Fluharty, Trustee v. Duet

IN THE UNITED STATES BANKRUPTCY COURT
FOR THE NORTHERN DISTRICT OF WEST VIRGINIA
IN RE:
SUMMIT III, LLC,
Debtor.
__________________________________
THOMAS H. FLUARTY, TRUSTEE,
Plaintiff,
v.
CRAIG M. DUET,
Defendant.
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Case No. 11-bk-01448
Chapter 7
Adv. Proc. No. 13-ap-00045
MEMORANDUM OPINION
Pending before this court is Craig Duet’s (“Mr. Duet”) Motion to dismiss the Complaint
filed against him by Thomas H. Fluharty, the Chapter 7 Trustee (“Trustee”) appointed to
administer the Debtor Summit III, LLC’s (the “Debtor”) bankruptcy estate complaint that seeks
to avoid and recover transfers made by the Debtor to Mr. Duet according to the terms of a
negotiated litigation settlement agreement (“Settlement Agreement”), executed by the Debtor,
Mr. Duet, Mountaintop, LLC (“Mountaintop”), Anthony J. Skattell, III (“Mr. Skattell”), and
Thomas Tretheway (“Mr. Tretheway”). For the reasons stated herein, the court denies, without
prejudice, Mr. Duet’s motion for dismissal.
Dated: Monday, March 24, 2014 3:02:51 PM
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I. STANDARD OF REVIEW
Under Federal Rule of Civil Procedure 12(b)(6), a complaint should be dismissed for
“failure to state a claim upon which relief can be granted.” 	Fed. R. Civ. P. 12(b)(6); Fed. R.
Bankr. P. 7012(b). “[T]he complaint must contain sufficient factual matter, accepted as true, to
‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)
(quoting Twombly, 550 U.S. at 570). The plausibility standard requires a plaintiff “to articulate
facts, when accepted as true, that ‘show’ that the plaintiff has stated a claim entitling him to
relief, i.e., the ‘plausibility’ of ‘entitlement to relief.’” Francis v. Giacomelli, 588 F.3d 186, 193
(4th Cir. 2009) (quoting Twombly, 550 U.S. at 557). When evaluating a motion to dismiss, the
court must (1) construe the complaint in a light favorable to the plaintiff, (2) take factual
allegations as true, and (3) draw all reasonable inferences in favor of the plaintiff. 	5C Charles
Wright & Arthur Miller, Federal Practice and Procedure § 1357 (3d ed. 2012) (collecting cases).
The court’s role in ruling on a motion to dismiss is not to weigh the evidence, but to analyze the
legal feasibility of the complaint. See Cooper v. Parsky, 140 F.3d 433, 440 (2d Cir. 1998).
A complaint for fraud must meet a heightened pleading standard. Fed. R. Civ. P. 9(b).
Rule 9 requires that a complaint set forth facts with sufficient particularity to apprise the
defendant of the charges against him so that he may prepare an adequate answer. Iqbal, 556 U.S.
at 686-87. The detail required by the particularity requirement differs with the facts of each case,
but in alleging circumstances constituting fraud, the claimant is generally required to allege: “the
time, place and contents of the false representations, as well as the identity of the person making
the misrepresentation and what he obtained thereby.” Harrison v. Westinghouse Savannah River
Co., 176 F.3d 776, 784 (4th Cir. 1999). Notably, Rule 9(b) allows the complaint to contain
“conclusory allegations . . . of the intent to deceive.” Id. at 784. 	And, “a trustee is afforded
greater liberality in pleading fraud, since he is a third-party outsider to the debtor’s transactions.”
Aphton v. Aventis (In re Aphton Corp.), 423 B.R. 76, 85 (Bankr. D.Del. 2010) (citations
omitted).
