Kapila v. Warburg Pincus, LLC

UNITED STATES DISTRICT COURT

MIDDLE DISTRICT OF FLORIDA

TAMPA DIVISION

SONEET KAPILA,

Plaintiff,

v. Case No: 8:21-cv-2362-CEH

WARBURG PINCUS, LLC,

WARBURG PINCUS EQUITY FUND

IX, L.P. and ALLEN WISE,

Defendants.

___________________________________/

ORDER

This matter comes before the Court on Defendant Allen Wise’s Motion for

Summary Judgment (Doc. 112). In the motion, Defendant requests summary

judgment in his favor on the counts asserted against him in the Second Amended

Complaint. Plaintiff filed a response in opposition (Doc. 120) and Allen Wise

(“Wise”) replied (Doc. 125). The Court heard argument on the motion on November

7, 2023. Upon due consideration of the parties’ submissions, including deposition

transcripts, affidavits, exhibits, argument of counsel, and for the reasons that follow,

Defendant Allen Wise’s Motion for Summary Judgment will be granted.

I. FACTS AND BACKGROUND1

1 The Court has determined the facts, which are undisputed unless otherwise noted, based

on the parties’ submissions, including declarations and exhibits, as well as the parties’

Stipulation of Agreed Material Facts (Doc. 122). For purposes of summary judgment, the

Court presents the facts in the light most favorable to the non-moving party as required by

Fed. R. Civ. P. 56.

A. Stipulated Facts

Universal Health Care Group, Inc. (“Universal) was a managed-care health

insurance company. Doc. 122 ¶ 3. Universal operated two entities regulated by the

Florida Office of Insurance Regulation (“FOIR”): Universal Health Care, Inc.

(“UHC”); and Universal Health Care Insurance Company (“UHCIC”). Id. ¶ 3. Dr.

Akshay Desai, M.D., now deceased, was the founder, CEO, and majority owner of

Universal. Id. ¶ 4.

Defendant Allen Wise (“Wise) formerly served as Chairman and Chief

Executive Officer of Coventry Health Care Inc., a managed health care insurance

company and health maintenance organization. Doc. 122 ¶ 1. Wise invested directly

in Universal in 2006. Id. ¶ 2. Wise is a limited partner in Defendant Warburg Pincus

Private Equity IX, LP (“WP IX”), which also invested in Universal. Id. ¶ 2.

A May 26, 2006, Securities Purchase Agreement (the “2006 SPA”) provided

that Wise would pay one million dollars in exchange for 384,271 shares of preferred

stock in Universal. Id. ¶ 5. On August 17, 2006, Universal stockholders executed a

Stockholders’ Agreement (“SA”) and Universal filed an Amended and Restated

Certificate of Incorporation (“COI”) with the State of Delaware. Id. ¶ 6. The COI

provided Wise with the right to have Universal redeem its preferred stock after five

years, at a price determined in the COI, subject to the terms of the COI and

Delaware law. Id. ¶ 7. The COI also provided that Wise’s investment was entitled to

an annual 12% dividend, subject to the same terms and conditions. Id. The agreed

“Redemption Price” in the COI was $2.60233 per share plus accrued dividends, or

approximately $1.8 million, subject to Delaware law. Id.

Wise initially served as a WP IX representative on Universal’s Board of

Directors. Id. ¶ 8. Wise resigned from Universal’s Board on March 29, 2007. Id. ¶ 9.

WP IX’s other initial designated director Joel Akerman resigned from Universal’s

Board on March 31, 2007. Id. ¶ 10. In December 2008, WP IX named Alok Sanghvi

to Universal’s Board. Id. Sanghvi served on the Board until the February 2011

redemption transaction closed. Id.

Sanghvi negotiated the redemption of WP IX’s and Wise’s investment in

Universal. Sandip Patel negotiated the redemption of WP IX’s and Wise’s

investment on behalf of Universal. Id. ¶ 11. Sanghvi communicated with Patel

toward the end of 2010 and through January 2011 concerning the proposed stock

redemption. Id. Wise’s shares were redeemed by Universal for $1.1 million. Id. ¶ 12.

