Imagine Fulfillment Servs., LLC v. DC Media Capital, LLC (In re Imagine Fulfillment Servs., LLC)

• Decision Date: 12 March 2013
• Docket Number: Bankruptcy No. 2:12–bk–20544–WB.,Adversary No. 2:12–ap–01514–WB.
• Citation: 489 B.R. 136
• Court: U.S. Bankruptcy Court — Central District of California
• Parties: In re IMAGINE FULFILLMENT SERVICES, LLC, Debtor. Imagine Fulfillment Services, LLC, Plaintiff, v. DC Media Capital, LLC, Defendant.

489 B.R. 136

In re IMAGINE FULFILLMENT SERVICES, LLC, Debtor.Imagine Fulfillment Services, LLC, Plaintiff,

v.DC Media Capital, LLC, Defendant.

Bankruptcy No. 2:12–bk–20544–WB.

Adversary No. 2:12–ap–01514–WB.

United States Bankruptcy Court,

C.D. California,

Los Angeles Division.

March 12, 2013.

Andy Kong, Aram Ordubegian, M. Douglas Flahaut, Arent Fox, LLP, Los Angeles, CA, for Plaintiff.

Jeffrey J. Williams, Law Offices of Jon A. Kodani, Santa Monica, CA, for Defendant.

AMENDED MEMORANDUM OF DECISION RE: (1) PLAINTIFF IMAGINE FULFILLMENT SERVICES, LLC'S MOTION FOR PARTIAL SUMMARY JUDGMENT OR, IN THE ALTERNATIVE, SUMMARY ADJUDICATION OF FACTS, AND (2) DEFENDANT DC MEDIA CAPITAL, LLC'S MOTION FOR PARTIAL SUMMARY JUDGMENT AS TO SECOND AND FIFTH AFFIRMATIVE DEFENSES

JULIA W. BRAND, Bankruptcy Judge.

Before the Court are (1) Plaintiff Imagine Fulfillment Services, LLC's (“Plaintiff” or “IFS”) Motion for Partial Summary Judgment, or in the Alternative, Summary Adjudication of Facts (“IFS' Motion”) and (2) Defendant DC Media Capital LLC's (“Defendant” or “DC Media”) Motion for Partial Summary Judgment as to Second and Fifth Affirmative Defenses (“DC Media's Motion”). IFS seeks summary judgment that three prepetition transfers to DC Media are avoidable preferences under section 547(b).¹ DC Media seeks summary judgment that the transfers are not avoidable because the defenses set forth in section 547(c)(2) and section 547(c)(9) apply.

A hearing was held on November 5, 2012, at 10:00 a.m., at which time the Court heard oral argument and took this matter under submission. The Court, having considered the pleadings, evidentiary record, and the oral arguments of counsel, finds and concludes as follows:

I. STATEMENT OF FACTS

A. Undisputed Facts

The Court finds the following facts to be undisputed.

IFS filed a voluntary chapter 11 petition on March 25, 2012 (the “Petition Date”).

Prior to the Petition Date, a dispute arose between IFS and DC Media. DC Media sued IFS in Los Angeles Superior Court (Case No. BC408418) for, among other things, breach of contract and damages (the “State Court Action”). On December 16, 2011, the Superior Court entered judgment in the State Court Action in favor of DC Media and against IFS for, among other things, breach of contract and damages, in the amount of $2,356,546.00, plus prejudgment interest, attorneys' fees and costs (the “Judgment”). The Judgment includes pre-judgment interest of $967,776, attorneys' fees of $541,946.50 and costs of $29,556.42 for a total of $3,997,223.

On December 27, 2011, DC Media filed a Notice of Judgment Lien with the California Secretary of State.

On January 24, 2012, DC Media recorded an Abstract of Judgment with the Los Angeles County Recorder.

On February 7, 2012, IFS filed a notice of appeal of the Judgment. This appeal was pending as of the Petition Date and remains pending.

On March 5, 2012, DC Media caused the Los Angeles County Sheriff's Office (“Sheriff”) to levy upon IFS' Wells Fargo bank account. The Sheriff seized approximately $81,196.00, which the Sheriff continues to hold and has not turned over to DC Media.

As of the Petition Date, IFS had not satisfied the Judgment. DC Media was a creditor of IFS during the period from December 16, 2011, through March 25, 2012.

During the period from December 16, 2011 through March 25, 2012 IFS did not own real property.

B. Facts related to IFS' Solvency

Both IFS and DC Media have provided evidence regarding IFS' solvency during the 90 days before the Petition Date. IFS introduced evidence showing the value of its assets and liabilities as stated on its balance sheet at the time of each of the transfers at issue.