II. BACKGROUND
On August 9, 2007, Mr. Duet filed a Complaint initiating a civil action in the Court of
Common Pleas of Berkley County, South Carolina (“State court”), against Mountaintop, a South
Carolina limited liability company, Mr. Trethway, Mr. Skattell and the Debtor. On September 4,
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2008, Mr. Duet filed an Amended Complaint, which alleged that the events surrounding a
December 11, 2006 capital call was a proper disassociation from Mountaintop and related
entities under the Uniform Limited Liability Act (S.C. Code. Ann. § 33-44-701) and thus entitled
him to redeem his 25% equity interest in Mountaintop and the Debtor. During the course of the
State court litigation, the parties entered into a Settlement Agreement and Mutual Release, dated
March 27, 2009, whereby the Debtor entered into a Promissory Note (“Note”) to make thirteen
scheduled payments totaling $754,750.00 to Mr. Duet, on behalf of Mr. Trethway, Mr. Skatell
and 	Mountaintop. 	Mr. 	Skatell 	personally 	guaranteed 	payment 	of 	$525,000.00 	under 	the
Settlement Agreement. Pursuant to the payment schedule, which commenced on March 27,
2009, Mr. Duet received $30,000.00 that day; and received $12,000.00 monthly between May
15, 2009 and October 15, 2009. The Debtor failed to make the November 15, 2009 scheduled
transfer of $52,750.00 and the December 15, 2009 scheduled transfer of $124,000.00. However,
it did transfer $12,000.00 on December 15, 2009. To bring the payment schedule current, Mr.
Duet and the Debtor entered into a Forbearance Agreement on January 12, 2010, to divide the
December 15, 2009 scheduled transfer of $124,000.00 into smaller payments. Pursuant to the
Forbearance Agreement, Mr. Duet received a transfer of $42,000.00 on February 8, 2010; and
received $12,000.00 monthly between March 11, 2010 and December 14, 2010. 	As detailed in
Mr. Duet’s proof of claim, the Debtor did not complete the payment schedule pursuant to the
Forbearance Agreement. The Debtor further failed to make the December 15, 2010 scheduled
transfer of $124,000.00. On January 14, 2011, pursuant to the Settlement Agreement, Mr. Duet
exercised his right to accelerate the principal balance due on the Note. Despite this, the Debtor
continued to make monthly transfers of $12,000.00 between January 14, 2011 and July 15, 2011
to Mr. Duet.
On August 22, 2011, the Debtor filed for bankruptcy under chapter 11. As of the petition
date of August 11, 2011, the Debtor had not completed the payment schedule as outlined in the
Settlement Agreement, and according to Mr. Duet’s proof of claim, owed $426,751.23 in unpaid
principal and interest. On June 25, 2013, the Debtor’s bankruptcy case was converted to a case
under chapter 7; on the same date, the United States Trustee designated Thomas Fluharty as
trustee in this case. The Trustee held the meeting of creditors pursuant to 11 U.S.C. § 341(a) on
July 24, 2013 in Clarksburg, West Virginia.
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On August 9, 2013, the Trustee filed an adversary complaint in this court against Mr.
Duet. The Trustee’s complaint alleges three grounds to avoid and recover transfers occurring
between the execution of the Settlement Agreement dated March 27, 2009, and the Debtor’s
petition date, August 11, 2011. The Trustee seeks to recover $66,000.00 based on claims of
actual and constructive fraud and transfers to an insider under the West Virginia Uniform
Fraudulent Transfers Act (“WVUFTA”) pursuant to his powers under 11 U.S.C. § 544(b); to
avoid and recover $282,000.000 as fraudulent transfers under 11 U.S.C. § 548(a)(1), and to
recover $132,000.00 as preferential transfers under 11 U.S.C. § 547(b). The Trustee asserts that
since Mr. Duet is an initial transferee, he is entitled to recover costs and attorney fees under 11
U.S.C. § 550(a) in addition to the amount of the transfers avoided. Additionally, the Trustee
asserts that pursuant to 502(d), he is entitled to offset the sum of the avoided transfer with the
amount claimed in Mr. Duet’s proof of claim, should Mr. Duet fail to turn over the amount of the
avoided and recovered transfers. The Trustee attached documents to his response, including Mr.