The Feb. 7, 2011 Securities Purchase Agreement (the “2011 SPA”) provided

that Universal would redeem Wise’s preferred stock for $1,113,333. Id. ¶ 13.

In the fall of 2012, FOIR conducted an audit of UHC’s and UHCIC’s then-

filed 2012 third quarter statutory accounting reports. Id. ¶ 14. In early February 2013,

FOIR petitioned to place Universal’s regulated subsidiaries into receivership. Id. On

February 6, 2013, Universal filed for protection under Chapter 11 of the Bankruptcy

Code. Id. ¶ 15. On April 22, 2013, the Court appointed Plaintiff, Soneet Kapilla

(“Plaintiff”), as Chapter 11 Trustee. Id.

B. Claims Against Wise

On November 20, 2018, Plaintiff, as the Liquidating Agent and former

Chapter 11 Trustee of the bankruptcy estate of Universal, filed a 20-count Complaint

against Warburg Pincus, LLC (Warburg”), WP IX, and Wise to avoid the alleged

actual and constructive fraudulent transfers under § 548 of the Bankruptcy Code and

§ 726 of the Florida Statutes (the Florida Uniform Fraudulent Transfer Act or

“FUFTA”). Doc. 2-253. Plaintiff asserts the following claims against Wise in Counts

seven through twelve: Avoidance of [actual] fraudulent transfer of property pursuant

to 11 U.S.C. § 548(a)(1)(A) (Count VII); Avoidance of [constructive] fraudulent

transfer of property pursuant to 11 U.S.C. § 548(a)(1)(B) (Count VIII); Avoidance of

[actual] fraudulent transfer of property pursuant to 11 U.S.C. § 544 and §

726.105(1)(a), Fla. Stat. (Count IX); Avoidance of [constructive] fraudulent transfer

of property pursuant to 11 U.S.C. § 544 and § 726.105(1)(b), Fla. Stat. (Count X);

Avoidance of [constructive] fraudulent transfer of property pursuant to 11 U.S.C. §

544 and § 726.106(1), Fla. Stat. (Count XI); and Recovery of Avoided Transfer

Pursuant to 11 U.S.C. § 550 (Count XII). The Bankruptcy Court denied Wise’s

motion to dismiss the Second Amended Complaint. Doc. 2-267. Wise answered the

Second Amended Complaint on March 5, 2019, denying Plaintiff’s claims and

raising sixteen affirmative defenses. Doc. 2-276. The Fourteenth affirmative Defense

states “Wise’s investment in [Universal] is distinct from Warburg IX’s investment

and must be treated separately.” Id. at 32.

C. Wise’s Investment

Wise’s holdings in Universal constituted 3.3% of the preferred shares

purchased by Wise and WP IX, with Wise’s shares equaling approximately .27%

interest in Universal’s total outstanding shares. Doc. 112-4 at 40; Doc. 112-3 at 4. In

connection with the stock purchase, Wise did not have the right to appoint members

to Universal’s Board of Directors, as WP IX did. Doc. 104-3 at 5–6. Wise was

identified as a separate investor from WP IX. Doc. 112-4 at 6, 40. WP IX had rights

under the stock purchase agreement that Wise did not have, such as rights of

termination. See, e.g., id. at 33–34. Wise did not control the day-to-day operations of

Universal. Doc. 112-3 at 5.

II. LEGAL STANDARD

Summary judgment is appropriate when the pleadings, depositions, answers to

interrogatories, and admissions on file, together with the affidavits, 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. Fed. R. Civ. P. 56(c); Celotex Corp. v. Catrett, 477 U.S.

