The opinion
ORDERED.
Dated: March 29, 2021
Caryl E. bein
Chief United States Bankruptcy Judge
UNITED STATES BANKRUPTCY COURT
MIDDLE DISTRICT OF FLORIDA
FORT MYERS DIVISION
www.flmb.uscourts.gov
In re: Case No. 2:17-bk-01712-FMD
Chapter 11
ATIF, Inc.,
Debtor.
—e—es—‘“‘“‘“‘i‘i‘il
Daniel J. Stermer, as Creditor Trustee,
Plaintiff,
Vs. Adv. Pro. No. 2:18-ap-00531-FMD
Old Republic National Title Insurance Company,
Old Republic National Title Holding Company,
Old Republic Title Companies, Inc., and
Attorneys’ Title Fund Services, LLC,
Defendants.
—es—‘“‘“‘“‘i‘_i
FINDINGS OF FACT, CONCLUSIONS OF LAW,
AND MEMORANDUM OPINION REGARDING REASONABLY EQUIVALENT VALUE
THIS PROCEEDING came before the Court for trial on February 16, 17, 18, 19, 22, and 23,
2021, on Plaintiff's Corrected Third Amended Adversary Complaint (the “Complaint”).'! Among
' Doc. No. 162.
other claims, Plaintiff, the Creditor Trustee in this confirmed Chapter 11 case, seeks to avoid Debtor’s
transfers of property to Defendant Old Republic National Title Insurance Company as actually and
constructively fraudulent transfers under 11 U.S.C. § 548 and Chapter 726 of the Florida Statutes, the
Florida Uniform Fraudulent Transfer Act.
With the agreement of the parties, the limited issue presented at trial was Plaintiff’s claim that
Debtor did not receive reasonably equivalent value in exchange for its transfers to Old Republic
National Title Insurance Company.2 As set forth below, the Court concludes that Plaintiff has not met
his burden of proof on the issue of reasonably equivalent value.
I. FACTS
A. The Parties
1. ATIF, Inc. (“Debtor”) is a Florida corporation wholly owned by Attorney’s Title
Insurance Fund, a Florida Business Trust (“ATIF Trust”).
2. On March 2, 2017, Debtor filed a petition for relief under Chapter 11 of the Bankruptcy
Code, 11 U.S.C. § 101, et seq. The Court confirmed a plan of reorganization and Plaintiff, Daniel J.
Stermer, was appointed as the Creditor Trustee.
3. Old Republic National Title Insurance Company (“OR Title”) is a nationwide title
insurer that is owned directly or indirectly by Old Republic National Title Holding Company (“OR
Holding”).3 Together, OR Title and OR Holding are referred to herein as the “OR Defendants.”
B. Debtor’s Former Business Operations
1. Prior to July 1, 2009, Debtor was licensed by the Florida Office of Insurance
Regulation (the “Florida OIR”) as a title insurance company. The Florida OIR regulates Florida title
2 Doc. No. 407, February 8, 2021 Hearing Transcript, pp. 5-8.
3 Doc. No. 360, Joint Pre-Trial Stipulation, ¶ 2.
insurers.4 Under Florida law, insurance companies are required to maintain a surplus of the value of
its assets over the value of its policy liabilities.5
2. Debtor’s business operations as a title insurer included insuring title, underwriting and
selling title insurance, selling title searches, managing and supporting insurance agents, and
administering title insurance claims. Debtor conducted its business under the trade name “The Fund.”6
3. Debtor conducted its insurance business through a network of attorney-agents, who
were themselves licensed as title insurance agents.7
4. Debtor’s headquarters were formerly located in an office building it owned in Orlando,
Florida (the “Headquarters Property”).8
5. Debtor owned and maintained a title plant of Florida real property records (the “Title
Plant”). Generally, a title plant is a compilation of property records and indexes to property records,
such as deeds, mortgages, and judgments, that is used to examine the title to real property in
connection with the issuance of title insurance policies.9
6. Between 2005 and 2008, Debtor’s market share of premiums earned by title insurance
companies in the State of Florida ranged from 18.65% to 19.44%. During that same time period, OR
Title’s market share of premiums earned by title insurance companies in the State of Florida ranged