Duet’s proof of claim, a copy of the Settlement Agreement, and a list of the dates and amounts of
transfers made to Mr. Duet.
To support his motion to dismiss,1 Mr. Duet makes four allegations: first, the Trustee
failed to plead sufficient facts to show the Debtor’s intent to hinder, delay or defraud its creditors
under W. Va. Code § 40-1A-4(a)(1) and 11 U.S.C § 548(a)(1)(A); second, the Trustee failed to
demonstrate that the Debtor received less than reasonably equivalent value in exchange for the
transfers because the Settlement Agreement reflects adequate consideration under W. Va. Code §
40-1A-4(a)(2) and 11 U.S.C. § 548(a)(2)(B); third, that the Trustee’s claims under 547(b) and W.
Va. Code § 40-1A-5(b) fail because he is not an “insider of the Debtor”; fourth, that the
Trustee’s claim under W. Va. Code § 40-1A-5(b) is time barred. Mr. Duet seeks to dismiss
claims under 11 U.S.C. § 502(d) and § 550(a) because the Trustee may not employ these as they
are remedies that depend on the avoidance and recovery of the transfers based upon § 548(a)(1)
and § 547(b); actions which he asserts should be dismissed.
1 Mr. Duet does not cite under which Federal Rule of Civil Procedure he is moving. Based on
the court’s review of Mr. Duet’s motion, it appears Mr. Duet seeks dismissal under Fed. R. Civ.
P. 12(b)(6).
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III. DISCUSSION
Mr. Duet alleges that the court must dismiss each count of the Trustee’s complaint based
upon the Trustee’s failure to state causes of upon which relief can be granted. 	He also alleges
that the court must dismiss a portion of Count I and all of Count II based upon the Trustee’s
failure to plead fraud with specificity. 	The Trustee argues that he stated causes of action upon
which he can recover and avoid transfers made to Mr. Duet.
A. 	Count I of the Trustee’s Complaint - Claims Under the WVUFTA.
By Count I of his complaint, the Trustee seeks to avoid certain payments made by the
Debtor to Mr. Duet more than two years prepetition. 	The Trustee asserts that § 544(b) of the
Bankruptcy Code allows him to avoid those payments under the WVUFTA. W. Va. Code §§ 40-
1A-1, et seq. The Trustee’s allegations in that regard, however, are imprecise. Mr. Duet, in his
memorandum supporting his motion to dismiss, and the Trustee, in his response to the motion to
dismiss, make clear that the Trustee actually seeks recovery under Count I of his complaint based
upon the following three distinct theories: (1) the subject transfers are avoidable under W. Va.
Code §§ 40-1A-4(a)(1) because the Debtor made them with an actual intent to hinder, delay, or
defraud its creditors; (2) the subject transfers are avoidable under W. Va. Code §§ 40-1A-4(a)(2)
because the Debtor did not receive reasonably equivalent value in exchange therefor at a time
when such transfers left it with an unreasonably small amount of assets in relation to its business,
or it should have believed that it would incur debts beyond its ability to pay as they came due;
and (3) the subject transfers are avoidable under W. Va. Code § 40-1A-5(b) because the Debtor
made them to Mr. Duet as an insider, on account of an antecedent debt to him, and at a time
when it was insolvent.
i. 	The Trustee’s Claim Under W. Va. Code § 40-1A-4(a)(1).
Mr. Duet asserts that the court must dismiss Trustee’s allegations under § 40-1A-4(a)(1)
because the Trustee failed to satisfy the heightened pleading standard to plead fraud with
particularity as required by Fed. R. Civ. P. 9(b). 	The Trustee asserts that his allegations are
sufficient to plead fraud with particularity in this instance such that his complaint should survive
Mr. Duet’s motion to dismiss. The court agrees with the Trustee.