317, 322 (1986). The moving party bears the initial burden of stating the basis for its

motion and identifying those portions of the record demonstrating the absence of

genuine issues of material fact. Celotex, 477 U.S. at 323; Hickson Corp. v. N. Crossarm

Co., 357 F.3d 1256, 1259–60 (11th Cir. 2004). That burden can be discharged if the

moving party can show the court that there is “an absence of evidence to support the

nonmoving party’s case.” Celotex, 477 U.S. at 325.

When the moving party has discharged its burden, the nonmoving party must

then designate specific facts showing that there is a genuine issue of material fact. Id.

at 324. Issues of fact are “genuine only if a reasonable jury, considering the evidence

present, could find for the nonmoving party,” and a fact is “material” if it may affect

the outcome of the suit under governing law. Anderson v. Liberty Lobby, Inc., 477 U.S.

242, 248–49 (1986). In determining whether a genuine issue of material fact exists,

the court must consider all the evidence in the light most favorable to the nonmoving

party. Celotex, 477 U.S. at 323. However, a party cannot defeat summary judgment

by relying upon conclusory allegations. See Hill v. Oil Dri Corp. of Ga., 198 F. App’x

852, 858 (11th Cir. 2006).

III. DISCUSSION

A. Wise’s Investment Should Be Assessed Independently

Wise argues that his one-million-dollar investment must be assessed

independently from WP IX’s twenty-nine-million-dollar investment. In support, he

points to the fact that the shares were not owned jointly, the 2006 SPA classified

Wise as an “Other Investor” who did not have preferential rights as opposed to WP

IX’s “Institutional Investor” status, Wise could not designate members to Universal’s

board of directors, Wise did not have transfer rights that WP IX enjoyed as it related

to the ability to transfer its shares, and Wise did not have rights such as first offer,

tag-along rights, or special rights to purchase additional shares. Docs. 112 at 8; 125 at

4–6.

In opposition, Plaintiff submits the investment of Wise and WP IX must be

analyzed as a single transaction. For this proposition, Plaintiff raises two arguments,

neither of which are persuasive. First, Plaintiff relies on the Bankruptcy Court’s

denial of Wise’s motion to dismiss in which that court found the Trustee had

adequately alleged the redemption of Wise’s preferred stock was an integral part of a

single transaction. Doc. 120 at 4 (citing Doc. 2-80 at 17). Second, Plaintiff relies on

the Bankruptcy Court’s April 1, 2021 order denying his motion for partial summary

judgment as to Wise’s Fourteenth Affirmative Defense. Id. at 4 (citing Doc. 2-491 at

17–18)

Plaintiff’s first argument is unavailing. A denial at the motion to dismiss stage

does not foreclose a party from raising the argument at the summary judgment stage.

See Windham v. City of Fairhope, 597 F. App’x 1068, 1073 n.7 (11th Cir. 2015)

(“[Appellant’s] assertion that the district court’s order denying the defendants’

motion to dismiss is somehow indicative of how it should rule on cross motions for

summary judgment is meritless.”); Vintilla v. United States, 931 F.2d 1444, 1447 (11th

Cir. 1991) (holding that where district court’s denial of the government’s initial

motion to dismiss was not a final judgment, the court was free to reconsider its ruling

at the summary judgment stage). Indeed, in the May 6, 2016 order, the bankruptcy

judge observed that resolution of the issue is “appropriately resolved after the issues

have been framed and discovery taken.” Doc. 2-80 at 17.

Plaintiff also relies on the bankruptcy court’s denial of his summary judgment

motion as to Wise’s Fourteenth Affirmative Defense. The Defense states “Wise’s

investment in [Debtor] is distinct from Warburg IX’s investment and must be treated

separately.” On the record before it, the Bankruptcy Court determined that whether

the Wise investment is distinct from Warburg IX’s investment is a disputed fact for

the fact finder. See Doc. 2-491 at 18. In its order, the Bankruptcy Court found

questions of fact existed to preclude summary judgment on Wise’s Fourteenth

Affirmative Defense. In support of Plaintiff’s position, the bankruptcy judge noted

the language from the order on the motion to dismiss which found that Plaintiff

adequately alleged that Wise’s stock was an integral part of a single transaction,

negotiated by Sanghvi, for the mutual benefit of WP IX and Wise. Second, the

Bankruptcy Court cited to Wise’s testimony that he was basically following along

with Warburg and doing whatever they decided was going to happen. See id.; see also