+----------------------------------------------------------------------------+
                ¦        ¦Date             ¦Value of Assets and         ¦                    ¦
                ¦        ¦                 ¦Liabilities                 ¦                    ¦
                +--------+-----------------+----------------------------+--------------------¦
                ¦        ¦December 27, 2011¦Assets $472,217             ¦                    ¦
                +--------+-----------------+----------------------------+--------------------¦
                ¦        ¦                 ¦Liabilities $780,315        ¦                    ¦
                +--------+-----------------+----------------------------+--------------------¦
                ¦        ¦December 31, 2011¦Assets $683,802             ¦                    ¦
                +--------+-----------------+----------------------------+--------------------¦
                ¦        ¦                 ¦Liabilities $871,900        ¦                    ¦
                +--------+-----------------+----------------------------+--------------------¦
                ¦        ¦January 24, 2012 ¦Assets $596,969             ¦                    ¦
                +--------+-----------------+----------------------------+--------------------¦
                ¦        ¦                 ¦Liabilities $941,968        ¦                    ¦
                +--------+-----------------+----------------------------+--------------------¦
                ¦        ¦March 5, 2012    ¦Assets $653,929             ¦                    ¦
                +--------+-----------------+----------------------------+--------------------¦
                ¦        ¦                 ¦Liabilities $951,770        ¦                    ¦
                +--------+-----------------+----------------------------+--------------------¦
                ¦        ¦March 31, 2012   ¦Assets $908,227             ¦                    ¦
                +--------+-----------------+----------------------------+--------------------¦
                ¦        ¦                 ¦Liabilities $1,176,256      ¦                    ¦
                +----------------------------------------------------------------------------+
                

In addition, IFS contends that the Judgment is a liability that, when added to its balance sheet liabilities, establishes its insolvency at each of the relevant times. DC Media introduced an appraisal of certain of IFS' assets. DC Media also introduced evidence in the form of IFS' business records to show that IFS' cash in its checking account as of December 27, 2011 was $231,965 instead of negative $65,151, as stated on IFS' balance sheet and that its accounts receivable as of December 27, 2011 was $413,650 instead of $394,779 as provided in the balance sheet. This resultsin an asset value of IFS' assets as of December 27, 2011 of $788,204, according to DC Media. In addition, DC Media presented evidence that IFS overstated its accounts payable by $24,291 and its customer depositions by $29,191 and asserts that IFS' accrued state income tax liabilities by $12,590 should not be included in the calculation of IFS' liabilities. From this, DC Media asserts that IFS was solvent on December 27, 2011 and that a triable issue of material fact exists with respect to IFS' solvency.

II. DISCUSSION

This Court has jurisdiction over this adversary proceeding under 28 U.S.C. §§ 157(b) and 1334(b). This matter is a core proceeding under 28 U.S.C. §§ 157(b)(2)(A), (E), (H), and (O). Venue is proper in this Court. 28 U.S.C. § 1409(a).

A. Summary Judgment Standard.

Rule 7056 states that Civil Rule 56 applies in adversary proceedings. Under Civil Rule 56(c), summary judgment is warranted where “the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the [moving party] is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(c). The court may grant summary judgment on all or part of the claim. Fed.R.Civ.P. 56(a)-(b).

To prevail on a summary judgment motion, the moving party must show that there are no triable issues of material fact as to matters on which it has the burden of proof at trial. See Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). On issues where the moving party does not have the burden of proof at trial, the moving party is required to show only that there is an absence of evidence to support the non-moving party's case. Id.

To defeat a summary judgment motion, the non-moving party must affirmatively present specific admissible evidence sufficient to create a genuine issue of material fact for trial. See Celotex Corp., 477 U.S. at 324, 106 S.Ct. 2548. The non-moving party may not rely solely on its pleadings or conclusory statements. Fed.R.Civ.P. 56(e). Nor may the non-moving party merely attack or discredit the moving party's evidence. Nat'l Union Fire Ins. Co. v. Argonaut Ins. Co., 701 F.2d 95, 97 (9th Cir.1983).

B. The Parties' Contentions.

IFS seeks summary judgment that (i) the filing of the Notice of Judgment Lien with the California Secretary of State (“Transfer One”), (ii) the recording of the Abstract of Judgment with the Los Angeles County Recorder (“Transfer Two”), and (iii) the Sheriff's levy on IFS bank account (“Transfer Three”) are avoidable preferences under section 547(b). DC Media argues that the Court must deny IFS' Motion because genuine issues of material fact remain as to (1) whether Transfer One was made during the 90–day window, (2) whether IFS was insolvent on the transfer dates, and (3) whether DC Media will receive more from the transfers than it would receive in a hypothetical chapter 7 liquidation.

DC Media seeks summary judgment that (1) Transfer One is not avoidable pursuant to section 547(c)(2) because the filing of the Notice of Judgment Lien was made in the ordinary course of business and according to ordinary business terms, and (2) Transfer Two is not avoidable pursuant to section 547(c)(9) because IFS owns no real property, and therefore the Abstract of Judgment is less than the $5,850.00 minimum amount that IFS may recover as a preferential transfer.

For the reasons set forth below, the Court will grant summary judgment as to each element of Transfer One, other than the last element, that the transfer allows DC Media to receive more than it would in a hypothetical chapter 7 liquidation. The Court will deny IFS' Motion with respect to Transfer Two. The Court will grant summary judgment as to Transfer Three. The Court will deny DC Media's Motion.

C. IFS is Entitled to...