As the court previously noted, a trustee is afforded greater liberality in pleading fraud.
Aphton, 423 B.R. at 85. And courts may consider a variety of factors in determining whether a
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debtor acted with actual intent under § 40-1A-4(a)(1). 	See W. Va. Code § 40-1A-4(b) (listing
factors). 	Although the Trustee’s allegations under § 40-1A-4(a)(1) are imprecise and do not fit
neatly into the standard for pleading fraud with specificity in the Fourth Circuit, the court finds
that the Trustee’s allegations under § 40-1A-4(a)(1) raise his right to relief beyond a speculative
level. In the complaint, the Trustee alleges facts regarding the Debtor’s insolvency at the time of
the transfers, Mr. Duet’s “insider” status, and the Debtor’s failure to timely make payments
pursuant to the Settlement Agreement. 	Construing the pleadings in the light most favorable to
the Trustee, and for purposes of evaluating a motion to dismiss under Rule 9(b), the court finds
that the Trustee’s complaint alleges a cause of action under § 40-1A-4(a) that is plausible on its
face.
ii. 	The Trustee’s Claim Under W. Va. Code § 40-1A-4(a)(2).
Mr. Duet seeks to dismiss the Trustee’s allegations under § 40-1A-4(a)(2) because he
asserts that the Trustee cannot prove the elements necessary to avoid the subject transfers under
that provision; specifically, that the Debtor did not receive reasonably equivalent value in
exchange for the transfers. In that regard, Mr. Duet asserts that the Fourth Circuit’s decision in
FDIC v. Kincaid Enterprises, Inc., 829 F.2d 1119 (4th Cir. 1987) controls. The Trustee asserts
that Kincaid is not controlling because it, among other things, did not arise in the bankruptcy
context or, more specifically, in the context of fraudulent transfer litigation. Rather, the Trustee
asserts that the court should follow its determination in Sheehan v. Sapp (In re Sapp), 364 B.R.
618 (Bankr. N.D.W. Va. 2007) that “[a] determination of whether ‘value’ is ‘reasonably
equivalent’ is based on the totality of the circumstances.” 	Id. at 632 (citation omitted). 	The
court agrees with the Trustee. Moreover, in determining reasonably equivalent value, the Fourth
Circuit has directed that, “[t]he focus is on the consideration received by the debtor, not on the
value given by the transferee.” Harman v. First Am. Bank of Md. (In re Jeffrey Bigelow Design
Grp., Inc.), 956 F.2d 479, 485 (4th Cir. 1992) (citations omitted).
The Trustee asserts that the Debtor did not receive reasonably equivalent value in
exchange for Mr. Duet’s membership interest because it, among other things, was compelled to
make the payments to Mr. Duet not just on its own behalf but also on the behalf of Mountaintop,
Mr. Skattell, and Mr. Tretheway. 	The Trustee also alleges that the Debtor was insolvent at the
time of the transfers, that all of the Debtor’s assets were encumbered, and that the Debtor failed
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to make timely payments under the Settlement Agreement. The court thus finds that, taking the
Trustee’s allegations as true, the Trustee sets forth sufficient facts in his complaint to raise a right
to relief under § 40A-1-4(a)(2) beyond a speculative level.
iii. 	The Trustee’s Claim Under W. Va. Code § 40-1A-5(b).
Mr. Duet seeks to dismiss the Trustee’s claim under W. Va. Code § 40-1A-5(b) based on
two arguments: (1) the action is barred by the statute of limitations; and (2) Mr. Duet is not an
“insider” of the Debtor, as that term is defined under the WVUFTA.
