THE POST-CONFIRMATION COMMITTEE FOR SMALL LOANS INC v. INNOVATE LOAN SERVICING CORP

Filing 62

ORDER denying 43 Motion for Summary Judgment; granting in part and denying in part 44 Motion for Summary Judgment; granting 49 Motion to Amend/Correct; denying 54 Motion for Oral Argument. Ordered by US DISTRICT JUDGE W LOUIS SANDS on 09/30/2015. (mdm)

IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF GEORGIA
ALBANY DIVISION
POST-CONFIRMATION COMMITTEE
FOR SMALL LOANS, INC.,

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Plaintiff,
v.
INNOVATE LOAN SERVICING
CORPORATION, et al.,
Defendants.

CASE NO.: 1:13-CV-191 (WLS)

ORDER
Pending before the Court are the Parties’ Cross Motions for Summary Judgment
(Docs. 43, 44) and Defendant Innovate Loan Servicing Corporation’s Motions to Amend
and for Oral Argument (Docs. 49, 54).

For the reasons that follow, Plaintiff Post-

Confirmation Committee for Small Loans, Inc.’s Motion for Summary Judgment (Doc. 44)
is GRANTED-IN-PART and DENIED-IN-PART, Defendant’s Motion for Summary
Judgment (Doc. 43) is DENIED, and Defendant’s Motion to Amend (Doc. 49) is
GRANTED. Accordingly, Defendant’s Motion for Oral Argument (Doc. 54) is DENIED
AS MOOT.
PROCEDURAL HISTORY
The Complaint in the above-captioned action was filed on December 10, 2013 (Doc.
1) and amended on February 26, 2014. (Doc. 9.) Defendant Innovate Loan Servicing Corporation answered the Amended Complaint on March 12, 2014 (Doc. 13) and amended its
Answer on April 2, 2014 (Doc. 16), but Co-Defendant Best Buy Autos of Bainbridge, Inc.
failed to appear in this case. The Court denied Plaintiff Post-Confirmation Committee for
Small Loans, Inc.’s Motion for Default Judgment (Doc. 21) as to Co-Defendant on February

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12, 2015 and ordered Plaintiff to refile its motion within thirty (30) days of the Court’s order
granting summary judgment in favor of or against Defendant. (See Doc. 50 at 2.)
On January 30, 2015, the Court denied Defendant’s Motion for Judgment on the
Pleadings (Doc. 30) and found that Plaintiff sufficiently pled its actual and constructive
fraudulent transfer claims under both Federal Rules of Civil Procedure 8(a) and 9(b). (Doc.
42 at 3-5.) The Court further found that the Amended Complaint did not establish enough
factual matter for an in pari delicto defense to apply against Plaintiff on the face of the pleadings. (Id. at 6.)
The Parties have filed their cross-motions for summary judgment as well as responses
and replies thereto. (See Docs. 43, 44, 51, 52, 59, 61.) They have complied with M.D. Ga.
L.R. 56 by attaching separate and concise statements of material fact along with responses
thereto.1 (Docs. 43-1, 44-1, 52-1, 53.) Defendant additionally moved to amend or correct its
Motion for Summary Judgment by adding an additional exhibit for the Court’s consideration
(see Doc. 49) and moved for Oral Argument pursuant to M.D. Ga. L.R. 7.5. (Doc. 54.)
Plaintiff filed a brief response to the Motion for Oral Argument and Defendant made its reply thereto. (Docs. 56, 57.) As such, the Court finds that the cross-motions for summary
judgment and motion for oral argument are ripe for review.
FACTUAL HISTORY
I. Introduction
The following facts are derived from the Complaint (Doc. 1), as amended (Doc. 9),
the Amended Answer (Doc. 16), the Committee’s Statement of Undisputed Material Facts
and Responses (Docs. 44-1, 52-1), and Innovate’s Statement of Undisputed Material Facts
and Responses (Docs. 43-1, 53, 60), all of which were submitted in compliance with M.D.
Ga. L.R. 56, and the record in this case. Where relevant, the factual summary also contains
undisputed and disputed facts derived from the pleadings, the discovery and disclosure materials on file, and any affidavits submitted, all of which are construed in a light most favorable to the nonmoving party. See Fed. R. Civ. P. 56; Celotex Corp. v. Catrett, 477 U.S. 317, 32223 (1986).
1

Though not part of the Local Rule, Parties also submitted supplemental material facts. (Docs. 52-1, 53, 60.)

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II. Relevant Facts
A. The Parties
The Money Tree of Georgia, Inc. (“TMG”), Small Loans, Inc. (“SLI”), The Money
Tree, Inc. (“TMT”), The Money Tree of Florida, Inc. (“TMF”), and The Money Tree of
Louisiana, Inc. (“TML”, collectively “the Debtors”), were engaged in the consumer finance
business in Georgia, Alabama, Florida, and Louisiana, respectively. (Doc. 9 at ¶ 4.) The
Debtors filed voluntary petitions for reorganization under Chapter 11 of the Bankruptcy
Code on December 16, 2011, in the United States Bankruptcy Court for the Middle District
of Alabama. (Id. at ¶ 5.)
Plaintiff Post-Confirmation Committee for Small Loans, Inc. (“the Committee”) was
formed pursuant to an Amended Joint Plan of Liquidation (“the Plan”), and has standing to
bring any claims and causes of action held by the Debtors, their Affiliates and subsidiaries,
and the Estates. (Docs. 9 at ¶ 5; 44-2 at 23.) The Plan specifically preserved claims against
certain individuals and entities, including Defendant Innovate Loan Servicing, Corp. (“Innovate”). (Doc. 44-1 at ¶ 3.) Innovate is a Texas corporation with its principal place of business in Texas. (Doc. 9 at ¶ 6.) Innovate specializes in purchasing portfolios of automobile
loans. (Doc. 44-1 at ¶ 4.)
Co-Defendant Best Buy Autos of Bainbridge, Inc. (“Best Buy”) is a Georgia corporation and a wholly owned subsidiary of TMG. (Docs. 9 at ¶ 7; 43-1 at ¶ 3.) TMG was also a
creditor of Best Buy from 2009 to 2011. (Doc. 44-1 at ¶ 28.) Best Buy was in the business
of selling and financing automobiles to subprime borrowers. (Doc. 43-1 at ¶ 4.) Best Buy
generated accounts receivable when it financed the purchase of automobiles by consumers,
typically held the promissory notes, and collected the accounts in the ordinary course of its
business. (Doc. 9 at ¶ 11.)
B. The 2010 and 2011 Agreements
Best Buy and Innovate entered into a Purchase and Sale Agreement of Contracts on
June 23, 2010 (“the 2010 Agreement”) to which Best Buy assigned accounts to Innovate for
a “Purchase Price” of at least $880,000 in exchange for $749,236. (Docs. 44-1 at ¶ 6; 53 at ¶
6.) The sale price of the 2010 loans represented approximately 85% of the aggregate unpaid

