Joseph DuMouchelle Fine & Estate Jewellers Trustee Seeks to Set Aside Jewelry Valued Over $5 Million as Alleged “Fraudulent Transfers”
January 28, 2021, Eastern District of Michigan – Last week, Trustee Mark H. Shapiro, for the bankruptcy estate of Joseph DuMouchelle Fine & Estate Jewellers, L.L.C. (the “Debtor”), filed a clawback suit against Defendants Zeidman’s Jewelry and Loan of Michigan, Inc., Zeidman’s Jewelry & Loan of Southfield, Inc., and Zeidman’s Loan Office, Inc. (collectively, “Defendants”) to avoid and recover alleged “fraudulent transfers” worth more than $5 million under 11 U.S.C. §§ 548(a)(1)(A) and 548(a)(1)(B) of the Bankruptcy Code.
Defendants are pawnshops and jewelry resellers doing business in Detroit since 1923. The Debtor was in the business of selling jewelry owned by third parties through private sales and auctions.
By way of background, a jewelry company, Noble reportedly “entered into a consignment agreement” with the Debtor and delivered certain jewelry items (“Noble Jewelry”) to the Debtor. According to the complaint, Noble and the Debtor agreed that the Debtor would sell the Noble Jewelry for a profit, and the parties would share the profit. Instead, the Debtor “pawned the Noble Jewelry to the Defendants for a small fraction of its value.” The Defendants apparently walked away with the Noble Jewelry valued at approximately $5,339,286, in exchange for the paltry sum of $760,000 paid to Debtor. Noble filed an involuntary Chapter 7 bankruptcy petition against the Debtor.
The Trustee seeks return of the Noble jewelry from Weidman’s, alleging that the Defendants were the “intermediate or mediate transferee” of the fraudulent transfers. The Debtor allegedly transferred the Noble Jewelry to the Defendants for substantially “less than its reasonably equivalent value” via the pawn transactions.
The Trustee seeks to recover three times the value of the Noble Jewelry as damages from the Defendants under MCL 600.2919(a). According to the Trustee, Noble has “superior rights as the owner of the jewelry, or as a priority secured creditor with a lien.”