Regarding the statute of limitations, claims under § 40-1A-5(b) can only be brought
within one year “after the transfer was made.” 	Thus the Trustee may not employ § 40-1A-5(b)
to avoid transfers made to Mr. Duet beyond one year prepetition, and the Trustee concedes as
much.2 	The Trustee may, however, employ § 40-1A-5(b) to avoid transfers made from the
Debtor to Mr. Duet within the one-year period ending on the date the Debtor filed its voluntary
Chapter 11 petition. 	And to the extent that Mr. Duet asserts that the statute of limitations bars
recovery because “the obligation was incurred” on March 27, 2009, the court is unpersuaded
because only transfers are avoidable under § 40-1A-5(b). 	The parties made clear in their
pleadings that the Trustee is not pursuing a claim under § 40-1A-5(a), which provides for the
avoidance of obligations incurred by a debtor, and, absent authority to the contrary, the court
finds that transfers made pursuant to an obligation do not relate back to the date the obligation
was incurred. Each obligation or transfer is separately avoidable. § 40-1A-5(b).
To the extent that Mr. Duet seeks dismissal of the Trustee’s action under § 40-1A-5(b)
based upon the Trustee allegedly being unable to prove that Mr. Duet was an insider, the court is
not tasked with testing the sufficiency of the evidence in disposing of a motion to dismiss.
Rather, the court’s role is simply to determine whether the facts allege raise a right to relief
beyond a speculative level. 	Here, the Trustee asserts that Mr. Duet was not properly
2 Mr. Duet alleges in his reply that the Trustee concedes or abandons his cause of action under §
40-1A-5(b) because the Trustee alleges in his response that he does not need to prove Mr. Duet’s
status as an “insider” to establish a claim under § 40-1A-4. Although the Trustee’s response
does not specifically address Mr. Duet’s assertion regarding the Trustee’s claim under § 40-1A-
5(b), the court finds that a fair reading of the pleadings does not indicate the Trustee concedes his
cause of action in that regard. Rather, the court believes the Trustee concedes, if anything, that
he may avoid only those transfers made within a year preceding the petition date.
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disassociated from the Debtor or related entities because, among other things, the Settlement
Agreement contains nothing acknowledging Mr. Duet’s disassociation. The court thus finds that
the Trustee’s allegations regarding Mr. Duet’s status as an “insider” are sufficient to raise a right
to relief beyond the speculative level, particularly when construing them in light most favorable
to the Trustee as the nonmoving party.
B. Count II of the Trustee’s Complaint – Claim Under 11 U.S.C. § 548(a)(1)
By Count II of his complaint, the Trustee seeks to avoid certain payments made by the
Debtor to Mr. Duet within two years prepetition. 	The Trustee asserts that § 548(a) of the
Bankruptcy Code allows him to avoid and recover those payments. The Trustee’s allegations in
that regard, however, are imprecise. 	Mr. Duet, in his memorandum supporting his motion to
dismiss, and the Trustee, in his response to the motion to dismiss, make clear that the Trustee
actually seeks recovery under Count II of his complaint based upon the following two distinct
theories: (1) the subject transfers are avoidable under 11 U.S.C. § 548(a)(1)(A) because the
Debtor made them with an actual intent to hinder, delay, or defraud its creditors; (2) the subject
transfers are avoidable under 11 U.S.C. § 548(a)(1)(B) because the Debtor did not receive
reasonably equivalent value in exchange therefore at a time when such transfers left it with an
unreasonably small amount of assets in relation to its business, or it should have believed that it
would incur debts beyond its ability to pay as they came due.
i. The Trustee’s Claim Under § 548(a)(1)(A)
Mr. Duet seeks to dismiss the Trustee’s claim under § 548(a)(1)(A) because he asserts
that the Trustee failed to allege sufficient facts to meet the heightened pleading standard under
Rule 9(b). Mr. Duet also asserts that the Trustee’s allegations regarding § 548(a)(1)(A) are
deficient because the Trustee does not allege facts that demonstrate an intent to hinder, delay or
defraud creditors. Specifically, Mr. Duet challenges the Trustee’s claims under § 548(a)(1)(A)
because the Settlement Agreement was allegedly a freely negotiated contract which was entered
into beyond the permitted two-year look back period under § 548(a)(1), which allegedly
undermines the Trustee’s ability to claim fraudulent intent. 	In his response, the Trustee
maintains that he has pleaded properly the badges of fraud in the complaint. Regarding Mr.