Doc. 2-393 at 5. On the other hand, from Defendants’ perspective, the Bankruptcy

Court referenced Defendants’ arguments that expert testimony is required to

distinguish the economic benefits to Debtor of the redemption of Wise’s stock; that

Universal’s corporate records distinguish Wise’s interest; that the Wells Fargo loan

was taken to redeem WP IX’s shares, not Wise’s shares; and that the redemption of

Wise’s shares did not cause Universal’s insolvency. Doc. 2-491 at 17–18 (citing Doc.

2-444 at 20–21). In opposing Plaintiff’s motion, Defendants argued the motion was

premature.

As discussed above, Plaintiff may not rely, at this stage of the proceedings,

upon the Bankruptcy Court’s 2016 ruling on a motion to dismiss in lieu of coming

forward with evidence to refute that the investment transactions were separate. The

ruling on the motion to dismiss was that Plaintiff adequately alleged that Wise’s stock

was an integral part of a single transaction, negotiated by Sanghvi, for the mutual

benefit of WP IX and Wise. We are way beyond the pleading stage and Plaintiff

must now come forward with record evidence to support his allegations. See

LaChance v. Duffy’s Draft House, Inc., 146 F.3d 832, 835 (11th Cir. 1998) (“To defeat a

motion for summary judgment, the nonmoving party may not rely on ‘mere

allegations.’ It must raise ‘significant probative evidence’ that would be sufficient for

a jury to find for that party.”). Plaintiff fails to do so. Plaintiff points to no deposition

testimony regarding the redemption of Wise’s shares being an integral part of the

transaction nor cites to any documents that support these allegations. In contrast,

Wise cites to overwhelming record evidence demonstrating how the investments

were separate. See Doc. 112 at 8; Doc. 125 at 4–6.

As for Wise’s testimony that he was just going along with WP IX’s plan, that

testimony does not create a disputed issue of material fact where there is no evidence

to indicate the Wells Fargo loan was obtained to fund the redemption of Wise’s stock

or that the redemption was contingent on Wise’s stock being redeemed. The lender

term sheets indicate the purpose of the loan is to redeem preferred shares held by

Warburg Pincus. Doc. 112-14 at 2. Indeed, there is no evidence that Universal

acquired any debt to redeem Wise’s shares. See Doc. 112-21 at 3 (FOIR Consent

Order issued January 5, 2011, acknowledges “the primary use of [the Wells Fargo]

loan proceeds will be to repurchase the preferred stock held by Warburg Pincus.”);

Doc. 171-2 at 65 (Wells Fargo Loan Agreement identifying that the proceeds of the

extensions of credit are to be used by Universal solely to redeem preferred Capital

Stock held by Warburg Pincus, to pay closing expenses, to pay costs and fees

incurred with the redemption, and for working capital). Plaintiff fails to direct the

Court to any record evidence that shows the Wells Fargo loan or any debt was

obtained for purposes of redeeming Wise’s shares.

Plaintiff presents no compelling evidence to support that Wise was not an

independent investor.2 Plaintiff’s arguments to the contrary are belied by the fact that

Plaintiff sued Wise individually, seeking an avoidance of the Wise stock redemption,

and any recovery of an avoided transfer as against Wise would be for the $1.1

million redemption, not the combined $33.4 million. For his part, Wise has offered

evidence which indicates: that he did not control the day-to-day operations of

Universal; he has not been involved with Universal since March 29, 2007; he did not

possess the same rights as an investor as WP IX did; he could not appoint a board

member like WP IX could; he did not have the same protections as WP IX did; Wise

and WP IX were distinct investors under the stock purchase agreement;

representations in the 2011 redemption were made severally and jointly; and he was

2 Plaintiff responds that Wise’s undisputed facts are, in fact, disputed. Doc. 120 at 3.

However, Plaintiff wholly fails to direct the Court to any facts in the record that contradict

the statements Wise includes in his motion. As Defendant points out, the Court’s

Scheduling Order requires a party opposing summary judgment to “specify the material

facts” to which the party contends is a genuine issue for trial and to provide pinpoint

citations to the page and line of the record that supports the facts relied upon by that party.

