Connecticut Court Denies Defendants’ Motion To Dismiss, Alleged Assets Were Transferred For Less Than Reasonably Equivalent Value
May 20, 2021, District of Connecticut – Debtor Integrity Graphics, Inc. was a full-service print and design company in Connecticut. The Debtor had a commercial revolving line of credit with Defendant People’s United Bank (PUB), as well as additional loans (collectively, the “Loan”) that were subject to a master credit agreement between the Debtor and PUB. The Loan was secured by a blanket lien on all of the Debtor’s assets. In June 2017, the Loan terminated, making the balance of $1,670,954.23 immediately due and payable to PUB. One week later, PUB and one of the other defendants, GHP Media, Inc. (GHP) entered into a secured party sale agreement, whereby PUB purported to transfer to GHP all of PUB’s interests in the Debtor’s assets that are subject to PUB’s perfected security interest for the sum of $1,300,000.00 (the “Purchase Price”). Defendant, Joseph Lavalla was the principal of the Debtor at the time of the sale.
Mainly, the Trustee alleged that neither PUB obtained an appraisal of the purchased assets nor thoroughly investigated the value of the purchased assets; which resulted in the purchased assets being sold for significantly less than reasonably equivalent value through a process that was not commercially reasonable. The Defendants argued that although this was cast as a secured party sale, it should be deemed a foreclosure because of the distressing circumstances leading up to the sale, and therefore the only material facts that remain relevant to the issue of reasonably equivalent value are facts that establish plausibility under a forced liquidation rubric, as opposed to the various methods of valuation applied in the amended complaint.
The Court held that a review of the amended complaint readily reveals that the Trustee has pled sufficiently particularized and plausible facts regarding the alleged value of the purchased assets such that, if taken as true, would demonstrate that the Debtor received less than the equivalent value under Section 548(a)(1)(B) or CUFTA. The Court further notes that at oral argument, the Defendants conceded that the purchase price of $1,300,000 fell below an estimated forced liquidation value of the purchased assets, which approximated $1,450,000. Accordingly, the Court denied the Defendants’ motion to dismiss the amended complaint.
Mangan v. People’s United Bank, N.A. (In re Integrity Graphics, Inc.), No. 19-02027 (JJT), 2021 Bankr. LEXIS 1365 (Bankr. D. Conn. May 20, 2021)