Duet’s Motion to dismiss the claim under § 548(a)(1)(A), a trustee is afforded greater liberality
in pleading fraud. Aphton, 423 B.R. at 85. Moreover, since the determination of actual intent can
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be difficult, courts looks to the “badges of fraud”3 as circumstantial evidence of actual fraudulent
intent. Whitaker v. Mortgage Miracles, Inc. (In re Summit, LLC) 298 B.R. 62, 70 (Bankr.
W.D.N.C. 2002) (citing In re World Vision Entertainment, Inc., 275 B.R. 641, 656 (Bankr.
M.D.Fla. 2002)). 	“While each fact does not have to demonstrate actual fraud, the facts taken
together must lead to the conclusion that actual fraud existed.” Harman, 956 F.2d at 483–84.
While the badges themselves are not direct evidence of fraud, they can lead to the conclusion
that the debtor's conduct was motivated by such fraudulent intent. Summit, 298 B.R. at 70 (citing
In re Cohen, 142 B.R. 720, 728–29 (Bankr. E.D.Pa.1992)).
Although the alleged facts do not fit neatly into the standard for pleading fraud with
specificity in the Fourth Circuit, the court finds that The Trustee’s allegations under §
548(a)(1)(A) raise his right to relief beyond a speculative level. In the complaint, The Trustee
alleges the badges of fraud as circumstantial evidence of intent, including facts regarding the
Debtor’s insolvency at the time of the transfers, Mr. Duet’s “insider” status, and the Debtor’s
failure to make timely payments pursuant to the Settlement Agreement. Construing the pleadings
in the light most favorable to the Trustee, and for purposes of evaluating a motion to dismiss
under Rule 9(b), the court finds that the Trustee’s complaint alleges a cause of action under §
548(a)(1)(A) that is plausible on its face.
ii. The Trustee’s Claim Under § 548(a)(1)(B)
Regarding Mr. Duet’s motion to dismiss the complaint under § 548(a)(1)(B), he asserts
that the Settlement Agreement is evidence that the Debtor received reasonably equivalent value
for the transfers.4 	The term “reasonably equivalent value” is not defined by the Bankruptcy
3 Fraudulent intent may be inferred from the presence of certain “badges of fraud,” which
include: (1) The lack or inadequacy of consideration; (2) the family, friendship or close associate
relationship between the parties; (3) the retention of possession, benefit or use of the property in
question; (4) the financial condition of the party sought to be charged both before and after the
transaction in question; (5) the existence or cumulative effect of the pattern or series of
transactions or course of conduct after the incurring of debt, onset of financial difficulties, or
pendency or threat of suits by creditors; and (6) the general chronology of events and
transactions under inquiry. Allman v. Wappler (In re Cansorb Industries Corp.), Case no. 07-
50041, 2009 WL 4062220 at *8 (Bankr. M.D.N.C. Nov. 20, 2008).
4 In support of his argument, the Defendant compares the settlement agreement at issue before
this court with the settlement agreement before the Fourth Circuit in Fed. Deposit Ins. Corp. v.
Kincaid Enter., Inc., 829 F.2d 1119 (4th Cir. 1987), which is a non-bankruptcy case. In Kincaid,
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Code. In making a determination regarding reasonably equivalent value, the Fourth Circuit has
directed that, “[t]he focus is on the consideration received by the debtor, not on the value given
by the transferee.” Harman, 956 F.2d at 485. In support of his claim, The Trustee alleges that the
Debtor was compelled to make payments to Mr. Duet on behalf of the Debtor, Mountaintop, Mr.