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principal balances plus accrued but unpaid interest due under the accounts. (Doc. 43-1 at ¶
19.) The 2010 Accounts bore average interest rates in excess of 21%. (Doc. 44-1 at ¶ 10.)
The 2010 Agreement also required Best Buy to repurchase accounts that were not paid by
the initial borrowers or account debtors. (Id. at ¶ 11.) Best Buy guaranteed nine (9) monthly
payments to Innovate under the repurchase obligation. (Id. at ¶ 12.) However, if any of the
payments were not made, Innovate retained the right to “put back” the account or require
Best Buy to repurchase the unpaid accounts. (Id. at ¶ 13.) As a result of the repurchase obligation, Best Buy paid $108,086 to repurchase accounts from Innovate. (Id. at ¶ 14.)
Similarly to the 2010 Agreement, Best Buy and Innovate entered into Receivable Purchase and Sale Agreement (Limited Recourse) on December 14, 2011 (“the 2011 Agreement”) to which Best Buy assigned accounts to Innovate for a “Payoff” balance of not less
than $5,210,339.97 in exchange for $4,428,788.98. (Docs. 44-1 at ¶ 17; 53 at ¶ 17.) The sale
price of the 2011 loans represented about 85% of the unpaid principal balance plus all accrued and unpaid interest and all accrued unpaid fees, charges, and the like of obligations
owed under the accounts. (Doc. 43-1 at ¶ 28.) The 2011 Accounts bore average interest
rates in excess of 19%. (Doc. 44-1 at ¶ 18.) The 2011 Agreement also required Best Buy to
assume the same repurchase obligations, including Innovate’s “put back” rights, in the event
the accounts were not paid. (Id. at ¶ 19, 23.) Yet, unlike the 2010 Agreement, Best Buy
guaranteed three (3) monthly payments, or six (6) biweekly payments, of the account debtors
to Innovate. (Id. at ¶ 22.) Best Buy ultimately paid Innovate $474,184 to repurchase those
unpaid accounts. (Id. at ¶ 24.)
Bradley Bellville, former President of TMT, TMG, and Best Buy, approved of all material transactions on behalf of his respective organizations. (Doc. 43-1 at ¶¶ 10-13.) Along
with Steve Morrison (Chief Financial Officer of TMT and TMG) 2 and Natasha Wood (former General Counsel for TMT, TMG, and Best Buy), Bellville participated in negotiations
with Innovate to effectuate the 2010 and 2011 Agreements. (Id. at ¶¶ 21, 30.) Prior to execution, Bellville, Morrison, and Wood reviewed the terms and repurchase obligations of the
Though Morrison was not an officer of Best Buy, he “handled all accounting functions for [Best Buy].”
(Doc. 43-1 at ¶ 15.) The corporate accounting staff for TMT also “handled all of the accounting and finance
functions for [Best Buy], to include compiling financial statements for [Best Buy], preparing reconciliations
for [Best Buy’s] bank accounts, and other accounting duties.” (Id. at ¶ 5.)
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Agreements. (Id. at ¶¶ 23, 31.) It is undisputed that Bellville, Morrison, and Wood all understood the terms of the 2010 Agreement and the effect of the repurchase obligations. (Id.
at ¶ 25.) Bellville, Morrison, and Wood even compared the 2010 Agreement to the proposed 2011 Agreement prior to its execution. (Id. at ¶ 32.) Likewise, it is undisputed that
Bellville and Morrison understood the terms of the 2011 Agreement. (Id. at ¶ 34.) Bellville
and Morrison even considered a competing offer, but determined Innovate’s offer was superior. (Id. at ¶ 35.) In each instance, neither Morrison nor Wood advised Bellville to not go
through with the Agreements. (Id. at ¶¶ 24, 31.) Thus, Bellville gave his full consent and
approval for Best Buy to enter into the 2010 and 2011 Agreements with Innovate. (Id. at ¶¶
26, 36.)
At the time of the 2010 and 2011 Agreements, however, Best Buy was insolvent.
(Doc. 44-1 at ¶ 29.) Innovate’s Chief Financial Officer, Daniel Martinez, could not recall
whether Innovate conducted a solvency analysis of Best Buy’s financial circumstances prior
to entering into these Agreements. (Id. at ¶ 21.) Best Buy also did not volunteer its “precarious financial position” to Innovate during negotiations. (Doc. 43-1 at ¶ 37.) Even though
Best Buy never filed for bankruptcy, it paid TMG over $5.6 million to reduce Best Buy’s intercompany obligation. (Id. at ¶¶ 39-40.) From September 25, 2009 to December 16, 2011,
Best Buy reduced its intercompany debt from $22,692,351.31 to $17,050,061.42. (Id. at ¶
40.)
C. Expert Assessments of the 2010 and 2011 Agreements
Jerry L. Robinson, retail lending, accounting, and finance expert for the Committee,
opined that Best Buy was not only “under distressed conditions that were not in the ordinary” for Buy Here Pay Here (BHPH) dealers like Best Buy, but Best Buy sold its account
receivables on terms “significantly worse than market to Innovate.” (Doc. 43-10 at 2.)
While the market for BHPH dealers were “competitive and had adequate financial liquidity”
in 2010 and 2011, Robinson stated that the 2010 nine-month and 2011 three-month repurchase provisions “caused the creditors of Best Buy to suffer additional cash losses as Best
Buy was forced to provide additional replacement collateral to Innovate in excess of the
market terms that could have otherwise been realized by Best Buy.” (Id.) Robinson based

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these conclusions on the Bellville deposition (See Docs. 46-1 to -7.), the “unusual” nine- and
three-month recourse, buy-back term for “cherry-picked”3 portfolios, and Innovate’s failure
to review Best Buy’s poor financial condition prior to the transfers. (Id. at 4-5.)
In contrast, Steve Burke, long-time professional in the BHPH industry, rebutted the
Robinson Report in a number of ways. First, Burke rejected the opinion that Best Buy suffered cash losses due to providing replacement collateral to Innovate, because it is apparently
common practice for BHPH dealers to repossess, resell, and/or refinance (called “Recycling”) the same collateral that would have otherwise defaulted under Innovate or Best Buy. 4
(Doc. 43-11 at 6-7.) In response to Robinson’s statement that the terms of the 2010 and
2011 Agreements were “significantly worse than market,” Burke contended that the 2010
and 2011 Accounts were actually purchased at an above market rate for the high risk of subprime loans. (Id. at 9.) With regard to the repurchase obligations, Burke stated that in his
experience, “recourse is always part of the deal,” and the nine- and three-month payment
terms “were standard and customary for similar transactions.” (Id. at 12, 20.)
Innovate’s Vice President of Risk Management, Preston Cecil, provided insight on
how Innovate negotiates and prices their potential purchase of car loan portfolios. (See Doc.
49-1.) Innovate considers a range of factors, including the total remaining face value of the
contracts sold, the average interest rate, the average credit score of an obligor, the size of the
portfolio purchased, the reputation of the seller in the industry, and other intangible factors
that effects Innovate’s purchasing and pricing decisions. (Id. at ¶ 5.) Under this methodology, Cecil concluded that the 2010 and 2011 Agreements were not “negotiated and consummated in a distressed sale environment, and that all sales were negotiated at arm’s length, in
good faith, and for fair value.” (Id. at ¶ 10.) As for the repurchase obligations, he found