See Doc. 12 at 6–7. Plaintiff’s blanket statement that Wise’s undisputed facts are disputed is

insufficient. Plaintiff must come forward with evidence from the record supporting his

position that the material facts are in dispute, and he has failed to do so. See Anderson, 477

U.S. at 257 (to defeat summary judgment, a party must come forward with affirmative

evidence to support its claim).

limited in his ability to transfer his shares, unlike WP IX. See Docs. 120 at 8, 125 at

4–6. On this record, Wise’s investment is due to be analyzed independently.

B. Actual Fraud Claims

Plaintiff sues Wise under state and federal law for avoidance of actual

fraudulent transfers. Under 11 U.S.C. § 548(a)(1)(A) of the Bankruptcy Code, “[t]he

trustee may avoid any transfer . . . of an interest of the debtor in property, or any

obligation . . . incurred by the debtor, that was made or incurred on or within 2 years

before the date of the filing of the petition, if the debtor voluntarily or involuntarily . .

. made such transfer or incurred such obligation with actual intent to hinder, delay,

or defraud any entity to which the debtor was or became, on or after the date that

such transfer was made or such obligation was incurred, indebted . . . .” 11 U.S.C. §

548(a)(1)(A). Thus, to establish an actual fraudulent transfer claim under §

548(a)(1)(A) of the Bankruptcy Code and Fla. Stat. § 726.105(1)(a),3 “the trustee

must establish: (1) the debtor ‘transferred an interest in property’ within the relevant

pre-petition time period, and (2) the debtor made such transfer with actual intent to

hinder, delay, or defraud any creditor.” In re ATM Fin. Servs., LLC, No. 6:08-BK-969-

KSJ, 2011 WL 2580763, at *4 (Bankr. M.D. Fla. June 24, 2011) (citing In re World

Vision Ent., Inc., 275 B.R. 641, 656 (Bankr. M.D. Fla. 2002)). The timing of the

3 Fraudulent transfer claims under Florida statutes are analogous “in form and substance” to

those under 11 U.S.C. § 548 and are frequently analyzed contemporaneously. In re Able Body

Temp. Servs., Inc., 626 B.R. 643, 656 (Bankr. M.D. Fla. 2020) (citing In re Pearlman, 515 B.R.

887, 894 (Bankr. M.D. Fla. 2014)). “The only material difference between the state and

bankruptcy provisions is the favorable four-year look-back period under the Florida law.” In

re Pearlman, 515 B.R. at 894.

transfers is not in dispute as the stock redemption occurred within two years of

Universal filing bankruptcy. However, on the second factor, “[g]iven the difficulties

in establishing a transferor’s actual intent, courts generally look at the totality of the

circumstances and the badges of fraud surrounding the transfers.” In re World Vision

Ent., Inc., 275 B.R. at 656; see also In re XYZ Options, Inc., 154 F.3d 1262, 1271 (11th

Cir. 1998) (Actual intent to defraud creditors is ordinarily established by

circumstantial evidence typically gathered by a court’s consideration of certain

badges of fraud.).

Considering the totality of the circumstances in a light most favorable to

Plaintiff, the Court cannot identify any evidence which demonstrates that Universal’s

$1.1 million redemption in 2011 of Wise’s preferred shares that were purchased for

$1 million in 2006 was done with an actual intent to hinder, delay, or defraud any

entity. Nor has Plaintiff identified record evidence of an actual intent related to the

Wise redemption. In his response, Plaintiff instead argues that genuine issues of

material fact exist because of the existence of at least five badges of fraud. Doc. 120

at 5. But, rather than identifying the badges of fraud, Plaintiff refers to his response in

opposition to the summary judgment motion filed by Warburg and WP IX.

