In re International Administrative Services, Inc., No. 04-11829.
| Decision Date | 03 May 2005 |
| Docket Number | No. 04-11829. |
| Citation | 408 F.3d 689 |
| Parties | In Re: INTERNATIONAL ADMINISTRATIVE SERVICES, INC., Debtor. IBT International, Inc., Southern California Sunbelt Developers, Inc., Defendants-Appellants, v. John A. Northern, Plaintiff-Appellee. |
| Court | U.S. Court of Appeals — Eleventh Circuit |
David Richard McFarlin, Frank M. Wolff, Wolff, Hill, McFarlin & Herron, P.A., Orlando, FL, for Defendants-Appellants.
Hans Christian Beyer, Saxon, Gilmore, Carraway, Gibbons, Lash & Wilcox, P.A., Tampa, FL, for Plaintiff-Appellee.
Appeal from the United States District Court for the Middle District of Florida.
Before MARCUS, FAY and SILER*, Circuit Judges.
This appeal stems from the bankruptcy of International Administrative Services, Inc. ("IAS" or the "Debtor"). The Debtor's stock trustee (the "Trustee"), acting on behalf of the Official Committee of Unsecured Creditors (the "Committee") filed an adversary proceeding against IBT International, Inc. ("IBT") and Southern California Sunbelt Developers, Inc. ("SCSD") to recover assets that had been fraudulently transferred from the Debtor to IBT and SCSD. The bankruptcy court entered judgment in the adversary proceeding in favor of the Trustee. IBT and SCSD appealed to the district court, which affirmed the judgment, and the Defendants then appealed to this Court. IBT and SCSD raise four grounds for error that would require reversal: (1) that the statute of limitations prevented an extension of the time for bringing the action by either court order or equitable tolling; (2) that the avoidance action was improperly brought because the Trustee did not first avoid the transfer to the initial transferees; (3) that the Trustee improperly traced the funds sought to be recovered; and (4) that the bankruptcy court incorrectly calculated pre-judgment interest against the Defendants. For the reasons set forth below, we disagree with the Defendants' assignments of error, and affirm the judgment of the bankruptcy court.
IAS specialized in marketing financial advice to unsophisticated consumers through a barrage of seminars and late night infomercials. A leviathan in the world of get-rich-quick schemes, IAS guaranteed customers increased wealth, provided they followed the company's financial strategies, which were contained in IAS publications. The trap, however, was that to be privy to this valuable information, a customer had to first purchase a membership and then pay a substantial amount in annual dues. Essentially, IAS promoted a gamble-free method of getting rich, once, of course, customers paid IAS, received the publications, and meticulously followed the instructions.
Charles Givens founded IAS in 1986, and was the company's sole shareholder. He served as an officer and director until 1991 or 1992, although management continued to look to Givens for guidance after his departure. As the visible voice of IAS, Givens traveled extensively, promoting his "wealth without risk" plan. A dynamic and compelling speaker, Givens persuaded audiences to buy expensive memberships in IAS, and those numbers swelled to over 250,000.
Sheer numbers, however, do not validate a theory absent empirical evidence, and doubt soon fell upon the legitimacy of the IAS financial advice. A majority of the information was neither novel nor covert — most of it was readily available and comprised common-sense business practices. Other advice, such as encouraging customers to cancel uninsured motorist coverage on their vehicles, raised more red flags.
In 1991, several members initiated lawsuits against IAS and Givens, challenging the practicality of their advice. On the advice of IAS, several customers dropped their uninsured motorist coverage, only to be involved in serious car crashes with uninsured drivers, and leaving them with uncompensated losses. The customers sued IAS for giving them the detrimental advice. Eventually, eleven similar lawsuits were filed throughout the country, seeking a large amount in damages.
Another layer was added to IAS' troubles when the SEC targeted Givens and IAS as part of a securities fraud investigation in connection to a real estate venture. IAS' problems grew when the attorney generals of several states launched major investigations involving IAS' failure to pay the state sales tax generated at seminars around the country. Finally, the Federal Trade Commission aimed its sights at the company's business practices.
