-JGR, this Court entered proposed findings of fact and conclusions of law determining that similar fraudulent transfer claims asserted by the Trustee were barred by controlling Tenth Circuit precedent set forth in In re Slack-Horner Foundries Co., 971 F.2d 577 (10th Cir. 1992), which requires the Trustee to avoid an initial transfer before the Trustee can recover from a subsequent transferee, and that the fraudulent transfers were not adequately reserved by the terms of the Plan.
United States District Court Judge Robert E. Blackburn approved and adopted the analysis and conclusions of the bankruptcy court and remanded the matter for resolution of remaining preference claims asserted by the Trustee against ESS.
Prior to resolution of the remaining claims, the Trustee voluntarily dismissed the ESS Adversary Proceeding.
Based on the ESS ruling, AFCO moved for summary judgment. The Trustee countered by arguing that because the ESS Adversary Proceeding was dismissed, it had no preclusive effect.
The Court entered an Order Dismissing Adversary Proceeding applying the law of the case doctrine.
The conclusion that the Trustee lacked standing to pursue the constructive fraudulent claims was reached by examining the Joint Chapter 11 Plan in the Chapter 11 bankruptcy cases and determining the avoidance claims premised on state and federal constructive fraudulent transfer laws arising out of the CCA were not adequately reserved. That conclusion applies to all causes of action brought by the Trustee on behalf of the beneficiaries of the Liquidating Trust and prevents inconsistency and reconsideration of matters previously decided in the case. The three alternate grounds to depart from the application of the doctrine do not apply here: (1) there is no new evidence that is substantially different; (2) controlling authority has not changed; and (3) the conclusions of law proposed by this Court and adopted by the District Court in ESS Adversary Proceeding are not clearly erroneous and do not work a manifest injustice.