According to Jerry L. Robinson, “cherry picked” refers to loans of the “highest quality,” while Steve Burke
refers to the same term as loans that meet a company’s underwriting guidelines and loss projections. (Docs.
43-10 at 5; 43-11 at 12.)
4 During S. Gregory Hays’ tenure as Chapter 11 Trustee, he neither conducted nor was aware of any repossessions or other recoveries of collateral for loans that were subject to the 2010 and 2011 Agreements. (Doc.
52-1 at ¶ 5.) Natasha Woods was also unaware of any repossessions or recoveries that were subject to the
Innovate transfers. (Id. at ¶ 6.) However, Bradley Bellville stated that Best Buy was able to replace the costs
of buying back through Recycling. (Doc. 43-5 at ¶ 9.)
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similarly to Burke that the terms were “fair and based on customary and standard terms in
the industry at the time.” (Id. at ¶ 11.)
D. Appointment of Hays and Termination of Bellville
S. Gregory Hays was appointed as Chapter 11 Trustee for the Debtors in May of
2011.5 (Doc. 52-1 at ¶ 1.) Upon his appointment, Hays immediately terminated Bellville as
president of TMT, TMG, and Best Buy “due to [Bellville’s] malfeasance and incompetence,”
which included Bellville obtaining a $180,000 salary from Best Buy in August 2010, in addition to his $225,000 salary from TMT, without providing additional services to Best Buy or
the Debtors. (Id. at ¶ 2, 3.) Bellville used the funds from the additional $180,000 salary to
finance his purchase of TMT stock from the trust of W. Derek Martin. (Id. at ¶ 4.)
Hays was advised by Bellville that the purpose of the 2011 Agreement was to fund
the necessary professional fees to allow the Debtors to reorganize under Chapter 11. (Id. at
¶ 8.) Hays believed that this purpose, the Innovate transfers, and the repurchase obligations
resulting from the transfers were harmful to the creditors of Best Buy, including TMG. (Id.
at ¶¶ 7-10.) Hays attempted to sell Best Buy’s remaining assets during the Debtors’ bankruptcy case.

(Id. at ¶ 11.) Innovate and a co-bidder made an offer to buy Best Buy’s re-

maining loans for $686,720, but the remaining loans had an aggregate principal amount of
$7.7 million. (Id. at ¶ 12.) This offer was rejected, and the bankruptcy estate ultimately received less than $2 million for Best Buy’s remaining assets. (Id. at ¶¶ 12-13.)
Almost exactly two years after the Debtors’ petition for Chapter 11 reorganization,
the Committee brought suit against Innovate and Best Buy in this Court on December 10,
2013. They seek to set aside the 2010 and 2011 Agreements under theories of constructive
and actual fraudulent transfers pursuant to the Georgia Uniform Fraudulent Transfers Act
(UFTA), O.C.G.A. 18-2-70, et seq.

While Hays’ Affidavit stated that he was appointed as Trustee on or about May 1, 2011, the Court recognizes that this might be an error since the Debtors’ filed for Chapter 11 reorganization on December 16, 2011.
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STANDARDS OF REVIEW
I. Federal Rule of Civil Procedure 56
Federal Rule of Civil Procedure 56 allows a party to move for summary judgment where
no genuine issue of material fact remains and the party is entitled to judgment as a matter of
law. “Summary judgment is appropriate if the pleadings, depositions, answers to
interrogatories, and admissions on file, together with the affidavits, if any, show there is no
genuine issue as to any material fact and that the moving party is entitled to judgment as a
matter of law.” Maddox v. Stephens, 727 F.3d 1109, 1118 (11th Cir. 2013). “A genuine issue
of material fact does not exist unless there is sufficient evidence favoring the nonmoving
party for a reasonable jury to return a verdict in its favor.” Chapman v. AI Transp., 229 F.3d
1012, 1023 (11th Cir. 2000) (en banc). “An issue of fact is ‘material’ if it is a legal element of
the claim under the applicable substantive law which might affect the outcome of the case.”
Allen v. Tyson Foods, Inc., 121 F.3d 642, 646 (11th Cir. 1997) (citing Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 248 (1986)). “It is ‘genuine’ if the record taken as a whole could lead a
rational trier of fact to find for the nonmoving party.” Tipton v. Bergrohr GMBH-Siegen, 965
F.2d 994, 998 (11th Cir. 1992) (citing Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S.
574, 587 (1986)).
The movant bears the initial burden of showing, by reference to the record, that there
is no genuine issue of material fact. See Celotex, 477 U.S. at 323; Chapman, 229 F.3d at 1023.
The movant can meet this burden by presenting evidence showing that there is no genuine
dispute of material fact, or by demonstrating to the district court that the nonmoving party
has failed to present evidence in support of some element of its case on which it bears the
ultimate burden of proof. See Celotex, 477 U.S. at 322-24. Once the movant has met its
burden, the nonmoving party is required “to go beyond the pleadings” and identify “specific
facts showing that there is a genuine issue for trial.” Id. at 324. To avoid summary
judgment, the nonmoving party “must do more than summarily deny the allegations or
‘show

that

there

is

some

metaphysical

doubt

as

to

the

material

facts.’” Matsushita, 475 U.S. at 586 (citations omitted). Instead, the nonmovant must point
to competent record evidence that would be admissible at trial. See also Jones v. UPS Ground

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Freight, 683 F.3d 1283, 1294 (11th Cir. 2012) (quoting Macuba v. Deboer, 193 F.3d 1316, 1322
(11th Cir. 1999)) (noting that hearsay may be considered on a motion for summary judgment
only if it “could be reduced to admissible evidence at trial or reduced to admissible form.”).
Such evidence may include affidavits or declarations that are based on personal knowledge
of the affiant or declarant. See Fed. R. Civ. P. 56(c)(4).
On a motion for summary judgment, the Court must view all evidence and factual
inferences drawn therefrom in the light most favorable to the nonmoving party and
determine whether that evidence could reasonably sustain a jury verdict. See Celotex, 477 U.S.
at 322-23; Allen, 121 F.3d at 646. However, the Court must grant summary judgment if
there is no genuine issue of material fact and the movant is entitled to summary judgment as
a matter of law. Fed. R. Civ. P. 56(c).
II. Local Rule 56
Local Rule 56 requires the following:
The respondent to a motion for summary judgment shall attach to the response a separate and concise statement of material facts, numbered separately, to which the respondent contends there exists a genuine issue to be tried.
Response shall be made to each of the movant's numbered material facts. All
material facts contained in the moving party's statement which are not specifically controverted by the respondent in respondent's statement shall be
deemed to have been admitted, unless otherwise inappropriate.
M.D. Ga. L.R. 56. As stated above, the Parties complied with the Federal Rules of Civil
Procedure and the Local Rules by filing timely cross-motions for summary judgment,
responses and replies thereto, and attached a separate and concise statement of material
facts. The Court will now address these ripe motions.
ANALYSIS
I.