Plaintiff’s failure to cite to any legal authority or facts in the record, and merely to

adopt its response to another motion, is insufficient.

Even considering the badges of fraud identified in Plaintiff’s response to

Warburg and WP IX’s motion (see Doc. 119 at 19), however, the purported badges of

fraud do not defeat Wise’s motion. Specifically, Plaintiff cites to the fact that the

transfer was made to an “insider,” WP IX; the transfer was substantially all of

Universal’s assets; the value of the consideration received by Universal was not

reasonably equivalent to the $33.4 million transferred; Universal was insolvent or

became insolvent shortly thereafter; and the transfer was made shortly after a

substantial debt was incurred. Id. Critically, the “badges of fraud” relied upon relate

to the total $33.4 million dollar redemption and do not attempt to separate or

identify the impact, if any, of the $1.1 million redemption of Wise’s stock. In fact, the

language used in describing the badges of fraud— “substantially all of Universal’s

assets,” “the $33.4 million transferred,” and “substantial debt” —suggests the $1.1

million Wise redemption was not the issue. Plaintiff fails to offer evidence that any of

these badges of fraud exist due to the $1.1 million redemption of Wise’s $1 million

investment. Because Plaintiff fails to present any record evidence supporting that the

$1.1 million redemption of Wise’s shares was done with an actual intent to hinder,

delay, or defraud creditors, Plaintiff’s claims for avoidance of actual fraudulent

transfers as to Wise fail.

C. Constructive Fraud Claims

Relevant to Plaintiff’s constructive fraud claims, under 11 U.S.C. §

548(a)(1)(B), a trustee may avoid any transfer made within two years before the filing

of a bankruptcy petition if the debtor;

(i) received less than a reasonably equivalent value in exchange for such

transfer or obligation; and

(ii) (I) was insolvent on the date that such transfer was made or such

obligation was incurred, or became insolvent as a result of such transfer or

obligation;

(II) was engaged in business or a transaction, or was about to engage in

business or a transaction, for which any property remaining with the debtor

was an unreasonably small capital;

(III) intended to incur, or believed that the debtor would incur, debts

that would be beyond the debtor's ability to pay as such debts matured; or

(IV) made such transfer to or for the benefit of an insider, or incurred

such obligation to or for the benefit of an insider, under an employment

contract and not in the ordinary course of business.

11 U.S.C. § 548(a)(1)(B).4

Wise argues that Plaintiff’s claims based on alleged constructive fraud fail

because Universal received reasonably equivalent value, specifically a substantial

benefit from the Wise redemption in the form of a 34% to 38% discount on the

projected redemption price according to Dr. Henry Fishkind, Warburg’s economic

expert. Next, Wise argues that Universal was not rendered insolvent by the

redemption. Wise relies on Defendants’ expert Richard Gaudet, who analyzed

Universal’s finances before and after the redemption transactions for Wise and WP

IX and opined that Universal could have paid Wise’s redemption in cash, as well as

every other debt out of its liquid assets with millions to spare. Doc. 112 at 14.

Defendant’s CPA expert Ian Ratner identifies and addresses the Wise redemption

independently. Ratner opines that Universal’s redemption of preferred stock held by

Wise for $1.1 million was reasonable and would have no bearing, based on the size

of the redemption, on Universal’s solvency. Doc. 44 at 32. Plaintiff fails to proffer

any evidence or testimony to rebut this opinion.

4 Florida’s constructive fraudulent transfer statutes, Fla. Stat. §§ 726.105(1)(b) and

726.106(1) are analogous to 11 U.S.C. § 548(a)(1)(B)(i) and (ii).

