661 F.3d 623 (11th Cir. 2011), 10-10683, Perkins v. Haines

Docket Nº:10-10683.
Citation:661 F.3d 623
Opinion Judge:HODGES, District Judge:
Party Name:William F. PERKINS, Plaintiff-Appellant, v. Aena Y. HAINES, James Bronner, Simone Bronner, Nathaniel Bronner, George Russell Curtis, Sr., et al., Defendants-Appellees.
Attorney:Colin Bernardino, John W. Mills, Kilpatrick Townsend & Stockton, LLP, Atlanta, GA, for Plaintiff-Appellant. Robert Jay Mottern, Investment Law Group of Gillett, Mottern, Thomas M. Byrne, Angela R. Fox, Juanita Passyn, Sutherland, Asbill & Brennan, LLP, Christopher Dubree Phillips, Lamberth, Cifel...
Judge Panel:Before EDMONDSON and MARTIN, Circuit Judges, and HODGES,[*] District Judge.
Case Date:October 27, 2011
Court:United States Courts of Appeals, Court of Appeals for the Eleventh Circuit
 
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Page 623

661 F.3d 623 (11th Cir. 2011)

William F. PERKINS, Plaintiff-Appellant,

v.

Aena Y. HAINES, James Bronner, Simone Bronner, Nathaniel Bronner, George Russell Curtis, Sr., et al., Defendants-Appellees.

No. 10-10683.

United States Court of Appeals, Eleventh Circuit

October 27, 2011

Page 624

[Copyrighted Material Omitted]

Page 625

Colin Bernardino, John W. Mills, Kilpatrick Townsend & Stockton, LLP, Atlanta, GA, for Plaintiff-Appellant.

Robert Jay Mottern, Investment Law Group of Gillett, Mottern, Thomas M. Byrne, Angela R. Fox, Juanita Passyn, Sutherland, Asbill & Brennan, LLP, Christopher Dubree Phillips, Lamberth, Cifelli, Stokes, Ellis & Nason, PA, Kevin A. Stine, Baker, Donelson, Bearman, Caldwell & Berkowitz, PC, Mark A. Kelley, Heather D. Brown, Kitchens, Kelley, Gaynes, PC, Paul Michael Spizzirri, Spizzirri Law Offices, Sharon M. Lewonski, Epstein, Becker & Green, PC, Jonathan H. Fain, Jonathan H. Fain & Associates, PC, William R. Lester, Fryer, Shuster & Lester, PC, Greg T. Bailey, Atlanta, GA, Timothy W. Mungovan, Joshua S. Barlow, Lee Harrington, Jonathan Sablone, Nixon Peabody, LLP, Boston, MA, Sblend A. Sblendorio, Catosha L. Woods, Hoge, Fenton, Jones & Appel, Pleasanton, CA, James K. Knight, Jr., Marietta, GA, for Defendants-Appellees.

Morgan Bradylyons, U.S. SEC, Washington, DC, for SEC, Amicus Curiae.

Mark S. Kaufman, Bryan Eugene Bates, McKenna, Long & Aldridge, LLP, Atlanta, GA, for Committee of Investors.

Appeal from the United States Bankruptcy Court for the Northern District of Georgia.

Before EDMONDSON and MARTIN, Circuit Judges, and HODGES,[*] District Judge.

HODGES, District Judge:

International Management Associates, LLC, and several related entities (the " Debtors" ) were operated as the instruments of a Ponzi scheme. 1 A receiver ultimately filed voluntary petitions in the bankruptcy court seeking relief for each of the Debtors under Chapter 11 of the Bankruptcy Code. A consolidated plan of liquidation was approved and William F. Perkins was appointed as Plan Trustee. The Trustee then instituted a number of adversary proceedings in the bankruptcy court seeking to avoid and to recover distributions that had been made to the investors in the Debtors. The Trustee claimed that transfers to the investors prior to the collapse of the Ponzi scheme were " fraudulent transfers" under 11 U.S.C. § 548(a)(1)(A) and applicable state law. The investors asserted an affirmative defense under 11 U.S.C. § 548(c), claiming that the transfers were " for value." The Trustee moved for partial summary judgment. The bankruptcy court denied the motion, effectively upholding the availability of the investors' affirmative defense.

The Trustee filed this appeal.2 It presents an issue of first impression in this Circuit. We affirm.

Page 626

I.

Kirk Wright formed the Debtors purportedly to manage and operate them as hedge funds, each of which was structured either as a limited liability company or a limited partnership. In reality, Wright used the Debtors to operate a fraudulent Ponzi scheme whereby capital contributions made to the Debtors by later equity investors were used to repay earlier investors more than their investments were actually worth, as well as fictitious profits.3 This was done to perpetuate the illusion that the Debtors had positive investment gains, to keep existing investors from seeking recovery of their equity investments, and to induce prospective investors to make new equity investments.

Each of the investor defendants made a capital contribution through execution of a limited liability company agreement, a limited partnership agreement, and/or a subscription agreement with one or more of the Debtors such that each investor defendant held an equity interest in one or more of the Debtors, denominated as a membership unit or limited partnership interest. At some point during the operation of the Ponzi scheme, each investor defendant received one or more transfers of property from one or more of the Debtors, representing returns of principal and/or purported profits on their equity investments.

II.

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