The Committee’s Motion for Summary Judgment
The Committee contends it is entitled to summary judgment6 on Counts I, III, and

IV7 of the Amended Complaint (Doc. 9), which raise allegations of constructive fraudulent

The Court notes the Committee’s desire to move for summary judgment against both Innovate and Best
Buy in their single motion, but at this time the Court will address Innovate as the only responsive party in this
action.
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transfers, and all of Innovate’s abundant affirmative defenses. (See Doc. 16.) For the
reasons stated below, the Committee’s Motion for Summary Judgment (Doc. 44) is
GRANTED-IN-PART and DENIED-IN-PART.
A. Constructive Fraud Claims
Under Georgia law, constructive fraudulent transfers will be set aside if the elements
of O.C.G.A. § 18-2-75(a) are proven by a preponderance of the evidence. See O.C.G.A. §
18-2-75(d). O.C.G.A. § 18-2-75(a) provides,
A transfer made or obligation incurred by a debtor is voidable as to a creditor
whose claim arose before the transfer was made or the obligation was incurred
if the debtor made the transfer or incurred the obligation without receiving a
reasonably equivalent value in exchange for the transfer or obligation and the
debtor was insolvent at that time or the debtor became insolvent as a result of
the transfer or obligation.
O.C.G.A. § 18-2-75(a). In order to prevail on a constructive fraudulent transfer claim, the
plaintiff must establish (1) a prior claim against the defendant-debtor by the plaintiffcreditor, (2) the defendant-debtor did not receive a reasonably equivalent value in exchange
for the transfer, and (3) the defendant-debtor was insolvent at the time of the transfer. CSX
Transp. Inc. v, Leggett, No. 1:07-CV-1152-WSD, 2010 WL 3210841, at *4 (N.D. Ga. Aug. 12,
2010) (citing Kipperman v. Onex Corp., 411 B.R. 805, 834 (N.D. Ga. 2009)). The Parties are
not in dispute as to whether Best Buy was indebted to its parent-creditor TMG or whether
TMG had a “claim” or right to payment from Best Buy prior to the transfers. See O.C.G.A.
§ 18-2-71(3) (definition of “claim”). It is also undisputed that Best Buy was insolvent8 at the
time it entered into the 2010 and 2011 Agreements with Innovate. (See Doc. 44-1 at ¶ 29.)
Thus, the only question before the Court is whether Best Buy received a “reasonably
equivalent value” in exchange for its transfers to Innovate.
Whether a debtor receives reasonably equivalent value, or “fair consideration,” in
exchange for the transfer is a question of fact “to which considerable latitude must be
Though the Committee requested summary judgment on Count IV of the Amended Complaint (Doc. 9),
the Court presumes the Committee meant Count V, and perhaps also Count VII, as Count IV is an actual
fraudulent transfer claim.
8 Under O.C.G.A. § 18-2-72(a), a debtor’s insolvency is measured by “the sum of the debtor’s debts [being]
greater than the sum of the debtor’s assets.”
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allowed to the trier of facts.” Nordberg v. Arab Banking Corp. (In re Chase & Sanborn Corp.), 904
F.2d 588, 593 (11th Cir. 1990) (interpreting 11 U.S.C. § 548).9 The Parties seem to disagree
on which standard the Court should apply in determining reasonably equivalent value.
(Docs. 44 at 11; 51 at 5-6; 61 at 5.) The Committee, citing Harman v. First Am. Bank of Md.
(In re Jeffrey Bigelow Design Grp., Inc.), 956 F.2d 479 (4th Cir. 1992), suggests reasonably
equivalent value should be evaluated from the creditor’s perspective and focus on the net
effect of the transfer on the debtor’s estate. Id. at 484. Thus, if the creditors are “no worse
off because of the debtor,” then a reasonably equivalent value has been received. Id. In
contrast, Innovate cites to Crumpton v. Stephens (In re Northlake Foods, Inc.), 715 F.3d 1251
(11th Cir. 2013) and Alexander v. Delong, Caldwell, Novotny & Bridgers, L.L.C. (In re Terry Mfg.
Co., Inc.), No. 2:07-CV-620-WKW, 2008 WL 4493240 (M.D. Ala. Sept. 30, 2008), for the
proposition that a transfer need not be set aside so long as the transfer conferred an
“economic benefit” or Innovate paid for “roughly the value” of the transfer. In re Northlake
Foods, Inc., 715 F.3d at 1255-56; In re Terry Mfg. Co., Inc., 2008 WL 4493240 at *7 (recognizing
“economic benefit” and “roughly the value” as less stringent standards).
The Court does not adopt the Committee’s creditor-centered, net-effect approach to
the reasonably equivalent value analysis, because the Court cannot look “with hindsight at a
transaction because such an approach could transform fraudulent conveyance law into an
insurance policy for creditors.” Kipperman, 411 B.R. at 837 (quoting Daley v. Chang (In re Joy
Recovery Tech. Corp.), 286 B.R. 54, 75 (Bankr. N.D. Ill. 2002)). The Count does not also
completely adopt Innovate’s understanding of the reasonably equivalent value test. While
the Court cannot set aside transfers that confer an economic benefit to the debtor, Gen. Elec.
Credit Corp. of Tenn. v. Murphy (In re Rodriguez), 895 F.2d 725, 727 (11th Cir. 1990), that is only
step one of the analysis. “Assessing reasonably equivalent value in the context of fraudulent
transfers involves a two-part test: (1) did Debtor receive any value whatsoever, whether in
In construing Georgia’s Uniform Fraudulent Transfers Act (UFTA), the Court finds it appropriate to consider similarly worded statutes under other statutory provisions, such as the Bankruptcy Code. See, e.g., Kipperman v. Onex Corp., 411 B.R. 805, 828 (N.D. Ga. 2009) (analyzing “reasonably equivalent value” standard
under both 11 U.S.C. § 548 and O.C.G.A. § 18-2-75); Pettie v. Bonertz (In re LendXFinancial, LLC), No. 1076803-MGD, 2012 WL 1597394, at *7 (Bankr. N.D. Ga. Mar. 19, 2012) (similarly analyzing Georgia’s UFTA
under 11 U.S.C. § 548 because the statutes “substantially mirror[]” one another).
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the form of an indirect or direct benefit; and (2) was the value reasonably equivalent to the
Property?” Anderson v. Patel (In re Diplomat Constr., Inc.), No. 09-68613-MGD, 2013 WL
5591918, at *5 (Bankr. N.D. Ga. Aug. 6, 2013).
Based on the above, it is clear that Best Buy directly received something of value
from Innovate. Under the 2010 Agreement, Best Buy received $749,326 in cash and an
additional $4,428,788.98 under the 2011 Agreement. However, ultimately the question is
whether what was received (here, cash) was reasonably equivalent to what was given away
(here, Best Buy’s accounts receivables). “In order to determine whether a debtor received
‘reasonably equivalent value,’ the court must look at what ‘value’ the debtor received in
return for the transfer. The court must then determine whether the value received is
reasonably equivalent; this will depend on the facts of each case.” Kipperman, 411 B.R. at
837.
The Committee argues that Best Buy did not receive a reasonably equivalent value in
the 2010 and 2011 Agreements due to the substantial discount Innovate received on highinterest subprime loans and the lengthy repurchase obligations for defaulted loans that
ensured a profit for Innovate but a financial detriment to Best Buy. (Doc. 44 at 11.) While
it is uncontested that the 2010 Accounts were valued at not less than $880,000 and the 2011
Accounts valued at not less than $5,210,339.97, assessing reasonably equivalent value does
not require a “dollar-for-dollar exchange.” Advanced Telecomm. Network, Inc. v. Allen (In re
Advanced Telecomm. Network, Inc.), 490 F.3d 1325, 1336 (11th Cir. 2007). Even with the
discount, Innovate’s expert reports and sworn affidavits create a factual dispute with regard
to the value of the loans. Burke’s report found that Best Buy sold the 2010 and 2011
Accounts at a “price higher than market value.” (Doc. 43-11 at 9.) Furthermore, the Cecil
Affidavit showed how Innovate approaches negotiations and pricing of car loan portfolios
based on numerous tangible and intangible factors. (Doc. 49-1 at ¶ 5.) These critiques on
the transfers at issue not only create a factual dispute, but they also show that reasonable
jurors could disagree on whether the transfers were reasonably equal in value, even given the
discounts on the high-interest loans.

