Central District Consumer Bankruptcy Attorney's Association

FYI.
Law Office of Eric Alan Mitnick
21515 Hawthorne Boulevard, Ste. 1080
Torrance, California 90503
Telephone: (310) 792-5864
Facsimile: (310) 347-4353
Email: MitnickLaw@aol.com, MitnickLaw@gmail.com
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r.ca.gov>
To: MitnickLaw
Sent: Thu, Dec 1, 2016 9:30 am
Subject: ILC E-Bulletin: Fla. Bankruptcy court rules bankruptcy trustee may use IRS' 10 year statute of limitations for fraudulent transfer litigation
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December 1, 2016
Dear constituency list members of the Insolvency Law Committee:
The following is a case update prepared by Professor Dan Schechter, Loyola Law School, Los Angeles, analyzing a recent decision of interest:
SUMMARY:
A bankruptcy court in Florida has held that a trustee had the power to borrow the Internal Revenue Service's 10 year statute of limitations in pursuing fraudulent transfer litigation on behalf of the estate. [In re Kipnis, 2016 Westlaw 4543772 (Bankr. S.D. Fla.).]
FACTS: An individual owed back taxes to the Internal Revenue Service. In an attempt to avoid paying those assessments, he allegedly engaged in fraudulent transfers of his assets. Roughly 10 years after those transfers, he filed a bankruptcy petition. His trustee then asserted fraudulent transfer claims against his transferees under 11 U.S.C.A. 544(b). They moved to dismiss on the ground that the claims were time barred, since the alleged transfers have occurred more than seven years prior to the filing of the bankruptcy petition.
REASONING: The bankruptcy court denied the motion to dismiss on the ground that the trustee was empowered to step into the shoes of the IRS. Under federal law, the IRS enjoyed a 10 year window for the avoidance of transfers made by taxpayers. The court recognized that there was little authority on point and that there was a split among the lower federal courts on this issue.
The court acknowledged that this ruling could have a very substantial impact:
The IRS is a creditor in a significant percentage of bankruptcy cases. The paucity of decisions on the issue may simply be because bankruptcy trustees have not generally realized that this longer reach-back weapon is in their arsenal. If so, widespread use of 544(b) to avoid state statutes of limitations may occur and this would be a major change in existing practice.
AUTHOR'S COMMENT: The court is absolutely right that this opinion, if widely followed, could be a game-changer. Further, I predict affirmance, since the plain language of 544(b) means exactly what it says:
[T]he trustee may avoid any transfer of an interest of the debtor in property or any obligation incurred by the debtor that is voidable under applicable law by a creditor holding an unsecured claim . . . .
Here, since the IRS (one of the unsecured creditors) had the power to challenge the transfers, the trustee succeeded to those powers, for the benefit of all of the creditors. This is the ancient rule of "void against one, void against all," as articulated in Moore v. Bay, 284 U.S. 4, 5, 52 S.Ct. 3, 76 L.Ed. 133 (1931).
It will be very interesting to see if this obscure bankruptcy court opinion results in a huge upheaval in the world of fraudulent transfer litigation, as the court has predicted.
These materials were written by Professor Dan Schechter of Loyola Law School, Los Angeles, for his Commercial Finance Newsletter, published weekly on Westlaw. Westlaw holds the copyright on these materials and has permitted the Insolvency Law Committee to reprint them. Thank you for your continued support of the Committee.
Best regards,
Insolvency Law Committee
Co-Chair
Asa S. Hami
SulmeyerKupetz, A Professional Corporation
ahami@sulmeyerlaw.com
Co-Chair
Reno Fernandez
Macdonald Fernandez LLP
Reno@MacFern.com
Co-Vice Chair
Radmila A. Fulton
Law Offices Radmila A. Fulton
Radmila@RFultonLaw.com
Co-Vice Chair
John N. Tedford, IV
Danning, Gill, Diamond & Kollitz, LLP
JTedford@dgdk.com
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FYI.
Law Office of Eric Alan Mitnick
21515 Hawthorne Boulevard, Ste. 1080
Torrance, California 90503
Telephone: (310) 792-5864
Facsimile: (310) 347-4353
Email: MitnickLaw@aol.com, MitnickLaw@gmail.com

Although this email and any attachments are believed to be free of any virus or other defect that might affect any computer system into which it is received and opened, it is the responsibility of the recipient to ensure that it is virus free and no responsibility is accepted by the sender for any loss or damage arising in any way from its use.

The information contained in this email message and any attached files may be privileged, confidential and protected from disclosure. If you are not the intended recipient, any dissemination, distribution or copying is strictly prohibited. If you think that you have received this email message in error, please notify the sender by reply email, and delete the email message you received and all of the attached files.
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To: MitnickLaw <MitnickLaw@aol.com>
Sent: Thu, Dec 1, 2016 9:30 am
Subject: ILC E-Bulletin: Fla. Bankruptcy court rules bankruptcy trustee may use IRS' 10 year statute of limitations for fraudulent transfer litigation
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