Again, Plaintiff’s response to Wise’s motion for summary judgment related to

the constructive fraud claims is inadequate as Plaintiff does not cite any record

evidence or legal authority in opposition to Wise’s arguments and, instead, cites only

to his response filed in opposition to the summary judgment motion filed by

Warburg and WP IX. See Doc. 120 at 4–5.

The first issue for consideration on an avoidance of a constructive fraud claim

is whether the redemption provided reasonably equivalent value. Reasonably

equivalent value (“REV”) is not specifically defined in the Bankruptcy Code.

However, the Eleventh Circuit has repeatedly recognized that the purpose of the

requirement is “to protect creditors against the depletion of a bankrupt’s estate.” In re

TOUSA, Inc., 680 F.3d 1298, 1311 (11th Cir. 2012) (citing In re Rodriguez, 895 F.2d

725, 727 (11th Cir. 1990)). Therefore, § 548(a)(1)(B) “does not authorize voiding a

transfer which confers an economic benefit upon the debtor” because “the debtor’s

net worth will have been preserved, and the interests of the creditors will not have

been injured by the transfer.” Rodriguez, 895 F.2d at 727. Under § 548, the “trustee

bears the burden of showing that a transfer was not for reasonably equivalent value.”

In re Rodriguez, 895 F.2d 725, 726 n.1 (11th Cir. 1990); see also In re Fruehauf Trailer

Corp., 444 F.3d 203, 211 (3rd Cir. 2006).

In his opposition to Warburg and WP IX’s summary judgment motion,

Plaintiff first argues that whether Universal received REV is a question of fact. Doc.

119 at 8. In support of denying Defendants’ motion for summary judgment, Plaintiff

cites to the Bankruptcy Court’s conclusion that questions of fact existed on the issue.

Id. Plaintiff argued to the Bankruptcy Court, as he does here, that the 1935 decision

of the Fifth Circuit Court of Appeals in Robinson v. Wangemann, 75 F.2d 756, 757

(5th Cir. 1935), stands for the principle that a corporation does not receive any net

increase in value when it acquires its own stock from a stockholder. Accordingly,

Plaintiff claims that Universal could not have received REV when it redeemed

Defendants’ stock. Wangemann is not dispositive of the issues here. First, the Wise

stock redeemed here was preferred stock, unlike in Wangemann. See, e.,g., In re Corp.

Jet Aviation, Inc., 45 B.R. 629, 634 (Bankr. N.D. Ga. 1985) (distinguishing

corporations who receive nothing of value for the benefit of creditors by redeeming

stock to be held by the corporation as treasury stock as in Wangemann from a

redemption used to fund preferred stocks, which “might survive the ‘reasonably

equivalent value’ test”). Moreover, as discussed by Chief Bankruptcy Judge Delano,

the stockholder in Wangemann did not receive cash for his stock at the time that he

relinquished it, as the Defendants did in this case, and the debtor in Wangemann had

been “adjudicated bankrupt” by the time that the payment for the redemption of its

stock would have become due. See Doc. 2-490 at 15–16. In denying Plaintiff’s motion

for summary judgment on the issue of whether Defendants received REV, the

Bankruptcy Court concluded issues of fact existed as to whether Universal was

insolvent at the time of the stock redemption and whether Universal received indirect

value as a result of the transfers. See Doc. 2-490 at 16.

Wise argues that Universal received REV from the Wise redemption, pointing

to the fact that the early redemption resulted in a $700,000 discount from the

contractually-agreed redemption rate. “By its terms and applications, the concept of

‘reasonably equivalent value’ does not demand a precise dollar-for-dollar exchange.”