from 6.84% to 7.71%.10
4 Doc. No. 360, ¶ 10.
5 Fla. Stat. § 624.408.
6 Doc. No. 360, ¶ 5.
7 Doc. No. 360, ¶ 5c.
8 Doc. No. 360, ¶ 5g.
9 Doc. No. 360, ¶¶ 5d, 5e; Doc. No. 370, Joint Supplemental Pre-Trial Stipulation, ¶ 141.
10 Doc. No. 462-11, Plaintiff’s Ex. 679.
C. The Joint Venture Agreement
1. Beginning in late 2008, Debtor experienced financial difficulties for three primary
reasons: the defalcations by certain attorney-agents in the amount of $60 million; the decline in value
of its stock market investments resulting from the global financial crisis; and the reduction in its
income from title insurance policies due to the effect of the global financial crisis on the Florida real
estate market.11
2. In early 2009, Debtor’s surplus (the value of Debtor’s assets over its liabilities) fell to
a level near the minimum required by Florida law for a title insurer to continue to issue new policies.12
3. In early 2009, Debtor’s President, Charles Kovaleski, contacted OR Title’s President,
Rande Yeager, regarding Debtor’s financial difficulties.13
4. After Mr. Kovaleski’s initial contact, Debtor’s representatives met with
representatives of OR Title at OR Title’s headquarters in Minneapolis, Minnesota. Shortly thereafter,
OR Holding proposed that Debtor and OR Title enter into a joint venture agreement.14
5. On July 1, 2009, Debtor and OR Holding entered into a Joint Venture Agreement (the
“JVA”).15
6. Under the JVA, Debtor and OR Holding formed a limited liability company known as
Attorneys’ Title Fund Services, LLC (“ATF Services”) and entered into an operating agreement for
ATF Services.16 The JVA states that ATF Services was formed “for the purposes of servicing title
insurance agencies.”17 Under the JVA, ATF Services provided services to OR Title in connection
11 Doc. No. 360, ¶ 14.
12 Doc. No. 360, ¶¶ 14-16; Fla. Stat. § 624.408.
13 Doc. No. 360, ¶ 17.
14 Doc. No. 360, ¶¶ 18-20, 27.
15 Doc. No. 424, Defendants’ Ex. 10.
16 Doc. No. 424, Defendants’ Ex. 10, pp. 29-48, Operating Agreement of Attorneys’ Title Fund Services, LLC,
attached as Exhibit C to the JVA.
17 Doc. No. 424, Defendants’ Ex. 10, p. 1.
with OR Title’s issuance and underwriting of title insurance policies, and Debtor agreed that it would
not engage in the business of title insurance underwriting or title insurance production.18
7. The JVA states:
[Debtor] covenants and agrees that it will take all reasonable action to ensure that its
former agents sign an agency agreement with [OR Title], and that it will shift all
business currently being written by [Debtor] to [OR Title]. All ancillary services
being provided by [Debtor] shall be transferred to [a new limited liability company
to be known as Attorneys’ Title Fund Services, LLC].19
8. Upon obtaining approval of the JVA from the Florida OIR, Debtor surrendered its
license to sell title insurance. However, Debtor maintained its license to service and manage its
existing title insurance policies and policy-related claims.20
9. Under separate contribution agreements attached to the JVA, Debtor contributed the
Title Plant and related subscription agreements to ATF Services, and OR Holding contributed
$10,000,000.00 in cash and a promissory note for $700,000.00 to ATF Services.21
10. Debtor and OR Holding held equal interests in ATF Services.22
11. As of July 1, 2009, 544 of Debtor’s 568 employees became employees of ATF
Services; Debtor retained 24 employees.23
12. In addition, a number of Debtor’s officers and senior employees became officers and
employees of ATF Services. For example, as of June 30, 2009, Ted Conner was Debtor’s Associate
General Counsel.24 Effective July 1, 2009, Mr. Conner became an employee of ATF Services, as
Associate General Counsel and Vice President for approximately two years, and as General Counsel
18 Doc. No. 360, ¶ 54; Doc. No. 370, ¶ 140; Doc. No. 424, Defendants’ Ex. 10, § 8a(ii).
19 Doc. No. 424, Defendants’ Ex. 10, § 8a(iii).
20 Doc. No. 210-31, Consent Order dated August 27, 2009, with Florida OIR.
21 Doc. No. 424, Defendants’ Ex. 10, pp. 49-53 and 54-57, attached as Exhibits D and E to the JVA; Doc. No.
370, ¶ 142.