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With respect to the repurchase obligations, Burke and Cecil also similarly concluded
that the repurchase obligations were common, customary, and standard in the BHPH
industry. (Docs. 43-11 at 12, 20; 49-1 at ¶ 11.) The Committee argues that the repurchase
obligations made it impossible for Best Buy to make a profit. (Doc. 44 at 11.) Best Buy paid
$108,086 to repurchase defaulted accounts under the 2010 Agreement and $474,184 to
repurchase defaulted accounts under the 2011 Agreement.

(Doc. 44-1 at ¶¶ 14, 24.)

However, the Bellville Affidavit stated that the repurchase obligations did not harm Best Buy
because they were able to “Recycle” repossessed collateral and refinance it under a new loan.
(Doc. 43-5 at ¶ 9.)

Again, this creates a factual dispute on the issue of whether the

repurchase obligations diminished the value of the transfer to make it less than a reasonably
equivalent to what Best Buy received from Innovate.
Viewing this evidence in a light most favorably to Innovate, a reasonable jury could
find that Best Buy received a reasonably equivalent value from Innovate under the 2010 and
2011 Agreements. Above all, the “purpose of voiding transfers unsupported by ‘reasonably
equivalent value’ is to protect creditors against the depletion of a bankrupt's estate.” In re
Rodriguez, 895 F.2d at 727. Because there is a genuine issue of material fact as to whether
Best Buy received reasonably equivalent value under the 2010 and 2011 Agreements, the
Court cannot fulfill the purpose of the voidance statute on motion for summary judgment.
Thus, the Committee’s Motion for Summary Judgment on their constructive fraudulent
transfer claims must be DENIED.
B. Affirmative Defenses
In their Response (Doc. 51), Innovate voluntarily released the following affirmative
defenses initially raised in their Amended Answer (see Doc. 16): (1) failure to state a claim,
(2) jury trial, (3) judicial and equitable estoppel, (4) release, (5) waiver, (6) lack of standing, (7)
simultaneous representation, (8) equitable subordination, and (9) characterization. (Doc. 51
at 24.) The Court will therefore accept Innovate’s release and only address the remaining
defenses, which are (1) arm’s length dealings in the ordinary course of business, (2) good
faith, (3) in pari delicto, and (4) setoff and recoupment. Thus, the Committee’s Motion for
Summary Judgment on the released affirmative defenses is DENIED AS MOOT.

13

1. Arm’s Length and In the Ordinary Course of Business
Though Innovate did not specifically preserve the defense of arm’s length dealings
“in the ordinary course of business or financial affairs and for reasonably equivalent value”
(See Doc. 16 at ¶ 70), it also did not voluntarily withdraw it from the Court’s consideration.
The Committee argues that there is neither a legal nor factual basis for this defense. (Doc.
44 at 14.) Innovate provides no response to the Committee’s argument. Thus, the Court
will presume and accept that Innovate concedes that there is no genuine issue of material
fact that Innovate cannot raise a viable affirmative defense that the transfers were arm’s
length and in the ordinary course of business. Additionally, the Court has not been pointed
to any record evidence to support a contrary finding. The Court will not, however, presume
that Innovate concedes to the issue of reasonably equivalent value. To that extent (i.e., the
defense of arm’s length transfers made in the ordinary course of business or financial
affairs), the Committee’s Motion for Summary Judgment on this ground is GRANTED.
2. Good Faith and Reasonably Equivalent Value
Having already addressed the question of “reasonably equivalent value,” the Court
here will only address whether the Committee is entitled to summary judgment on the “good
faith” affirmative defense with respect to its constructive fraudulent transfer claims. While
the Parties acknowledge that good faith is not an available affirmative defense for
constructive fraudulent transfer claims (See Docs. 44 at 15-16; 51 at 21), Innovate argues that
“good faith will afford the transferee protection on the amount that was given in the
transfer.” (Doc. 51 at 21 (citing In re Terry Mfg. Co., Inc., 2008 WL 4493240, at *7)).
However, this is an argument of what a good-faith transferee is entitled to upon judgment.
See In re Terry Mfg., Inc., 2008 WL 4493240, at *7 (“‘good faith’ can enter the analysis of
‘reasonably equivalent value’ under the [Georgia] UFTA only after a transfer is considered
fraudulent”) (emphasis in original). This is made explicit under the UFTA. See O.C.G.A. §
18-2-78(d). Thus, it is clear Innovate is not entitled to raise a good faith defense against the
Committee’s constructive fraudulent transfer claims at this stage of the litigation.
However, Innovate correctly points out that the Committee offers no legal or factual
grounds for granting summary judgment in the Committee’s favor with respect to the actual
14

fraudulent transfer claims. Under O.C.G.A. § 18-2-78(a), the good faith affirmative defense
is a statutory defense for actual fraudulent transfer claims under O.C.G.A. § 18-2-74(a)(1).
Because the Committee failed to carry its burden, the Committee’s Motion for Summary
Judgment as to Innovate’s good faith affirmative defense is DENIED.
3. In Pari Delicto
Georgia codified the in pari delicto defense at O.C.G.A. § 23-1-15, which states in
pertinent part, “[w]hen both parties are equally at fault, equity will not interfere but will leave
them where it finds them.” “The doctrine of in pari delicto is based on the policy that ‘courts
should not lend their good offices to mediating disputes among wrongdoers’ and ‘denying
judicial relief to an admitted wrongdoer is an effective means of deterring illegality.’” Official
Comm. of Unsecured Creditors of PSA, Inc. v. Edwards, 437 F.3d 1145, 1152 (11th Cir. 2006)
(quoting Bateman Eichler, Hill Richards, Inc. v. Berner, 472 U.S. 299, 306 (1985)).