Advanced Telecomm. Network, Inc. v. Allen (In re Advanced Telecomm. Network, Inc.), 490

F.3d 1325, 1336 (11th Cir. 2007) (citation omitted). And economic benefit to the

debtor, either direct or indirect, can constitute “reasonably equivalent value” for

alleged constructively fraudulent transfer. Id. The Trustee may not avoid a transfer if

the transfer conferred an economic benefit upon the debtor, either directly or

indirectly. Id. (citing Gen. Elec. Credit Corp. of Tenn. v. Murphy (In re Rodriguez), 895

F.2d 725 (11th Cir. 1990)). Plaintiff does not respond to Wise’s argument that

Universal received REV other than to rely on the Bankruptcy Court’s prior orders.

But the prior bankruptcy orders did not distinguish between the Wise redemption

and the redemption of Warburg and WP IX stock. Having determined above that the

Wise transaction should be analyzed independently, the Court looks to Plaintiff to

come forward with evidence to refute Wise’s evidence that Universal received REV

from the Wise redemption. Plaintiff fails to do so.

As to the issue of insolvency, although Wangemann is not dispositive of the

REV issue here, Wangemann counsels that insolvency is to be considered as part of

the REV analysis. Wise submits that Plaintiff never actually claims Universal was

rendered insolvent by the redemption of Wise’s preferred shares for $1.1 million.

Doc. 112 at 23. The Court agrees. In his response, again, Plaintiff has only

incorporated his arguments as it relates to Warburg and WP IX.5 Doc. 120 at 4. In

general, under the Bankruptcy Code, insolvency means “a financial condition such

that the sum of such entity’s debts is greater than all of such entity’s property.” 11

U.S.C. § 101(32). No fact or expert witness has offered testimony that the Wise

redemption resulted in Universal’s insolvency as defined under the Bankruptcy

Code. And the one expert to address the Wise redemption independently, CPA

Ratner, opined the $1.1 million redemption of Wise’s stock would have no bearing

on Universal’s solvency.

In sum, Plaintiff does not direct the Court to any evidence supporting that the

$1.1 million Wise redemption rendered Universal insolvent. Because Plaintiff fails to

show disputed issues of material fact exist as to Universal’s receipt of REV from the

Wise redemption, Wise is entitled to summary judgment on Plaintiff’s claims for

avoidance of constructively fraudulent transfers under 11 U.S.C. § 548(a)(1)(B), and

Florida’s statutory counterparts.

D. Recovery of Fraudulent Transfer

A trustee may recover property that was fraudulently transferred under

sections 544 or 548 from the initial transferee of such transfer or the entity for whose

benefit the transfer was made. See 11 U.S.C. § 550. Given the conclusion above that

there were no actual or constructively fraudulent transfers as it relates to the Wise

5 And in his response to Warburg and WP IX’s motion for summary judgment, Plaintiff’s

arguments against a finding of REV address the Warburg and WP IX redemption, not the

Wise redemption. See Doc. 119 at 9. Plaintiff cites to the opinions of his expert Stuart Cohn

to challenge the opinions of Dr. Fishkind regarding REV, but nothing in Cohn’s opinions

suggest that the $1.1 million Wise redemption rendered Universal insolvent.

stock redemption, the Plaintiff may not obtain recovery from Wise under section

550.

IV. CONCLUSION

Because no genuine issues of material fact exist, Allen Wise is entitled to

summary judgment as to Plaintiff's actual fraudulent transfer claims (Counts VII and

TX) and constructively fraudulent transfer claims (Counts VIII, X, XJ) under state

and federal law. And because Plaintiff is unable to avoid the transfer to Wise as a

fraudulent transfer, Plaintiff's claim for recovery under § 550 fails as well.

Accordingly, it is

ORDERED AND ADJUDGED:

1. Defendant Allen Wise’s Motion for Summary Judgment (Doc. 112) is

GRANTED.

2. A Judgment in favor of Defendant Allen Wise and against Plaintiff

Soneet Kapila will be entered at the conclusion of this litigation.

DONE AND ORDERED in Tampa, Florida on March 28, 2024.

Chaken etd GAd_a Mn TDA pl el

Charlene Edwards Honeywell

United States District Judge

Copies to:

Counsel of Record

Unrepresented Parties, if any

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