22 Doc. No. 424, Defendants’ Ex. 10, preamble and §§ 2, 5; Doc. No. 360, ¶ 31.
23 Doc. No. 360, ¶¶ 38 and 39.
24 Doc. No. 370, ¶ 122.
and Senior Vice President for approximately three years. In July 2009, Mr. Conner was appointed an
Assistant Vice President of OR Title. In 2014, Mr. Conner ceased being an employee of ATF Services
and became a Senior Vice President of OR Title (which position he still holds) and Deputy General
Counsel and Vice President of OR Holding (which positions he still holds). As Deputy General
Counsel of OR Holding, Mr. Conner is counsel to all subsidiaries of OR Holding, including ATF
Services.25
13. In addition, effective July 1, 2009, the following senior management employees
terminated their employment with Debtor and became employees of ATF Services:
(a) Debtor’s Chief Financial Officer, Jimmy Jones, became ATF Services’ President and
Chief Executive Officer. Mr. Jones presently serves as ATF Services’ Chief Executive Officer.26
(b) Debtor’s general counsel, Norwood Gay, became ATF Services’ Chief Legal
Officer.27
(c) Debtor’s Controller, Deanna Bolger, joined ATF Services effective July 1, 2009, and
is currently ATF Services’ Chief Financial Officer and Chief Information Officer.28
(d) Debtor’s Human Resources Director, Gwen Geier, became ATF Services’ Senior Vice
President and Chief Financial Officer. Ms. Geier is currently ATF Services’ President.29
(e) Jeannie L. Calabrese, a Debtor employee, became ATF Services’ Senior Vice
President and Chief Information Officer.30
25 Doc. No. 370, ¶¶ 123-126.
26 Doc. No. 360, ¶¶ 40-42.
27 Doc. No. 360, ¶¶ 50-51.
28 Doc. No. 360, ¶¶ 52-53; Doc. No. 464, February 16 Trial Transcript, p. 207.
29 Doc. No. 360, ¶¶ 43-45.
30 Doc. No. 360, ¶¶ 46-47.
(f) Sharon Priest, a Debtor employee, became ATF Services’ Senior Vice President and
Chief Operating Officer.31
14. At some point in time, Debtor’s president at the time Debtor entered into the JVA,
Charles Kovaleski, became a member of the Board of Directors of Old Republic International
Corporation, the parent company of OR Title and OR Holdings.32
15. Commencing July 1, 2009, ATF Services’ principal place of business was located in
the Headquarters Property, which it leased from Debtor.33
16. After July 1, 2009, most of Debtor’s attorney-agents signed title agency agreements
with OR Title.34
17. After July 1, 2009, Debtor’s business was to administer its previously issued title
policies and manage policy claims. This is referred to as “running off its claims tail.”35
18. Commencing July 1, 2009, ATF Services—not Debtor—maintained and updated the
Title Plant.36 Deanna Bolger, ATF Service’s CFO since 2014, testified that the cost for ATF Services
to maintain the Title Plant is approximately $10 million per year.37
19. ATF Services earns fees from OR Title and third parties for searches of real property
records conducted on the Title Plant in connection with their issuance of title insurance policies.38
20. Debtor did not retain a copy of the Title Plant as it existed on July 1, 2009.
31 Doc. No. 360, ¶¶ 48-49.
32 Doc. No. 467, February 19 Trial Transcript, p. 202; Doc. No. 360, ¶ 9.
33 Doc. No. 360, ¶ 58; Doc. No. 370, ¶ 134.
34 Doc. No. 360, ¶ 32.
35 Doc. No. 360, ¶ 36.
36 Doc. No. 360, ¶ 37; Doc. No. 370, ¶ 143.
37 Doc. No. 468, February 22 Trial Transcript, pp. 127-128.
38 Doc. No. 360, ¶ 63; Doc. No. 370, ¶ 140.
21. After Debtor and OR Holding formed ATF Services, Debtor permitted ATF Services
to operate under the trade name “The Fund.”39
22. The evidence suggests that, after the JVA, all of Debtor’s business operations related
to the sale, issuance, and underwriting of title insurance policies were moved to OR Title, and all of
Debtor’s “ancillary” business operations were moved to ATF Services. In other words, OR Title
received the revenues from the sale of title insurance policies, while the cost of maintaining the Title
Plant and employing 544 of Debtor’s former employees was borne by ATF Services.