IAS vigorously defended the lawsuits and government investigations, but it was clear that IAS' exposure to liability in these cases exceeded $10 million. As a preemptive method of preserving both his and IAS' wealth, Givens retained the services of attorney David H. Tedder ("Tedder"), his law firm, and his company, The Institute for Asset & Lawsuit Protection, to formulate a plan that would shield the assets from creditors.1
Tedder moved to Florida in order to implement the IAS/Givens asset protection plan. First, assets were transferred to various Tedder-owned foreign and domestic entities. Tedder then recycled the assets through a tangled and complex web of multi-step international transactions. In total, Tedder transferred assets more than one hundred times among twenty-three different entities. Between January 1992 and 1996, Givens removed a treasure chest in excess of $50 million from IAS' coffers; putting it out of the direct reach of IAS' creditors.
On June 20, 1996, IAS filed a voluntary Chapter 11 bankruptcy petition, no doubt due in part to Givens and Tedder's purge and plunder scheme. The U.S. Trustee appointed the Official Committee of Unsecured Creditors (the "Committee") to facilitate the IAS reorganization, which would seem plausible because Givens no longer managed the day-to-day affairs of the debtor. Unfortunately for the Debtor, Givens still played an active role in the company, which crippled IAS' ability to investigate the suspect transfers without bias or influence.
The Committee soon discovered the existence of the Givens-IAS transfers, and with the goal of reorganization in mind, the Debtor assigned its right and duty to pursue any fraudulent transfer actions or avoidance claims to the Committee.2 By September of 1996, the Trustee then began the unenviable task of unraveling the knotted trail of transfers. The Trustee's ability to investigate the transfers was hampered by Givens and his associates, who, among other things, delayed document production, withheld discovery responses, and simply "lost" records of the asset transfers. As a result, the Trustee filed a motion to hold Givens, and the professionals assisting him in covering the tracks, in contempt of court. The bankruptcy court appointed a Special Master to oversee and administer discovery compliance.
The problems associated with discovery led to the Trustee's inability to timely identify the long chain of transferees, and thus initiate any proceeding to avoid the transfers within the limitation period, which expired on June 20, 1998, two years after IAS filed for bankruptcy. The bankruptcy court granted the Committee's request to extend the time to file avoidance actions through the time of a hearing by the Special Master on July 29, 1998, when the court would again consider any extensions based upon the progression of discovery.
As seems par for this case, discovery disputes continued, and the hearing in which the Special Master delivered his report was not concluded until September 3, 1998, more than one month after the deadline of the initial extension. At this hearing, the Special Master determined that the all-important transfer documents did not appear to have been "misplaced," but, rather, that the items had been "deliberately and intentionally secreted" from the Trustee. Based upon these findings, the Trustee moved in open court to further extend the time to file avoidance actions. The oral motion was granted, and the bankruptcy court entered a written order memorializing its ruling on September 17, 1998. That order extended the time period for the Trustee to file avoidance actions until February 10, 1999.
On February 10, 1999, the Trustee filed this adversary proceeding against a list of defendants, including John Does. IBT and SCSD were not named parties until August 17, 1999, once the Trustee had traced IAS assets to them, and filed a first amended complaint. Count I of the complaint sought to avoid any transfer of an interest of the Debtor in property pursuant to 11 U.S.C. § 544(b) and Florida Statutes §§ 726.105, 726.106, and 726.108, which permit avoidance of transfer made with the actual intent to hinder, delay, or defraud creditors. In Count II, the Trustee sought turnover of the property improperly transferred from the Debtor under 11 U.S.C. § 542(a).
The Trustee targeted IBT and SCSD because they received $1,050,000 from IAS, through several of Tedder's intricate transfer devices. The exact route the money took, and the various stops it made, is a difficult road to follow. After essentially being laundered through the Tedder mechanisms, the IAS money trickled down to the Van Dan Limited Partnership ("Van Dan"), which was a Nevada entity owned by Tedder. Van Dan transferred $50,000 of IAS money to IBT on May 11, 1993. Two days later, a Netherlands company, Eurokredit Finance S.A. ("Eurokredit"), transferred another $3,500,000 of IAS funds to an account held by H.D., Inc., an Isle of Mann corporation. On May 26, 1993, Eurokredit transferred an additional $3,350,000 of the Debtor's funds to a second HD-held account. Tedder himself transferred $999,975 from the two HD accounts to a Van Dan account on July 1, 1993. Finally, on July 7, 1993, Tedder transferred $1,000,000 from Van Dan to IBT and SCSD. Consequently, between the May 11 and July 7, 1993, transfers, IBT and SCSD received $1,050,000 in Debtor-derived funds.