The

Committee makes several arguments for summary judgment in their favor with respect to
Innovate’s in pari delicto defense.10
First, the Committee relies on the “adverse interest exception” to show that an in pari
delicto defense is inappropriate when a corporate officer of Best Buy acts for their own
benefit and to the detriment the company. See Cohen v. Morgan Schiff & Co., Inc. (In re
Friedman’s Inc.), 394 B.R. 623, 629 (S.D. Ga. 2008) (adverse interest exception “allows the
company to recover, when the company’s agents have acted entirely adverse to the
company.”).

To support their reliance on this exception, the Committee contends that

Bellville admitted to taking an additional salary as president of Best Buy from the funds of
the 2010 Agreement. (Doc. 44 at 16.) However, Innovate is correct in that Bellville’s
deposition testimony cannot be construed in this manner. While Bellville admitted to taking
a $180,000 salary as President of Best Buy in August 2010, he never admitted that he took
the salary from the proceeds of the June 2010 Agreement. (See Doc. 46-1 at 40:11-42:17.)
Thus, the Committee cannot rely on the adverse interest exception solely on this allegation.

The Committee incorporates its previous arguments from its Response to Innovate’s Motion for Judgment
on the Pleadings. (See Doc. 37.)
10

15

Next, the Committee asserts that an in pari delicto defense is inapplicable in a
constructive fraudulent transfer action when the Committee is asserting a cause of action on
behalf of a parent company against its subsidiary because TMG and Best Buy are separate
entities. (Docs. 37 at 7-8; 44 at 16.)

While “in pari delicto by agency” may not be a

recognized defense, the Court has previously stated that the Committee “is acting on behalf
of the Debtors,” which includes TMG, and “all claims available to the Debtors, as well as all
defenses applicable to those claims, are likewise available to the Committee and its claims.”
(Doc. 42 at 5). Thus, Innovate may pursue an in pari delicto defense against TMG, by and
through the Committee.
Finally, the Committee argues that in pari delicto does not apply to constructive
fraudulent transfer actions because these types of offenses do not require wrongdoing.
(Doc. 44 at 16.) However, the Court cannot adopt the Committee’s understanding of the
defense, because the Georgia statute does not require “wrongdoing,” but “fault.”

See

O.C.G.A. § 23-1-15. Furthermore, in pari delicto is an equitable doctrine, “not a rigid formula
which trammels the free and just exercise of discretion.” In re Friedman’s Inc., 394 B.R. at 631
(quoting Johnson v. Yellow Cab Transit Co., 321 U.S. 383, 387 (1944)). Even if the law applying
in pari delicto to constructive fraudulent transfers is scant, this does not mean the doctrine is
wholly inapplicable. Thus, the Committee’s Motion for Summary Judgment on Innovate’s in
pari delicto defense must be DENIED.
4. Setoff and Recoupment
The Committee cites O.C.G.A. § 13-7-311 for the proposition that Innovate has no
viable setoff and recoupment defense against either the Committee or TMG because
Innovate only engaged in business with Best Buy—not with the Committee or TMG. (Doc.
44 at 13-14.) Under this reasoning, the Committee argues that Innovate has no possible
“claim or demand” against either the Committee or TMG. (Id.) As stated above, the
Committee is equally empowered to bring claims available to Debtors against Innovate as
Innovate is allowed to bring defenses against the Committee and the Debtors. (See Doc. 42
“Any claim or demand the defendant may have against the plaintiff may be used as a setoff, while only a
claim or demand arising out of the same transaction as that sued on by the plaintiff may be used as a recoupment.” O.C.G.A. § 13-7-3.
11

16

at 5.) The Plan provides that the Committee may “enforce all Causes of Action of the
Debtors, their Affiliates and subsidiaries, and the Estates . . . .” (Doc. 44-2 at 23) (emphasis
added). Thus, even if Innovate had no claim or demand against the Committee or TMG,
the Committee concedes that Innovate would have a claim or demand against Best Buy,
which is indisputably TMG’s subsidiary.

Thus, summary judgment on the setoff and

recoupment defense must be DENIED. Furthermore, the Court agrees with Innovate in
that setoff and recoupment defenses are more properly considered at the trial phase of this
litigation.
II.

Innovate’s Motion for Summary Judgment
Innovate moves for summary judgment on all Counts of the Amended Complaint

(See Doc. 9) and, in the alternative, moves for summary judgment on all Counts based on
Innovate’s good faith and reasonably equivalent value and in pari delicto affirmative defenses
raised in its Amended Answer. (See Doc. 16 at ¶¶ 70, 74, 76, 78.) For the reasons stated
below, Innovate’s Motion for Summary Judgment (Doc. 43) is DENIED.
A. Actual Fraud Claims
In order to set aside an actual fraudulent transfer, the creditor-plaintiff must prove
the elements of O.C.G.A. § 18-2-74(a) by a preponderance of the evidence. See O.C.G.A. §
18-2-74(d). Subsection (a)(1) states,
(a) A transfer made or obligation incurred by a debtor is voidable as to a creditor, whether the creditor's claim arose before or after the transfer was made or
the obligation was incurred, if the debtor made the transfer or incurred the
obligation:
(1) With actual intent to hinder, delay, or defraud any creditor of the debtor;
O.C.G.A. § 18-2-74(a)(1). What separates actual and constructive fraudulent transfers is
intent. See Truelove v. Buckley, 733 S.E.2d 499, 502 (Ga. Ct. App. 2012). “In order to prove
that the relevant transfers were actually fraudulent, a plaintiff must show through direct
evidence or various ‘badges of fraud’ that the relevant transfers ‘were made with actual intent
to hinder, delay, or defraud’ the debtor's unsecured creditors.” Kipperman, 411 B.R. at 829
(quoting O.C.G.A. § 18-2-74(a)(1)). Actual intent to hinder, delay, or defraud requires a

17

showing of debtor’s manifest objective to prevent its creditors from enjoying a benefit
rightfully owed to them. See, e.g., Perkins v. Crown Fin., LLC (In re Int’l Mgmt. Assocs. LLC),
No. A06-62966-PWB, 2007 WL 7141787, at *3 (Bankr. N.D. Ga. Mar. 7, 2007) (recognizing
that the existence of a Ponzi scheme would sufficiently show debtor’s actual intent to
defraud).
The “badges of fraud” are eleven (11) enumerated considerations for determining
actual intent under subsection (b) of O.C.G.A. § 18-2-74.12 They are just as the statute
states—considerations.

