Official Committee of Unsecured Creditors of Legac v. Bryan et al

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UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
In re
THE LEGACY ESTATE GROUP, No. 05-14659
Debtor(s).
______________________________________/
OFFICIAL CREDITORS COMMITTEE,
Plaintiff(s),
v. A.P. No. 06-1173
JOHN M. BRYAN, et al.,
Defendant(s).
_______________________________________/
Memorandum on Motion for Summary Judgment of Harry Chew and AIC Capital Partners, LLC
_________________
Defendants Harry Chew and AIC Capital Partners, LLC, have moved for summary judgment against
plaintiff Official Creditors Committee, representing the bankruptcy estate of The Legacy Group. The court
begins its analysis of this motion by reciting the facts as they may be most favorably be found for plaintiff.
In March, 2005, debtor The Legacy Group paid about $7.1 million to defendant John M. Bryan and
his trusts in order to induce Bryan to sell his interest in Legacy to Connaught Capital Partners, LLC. Since
Legacy got nothing in return for the payment, and the payment left Legacy insolvent and unable to pay its
Entered on Docket
October 23, 2007
GLORIA L. FRANKLIN, CLERK
U.S BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
Case: 06-01173 Doc# 128 Filed: 10/23/07 Entered: 10/23/07 15:02:08 Page 1 of
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1Plaintiff argues that “Chew, as a Manager of AIC and Connaught, owed fiduciary obligations to
those companies. The fact that Connaught, in turn, owed a fiduciary obligation to Legacy imposed a
corresponding obligation on Chew, because it was only through Chew and the other Manager/Members
that Connaught could act.” The court finds the portion of this assertion which it has italicized to be wrong. It
is certainly unsupported by any law cited by Plaintiff.
2John Paul Lumber Co. v. Agnew, 125 Cal.App.2d 613, 619 (1952). The case deals with agency
and ostensible authority, not fiduciary duty.
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debts, the payment was an avoidable fraudulent transfer.
Connaught owned Legacy. Defendant AIC Capital Partners, LLC, owned 60% of Connaught.
Defendant Harry Chew owned 32% of AIC and controlled AIC. Through AIC, Chew controlled
Connaught. Through Connaught, Chew controlled Legacy.
The twelfth claim of the complaint alleges that Chew and AIC breached their fiduciary duties to
Legacy. The fifteenth claim alleges that Legacy is entitled to some sort of equitable indemnity related to claims
asserted by Bryan. Chew and AIC seek summary judgment as to these two claims. Legacy has not
contested the motion as to the fifteenth claim, leaving only the fiduciary duty claims to be decided.
The twelfth claim appears to be a house of cards. Plaintiff argues that because Chew owed a
fiduciary duty to AIC and AIC owed a duty to Connaught and Connaught owed a fiduciary duty to Legacy,
then Chew and AIC owed fiduciary duties to Legacy.1 However, the court finds no basis in the law for this
daisy-chain of fiduciary duties. A fiduciary of Company X is not a fiduciary of Company Y just because
Company X is a fiduciary of Company Y. The only case cited by plaintiff to support its position, a 55-year-
old California case having nothing to do with fiduciary duty,2 is simply not on point.
Plaintiff argues that Chew owed Legacy a fiduciary duty because he admitted it, another witness so
testified, and the Legacy Operating Agreement so provided. If anything in the Operating Agreement turns
Chew or AIC into a fiduciary of Legacy, plaintiff has not quoted it. The mere fact that a witness has testified
that Chew was a fiduciary of Legacy, or that Chew testified as such himself, is not conclusive and does not
create a triable issue of fact because the issue is one of law. See Strauch v. U.S., 637 F.2d 477, 481 (7th
Cir. 1980).
Case: 06-01173 Doc# 128 Filed: 10/23/07 Entered: 10/23/07 15:02:08 Page 2 of
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For the foregoing reasons, the motion of Chew and AIC for summary judgment will be granted.
Counsel for Chew and AIC shall submit an appropriate form of order.
Dated: October 23, 2007
SAlan Jaroslovsky
U.S. Bankruptcy Judge
Case: 06-01173 Doc# 128 Filed: 10/23/07 Entered: 10/23/07 15:02:08 Page 3 of
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