...
To continue reading
Request your trial
-
Morton v. Kievit ( In re Vallecito Gas, LLC), CASE NO. 07-35674-BJH-11
...can be extended by agreement of the parties. Granger v. Aaron's Inc., 636 F.3d 708 (5th Cir. 2011) (EEOC case); In re Int'l Admin. Servs., Inc., 408 F.3d 689 (11th Cir. 2005); Int'l Brotherhood of Teamsters, Gen'l Teamsters Union Local 406 v. Fivecap, Inc.,No. 1:02-cv-928, 2003 WL 22697173 ......
-
Mendelsohn v. Roslyn, LLC (In re Leff)
...may be had from a subsequent transferee without suing the initial transferee."); see, e.g., IBT Int'l Inc. v. Northern (In re Int'l Admin. Servs., Inc.) , 408 F.3d 689, 708 (11th Cir. 2005) ("[W]e hold that Section 550(a) does not mandate a plaintiff to first pursue recovery against the ini......
-
Sec. Investor Prot. Corp. v. Bernard L. Madoff Inv. Sec. LLC
...the immediate or mediate transferees, and nothing in the statute requires a different result. IBT Int'l, Inc. v. Northern (In re Int'l Admin. Servs., Inc. ), 408 F.3d 689, 706-07 (11th Cir. 2005). The Trustee pleaded the avoidability of the initial transfer (from BLMIS to Fairfield Sentry) ......
-
Sec. Inv'r Prot. Corp. v. Bernard L. Madoff Inv. Sec. (In re Madoff)
...initial transferee before asserting an action against subsequent transferees. IBT Int'l Inc. v. Northern (In re Int'l Admin Servs., Inc.), 408 F.3d 689, 706-07 (11th Cir. 2005). The Trustee is free to pursue any of the immediate or mediate transferees, and nothing in the statute requires a ......
-
CHAPTER 2 TINKERBELLE, THE CRUDE PEOPLE AND THE BANKRUPTCY CODE
...v. Leonard (In re AVI, Inc.), 389 B.R. 721 (B.A.P. 9th Cir. June 13, 2008); IBT Int'l, Inc. v. Northern (In re Int'l Admin. Servs., Inc.), 408 F.3d 689, 708 (11th Cir. 2005); but see, Weinman v. Simons (In re Slack-Horner Foundries Co.), 971 F.2d 577, 580 (10th Cir. 1992) (requiring avoidan......
-
Trial Practice and Procedure - John O'shea Sullivan and Ashby L. Kent
...under the Alien Tort Claims Act and the Torture Victim Protection Act, 28 U.S.C. Sec. 1350 (2000)); In re Int'l Admin. Servs., Inc., 408 F.3d 689, 700 (11th Cir. 2005) (applying an extraordinary circumstances standard to tolling the statute of limitations under 11 U.S.C. Sec. 546(a)(1) (200......
-
Liquidating Trust Plans in the Tenth Circuit Recovering on Avoidance Claims
...Slack-Homer Foundries Co., 971 F.2d 577, 580 (10th Cir. 1992). [5] Id [6] Id. [7] Id. [8] Id. at 580. [9] In re Int'l Admin. Servs., Inc., 408 F.3d 689 (11th C1r 2005). This case has been widely followed Most circuit courts that have considered the issue, including the Eleventh Circuit, hav......
-
Chapter 5 THE ROLE OF THE FORENSIC ACCOUNTANT IN FRAUDULENT TRANSFER LITIGATION
...the Trustee's burden to trace the funds he claims are property of the estate"); IBT Intl Inc. v. Northern (In re Int'l Admin. Servs.), 408 F.3d 689, 708-709 (11th Cir. Fla. 2005) (finding that a plaintiff has the burden of establishing by a preponderance of the evidence that the funds for w......