However, these nonexclusive considerations enable creditor-

plaintiffs with another way of showing actual intent on the part of the debtor-defendant they
would not otherwise be able to prove. See UNIF. FRAUDULENT TRANSFER ACT § 4 cmt. 5,
7A U.L.A. 654 (2004) (proof of one or more of the factors indicate “relevant evidence as to
the debtor’s actual intent”). Yet, “proof of some, or even all, of the factors listed in the
Fraudulent Transfer Act does not create a presumption of actual intent to defraud. Rather,
those factors are indicators of such intent on which the trial court may rely to make its
findings based on evidence presented by the parties.” Lindholm v. Holtz, 581 N.E.2d 860, 864
(Ill. App. 2d 1991) (interpreting “badges of fraud” under the Illinois UFTA).13
The eleven “badges of fraud” are as follows:
1. The transfer or obligation was to an insider;
2. The debtor retained possession or control of the property transferred after the transfer;
3. The transfer or obligation was disclosed or concealed;
4. Before the transfer was made or obligation was incurred, the debtor had been sued or threatened
with suit;
5. The transfer was of substantially all the debtor's assets;
6. The debtor absconded;
7. The debtor removed or concealed assets;
8. The value of the consideration received by the debtor was reasonably equivalent to the value of the
asset transferred or the amount of the obligation incurred;
9. The debtor was insolvent or became insolvent shortly after the transfer was made or the obligation
was incurred;
10. The transfer occurred shortly before or shortly after a substantial debt was incurred; and
11. The debtor transferred the essential assets of the business to a lienor who transferred the assets to an
insider of the debtor.
13 The Court specifically notes that Georgia’s “badges of fraud” provision under O.C.G.A. § 18-2-74(b) is the
same as Illinois’ “badges of fraud” provision under 740 Ill. Comp. Stat. 160/5. Because Georgia’s UFTA is
“modeled on the Uniform Fraudulent Transfer Act promulgated by the National Conference of Commissioners on Uniform State Laws and adopted in various forms by 43 states and the District of Columbia,”
Bishop v. Patton, 706 S.E.2d 634, 639 (Ga. 2011), disapproved on other grounds by SRB Inv. Servs., LLLP v.
Branch Banking and Tr. Co., 709 S.E.2d 267 (Ga. 2011), the Court finds it appropriate to consider case law out12

18

Innovate contends that Best Buy’s intent is not in dispute because Bellville and
Morrison both stated that the purpose of the 2010 and 2011 Agreements was to “upstream[]
the proceeds from [Best Buy] to TMG, and TMG’s parent, TMT.” (Doc. 43 at 10-11.)
Additionally, Innovate argues that because the Committee only satisfied one of the eleven
badges of fraud (Best Buy’s insolvency) and failed to prove others (reasonably equivalent
value and transfers constituting substantially all of Best Buy’s assets), this cannot overcome
Innovate’s motion for summary judgment as a matter of law. However, “[t]here is no magic
formulation” when considering the badges of fraud. Kipperman v. Onex Corp., No. 1:05-CV01242-JOF, 2010 WL 761227, at *4 (N.D. Ga. Mar. 2, 2010). “One badge may be enough;
many badges may not be enough.” Id. This is to say that a court should treat these factors
as considerations, rather than mere check marks on a list. Id.
Furthermore, reasonable jurors could disagree upon the material disputed facts on the
issue of Best Buy’s intent. With respect to the 2010 Agreement, Bellville’s own deposition
revealed that he took a substantial salary of $180,000 as president of Best Buy in August
2010, in addition to his $225,000 salary from the TMT, shortly after the June 23, 2010
transfer to Innovate. (Docs. 44-1 at ¶ 27; 52-1 at ¶ 4.) Bellville even stated that the purpose
of taking the additional salary was to purchase TMT stock from the trust of W. Derek
Martin. (Doc. 52-1 ¶ 4.) A jury could reasonably view that type behavior with suspicion and
fraudulent intent because of the closeness in time between the $749,236 transfer in June and
the taking of an additional salary of $180,000 in August and the surrounding circumstances.
With respect to the 2011 Agreement, Bellville advised Hays that the purpose of the
2011 Agreement was to fund and necessitate the Debtors’ Chapter 11 reorganization filing.
(Doc. 52-1 at ¶ 8.) The Committee highlights in its Response that this type of activity raises
a fact question as to Best Buy’s intent to hinder or delay its creditors. (Doc. 52 at 5.) The
Committee also notes Innovate’s focus on Best Buy’s intent to defraud rather than Best

side of its jurisdiction to determine matters under the UFTA. See, e.g., Truelove v. Buckley, 733 S.E.2d 499, 501
(Ga. Ct. App. 2012).

19

Buy’s intent to hinder or delay.14 (Id.) While Innovate argues that the filing of bankruptcy
alone cannot be evidence of intent to hinder or delay, it may be considered in the larger
inquiry of Best Buy’s alleged fraudulent intent to hinder or delay its creditors.
Along with there being a genuine material fact question as to whether Best Buy
received a reasonably equivalent value for the transfers made to Innovate, the Court finds
there is enough here to create a genuine issue of material fact on Best Buy’s intent. Though
these facts do not fit neatly within the eleven enumerated indicia of fraud, these are the type
of facts that would be relevant to a jury in determining whether Best Buy acted with intent to
hinder, delay, or defraud its creditors. Thus, when construing the facts most favorably to the
nonmoving party, Innovate’s Motion for Summary Judgment on all actual fraudulent
transfer claims must be DENIED.
B. Constructive Fraud Claims
The Court incorporates it analysis from Section I(A) above.

Similar to the

Committee’s Motion for Summary Judgment on the constructive fraudulent transfer claims,
Innovate’s Motion for Summary Judgment must also be denied, because a genuine issue of
material fact exists on the issue of reasonably equivalent value. Innovate maintains that it is
entitled to summary judgment because there is no genuine dispute that Best Buy received
reasonably equivalent value in exchange for the 2010 and 2011 transfers. Innovate also rests
on its expert Burke Report and Cecil Affidavit discussed above and rejects the Committee’s
expert.
However, the Committee’s expert, Jerry L. Robinson, found that Best Buy sold its
account receivables on terms “significantly worse than market to Innovate.” (Doc. 43-10 at
2.) Robinson specifically determined that the repurchase obligations were unusual terms and
“caused the creditors of Best Buy to suffer additional cash losses . . . .” (Id. at 2, 5.)
Innovate points to the Bellville Affidavit, mentioned above, which stated that Best Buy was
able to recoup any losses from the repurchase obligations because the company was able to