Skattell and Mr. Tretheway. The Trustee also alleges facts that the Debtor was insolvent at the
time of the transfers; that the Debtor’s assets were encumbered, and the Debtor failed to make
timely payments under the Settlement Agreement. Solely for the purpose of adjudicating the
Motion to dismiss, the court must accept the facts plead by the Trustee as true. The court finds
that the Trustee’s complaint alleges sufficient facts to raise a right to relief under § 548(a)(1)(B).
C. Count III of the Trustee’s Complaint - Claim Under § 547(b)
Mr. Duet seeks to dismiss The Trustee’s cause of action under § 547(b) based on the
Trustee’s failure to plead sufficient facts to demonstrate that Mr. Duet was an insider of the
Debtor at the time of the transfers. To avoid transfers under § 547(b), the trustee must show that
the insolvent debtor made transfers to a creditor, based upon an antecedent debt, which enabled
the creditor to receive more than he would receive as a creditor of the debtor in a Chapter 7. 11
U.S.C. § 547(b). The look back period for the avoidance of a transfer to a creditor is generally 90
days. 11 U.S.C. § 547(b)(4)(A). However, the look back period is extended to one year prior to
the petition date if the trustee can establish that the creditor is an insider. 11 U.S.C. §
547(b)(4)(B). An ‘insider’ is a “(i) director of the corporation; (ii) officer of the corporation; (iii)
person in control of the debtor.” 11 U.S.C. § 101(31)(B). A “trustee's mere labeling of
transferees as “insiders” is not enough to establish a reasonable inference. . . [the trustee] must
include the basis for asserting that a defendant qualifies as an insider . . . and facts showing that
the alleged relationship is plausible.” Argell v. Ber Care, Inc., (In re Caremerica, Inc.) 409 B.R.
the Fourth Circuit affirmed the district court’s decision to enforce a settlement agreement, which
had already been adjudicated as valid in West Virginia state court. The Fourth Circuit
determined that although the appellees cannot seek relief in the form specific performance, they
may look to the settlement agreement, which contained valuation information, to determine
damages. The court finds Kincaid unpersuasive because the court dealt with the enforcement of a
settlement agreement and the determination of damages. Here, at issue is whether the Trustee can
recover and avoid any transfers made to Mr. Duet pursuant to the Settlement Agreement,
specifically whether the Debtor received reasonably equivalent value in exchange for the
transfers.
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737, 752 (Bankr. E.D.N.C. 2009). 	To support his contention that Mr. Duet was an insider and
the longer look back period, the Trustee recounts Mr. Duet’s connection to the Debtor and his
disassociation from Mountaintop while negotiating the Settlement Agreement and receiving
payments from the Debtor. The Trustee asserts that Mr. Duet never disassociated himself from
the Debtor. Accepting as true, in conjunction with a Rule 12(b) motion to dismiss, the Trustee’s
allegations that Mr. Duet was an insider of the Debtor at the time of the transfers as the court
must, the court finds that The Trustee’s claim under § 547(b) raises a right to relief beyond a
speculative level.
D. Counts IV and V of the Trustee’s Complaint -- Claims Under § 502(d) and § 550(a)
Mr. Duet, in his memorandum to support his Motion, seeks to dismiss the Trustee’s
claims under § 502(d) and § 550(a) as moot if the court should find that the transfers cannot be
avoided under § 548(a)(1) and § 547(b). In his response, the Trustee maintains that the claims
under § 502(d) and § 550(a) survive the Motion to the extent that the claims under § 548(a) and §
547(b) survive the Motion. Since the Trustee’s claims under § 548(a)(1) and § 547(b) raise a
plausible right to relief, the court finds that the remedies under § 502(d) and § 550(a) survive the
Motion.
IV. CONCLUSION
For the above-stated reasons, the court will enter a separate order denying Mr. Duet’s
Motion to Dismiss.
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