Courts recognize that “the term ‘defraud’ does not subsume ‘hinder or delay.’” Crews v. First Colony Life Ins.
Co. (In re Barker), 168 B.R. 773, 778 (Bankr. M.D. Fla. June 3, 1994) (citing NCNB Tex. Nat’l Bank v. Bowyer (In
re Bowyer), 916 F.2d 1056, 1059 (5th Cir. 1990), rev’d on reh’g, 932 F.3d 1100 (5th Cir. 1991)).
14

20

“Recycle” those defaulted loans. Yet, this is contrasted by the Affidavits of Hays and
Woods, who stated they were unfamiliar with any repossession or recoveries that were
subject to the Agreements. (Doc. 52-1 at ¶¶ 5-6.) The Robinson Report and the Hays and
Woods Affidavits creates a genuine material factual dispute on the reasonably equivalent
value issue. A reasonable juror could find that Best Buy received a reasonably equivalent
value for the 2010 and 2011 transfers, especially considering Best Buy made these transfers
during a market that was “competitive and had adequate financial liquidity,” but still suffered
great financial hardship after these substantial transfers, or it could find to the contrary.
(Doc. 43-10 at 2.)
It seems clear to the Court, that the issue of reasonably equivalent value will become
a “battle of the experts,” which is best fought out at trial before a jury. If the question of
reasonably equivalent value rests on the facts, as stated in In re Chase & Sanborn Corp. and
Kipperman, then the numerous disputed issues of fact throughout this case cannot survive
summary judgment on either side. Thus, Innovate’s Motion for Summary Judgment on all
constructive fraudulent transfer claims is DENIED.
C. Affirmative Defenses
Innovate specifically moves for summary judgment as a matter of law with respect to
its good faith and in pari delicto affirmative defenses as to the actual and constructive
fraudulent transfers claims. As noted above, the good-faith defense found under O.C.G.A. §
18-2-78(a) is only applicable to claims of actual fraud under O.C.G.A. § 18-2-74(a)(1).
Having found that Innovate is not entitled to summary judgment on the actual fraudulent
transfer claims, Innovate is, however, entitled to seek to present this statutory affirmative
defense. However, in order to succeed under this O.C.G.A. § 18-2-78(a), Innovate must
show that they both “took in good faith and for reasonably equivalent value . . . .”15
(emphasis added). Because there is a factual dispute on the issue of reasonably equivalent
value, Innovate’s summary judgment motion on this ground is DENIED.

The statute’s “. . . or against any subsequent transferee or oblige” is inapplicable here as this was a direct
transfer between Best Buy and Innovate.
15

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With respect to in pari delicto, the Court incorporates its analysis from Section I(B)(3)
above. Innovate moves for summary judgment on its in pari delicto defense to the extent that
if Best Buy “did commit any wrongdoing against its creditor, TMG, it only did so at the
behest and direction of that same creditor, TMG, and TMG’s ultimate parent, TMT.” (Doc.
43-2 at 25.) “[A]pplication of the in pari delicto doctrine in Georgia is a fact intensive inquiry
done on a case by case basis.” In re Friedman’s Inc., 394 B.R. at 632. While the facts are clear
that Best Buy, through Bellville, entered into the 2010 and 2011 Agreements, there is still a
genuine material fact question as to whether these transfers to Innovate were fraudulent
transfers. The Court has already decided that this is a question best answered by a jury, and
thus, it cannot unequivocally say as a matter of law that TMG and Best Buy were in pari
delicto, or equally at fault, in effectuating these allegedly fraudulent transfers.
The Court is also concerned with the equities surrounding this case and the
possibility that an in pari delicto defense would prevent innocent third-party creditors from
seeking recovery of their investment. If applying this defense would result in the “protection
[of] the alleged wrongdoers and the punishment of the innocent,” the Court should not
apply in pari delicto, especially on motion for summary judgment. Hays v. Paul, Hastings,
Janofsky & Walker LLP, No. Civ.A 106CV754-CAP, 2006 WL 4448809, at *10 (N.D. Ga.
Sept. 14, 2006). Therefore, Innovate’s Motion for Summary Judgment on its in pari delicto
defense must be DENIED.
III. Innovate’s Motion to Amend and Motion for Oral Argument
Innovate moved to amend its motion for summary judgment on February 5, 2015
and attached the affidavit of Preston Cecil, Innovate’s Vice President of Risk Management,
Exhibit A entitled “Best Buy Purchase Stat v. Annual Vintages Summary,” and Exhibit B
entitled “Historical Identity of Sellers of Notes to Innovate.” (See Doc. 49.) Finding that
such an amendment would not prejudice either party, Innovate’s Motion to Amend (Doc.
49) is GRANTED. Although the Court has already decided that Innovate’s Motion for
Summary Judgment (Doc. 43) should be DENIED, in reaching that conclusion it fully
considered the attached affidavit and exhibits.

22

On February 27, 2015, Innovate moved for oral arguments with respect to the instant
cross motions for summary judgment pursuant to M.D. Ga. L.R. 7.5.

Through oral

arguments, it was Innovate’s intent to “provide an opportunity to the Court to probe the
veracity of the claims and evidence at issue in this case.”

(Doc. 54 at 3.) However, the

Court agrees with the Committee that the need for oral arguments on these fully briefed,
well-supported cross-motions for summary judgment is unnecessary. Having found above
that the Committee’s Motion for Summary Judgment (Doc. 44) should be GRANTED-INPART and DENIED-IN-PART, and Innovate’s motion for Summary Judgment (Doc. 43)
should be DENIED, Innovate’s Motion for Oral Argument (Doc. 54) is DENIED AS
MOOT.
CONCLUSION
For the reasons stated above, the Committee’s Motion for Summary Judgment (Doc.
44) is GRANTED-IN-PART and DENIED-IN-PART. Accordingly, the Committee’s
Motion for Summary Judgment is GRANTED with respect to Innovate’s affirmative defense of arm’s length transfers made in the ordinary course of business or financial affairs,
but DENIED with respect to the Committee’s constructive fraudulent transfer claims and
Innovate’s good faith, in pari delicto, and setoff and recoupment affirmative defenses. The
Court accepted Innovate’s release of the following affirmative defenses, which may not be
later raised at trial: (1) failure to state a claim, (2) jury trial, (3) judicial and equitable estoppel,
(4) release, (5) waiver, (6) lack of standing, (7) simultaneous representation, (8) equitable
subordination, and (9) characterization. (Doc. 51 at 24.) Thus, the Committee’s Motion for
Summary Judgment on these released affirmative defenses is DENIED AS MOOT.
Innovate’s Motion for Summary Judgment (Doc. 43) is DENIED with respect to
the actual fraudulent transfer claims, constructive fraudulent transfer claims, and the good
faith and in pari delicto affirmative defenses. Accordingly, Innovate’s Motion to Amend (Doc.
49) is GRANTED, and Innovate’s Motion for Oral Argument (Doc. 54) is DENIED AS
MOOT.
SO ORDERED, this 30th day of September, 2015.
/s/ W. Louis Sands______________________
W. LOUIS SANDS, SR. JUDGE
UNITED STATES DISTRICT COURT
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