23. In 2010, the year after the 2009 JVA and the formation of ATF Services, OR Title’s
market share of premiums earned by title insurance companies in the State of Florida increased to
28.65%, and for the years 2011 through 2015 ranged between 29.6% and 32.5%.40
D. Debtor transfers the Marks to ATIF Trust.
1. In June 2011, two years after entering into the JVA, Debtor transferred all of its trade
and services marks (the “Marks”), including its trade name “The Fund,” to Debtor’s parent, ATIF
Trust.41
2. Plaintiff acknowledges that Debtor was solvent in 2011.42
E. The Amended JVA
1. As of October 2011, ATF Services reported operating losses of approximately $30
million, and OR Holding had loaned ATF Services approximately $20 million under a loan
agreement.43
39 Doc. No. 360, ¶¶ 56-57; Doc. No. 370, ¶ 127.
40 Doc. No. 462-11, Plaintiff’s Ex. 679.
41 Doc. No. 370, ¶ 129.
42 Doc. No. 466, February 18 Trial Transcript, p. 99; Doc. No. 469, February 23 Trial Transcript, pp. 14-15,
46.
43 Doc. No. 360, ¶¶ 67-68.
2. On October 6, 2011, Debtor, OR Holding, and ATF Services entered into an Amended
and Restated Joint Venture Agreement (the “Amended JVA”). The Amended JVA states that it was
predicated on an understanding between the parties “with respect to the organization and financing”
of ATF Services.44
3. The Amended JVA included the following three critical provisions:
(a) OR Holding agreed to continue making loans to ATF Services under the existing loan
agreement;45
(b) Debtor agreed that it would not engage in the business of title insurance underwriting
or title insurance production;46 and
(c) Debtor represented and warranted that it held intellectual property rights in certain
trade names and marks, including the trade name “The Fund,” and granted a license to ATF Services
to use the trade names and marks at no cost.47
4. Section 3 of the Amended JVA provided for (a) an initial term ending on July 1, 2014,
to be renewed automatically for successive one-year terms, unless Debtor or OR Holding gave notice
of its election to terminate the Amended JVA at least 120 days prior to the expiration of the initial
term or a renewal term; (b) for termination upon the mutual written consent of both parties; and (c)
for immediate termination upon the dissolution of ATF Services pursuant to the terms of its operating
agreement.48
5. Section 10 the Amended JVA provided Debtor with a “Put Option,” and Section 11 of
the Amended JVA provided OR Holding with a “Call Option.” If the requirements for Debtor’s
44 Doc. No. 427, Defendants’ Ex. 26, p. 1; Doc. No. 360, ¶ 73.
45 Doc. No. 427, Defendants’ Ex. 26, § 4c(i).
46 Doc. No. 427, Defendants’ Ex. 26, § 8a(ii).
47 Doc. No. 427, Defendants’ Ex. 26, § 8a(iii); Doc. No. 370, ¶ 128.
48 Doc. No. 427, Defendants’ Ex. 26, § 3.
exercise of the Put Option were met, among other provisions, ATF Services was to provide Debtor
with a current copy of the Title Plant and related software.49
6. In the Amended JVA, Debtor and OR Holding stated their “overriding intent” that
“upon the dissolution or liquidation of [ATF Services], or upon exercise of a put or call, [Debtor and
OR Holding] each hereby pledges its mutual cooperation to ensure that each receives a useable and
working copy of the Title Plant, including but not limited to Software, all Derivatives and irrevocable
licenses thereto, but excluding computer hardware.”50
7. Under the Amended JVA, ATF Services was required to deliver an electronic copy of
the Title Plant to Debtor and OR Title every six months,51 and, as required, every six months ATF
Services delivered a copy of the updated Title Plant to Debtor’s then-president, John Simmons.52 Mr.
Simmons retained a copy of the newly and most recently updated Title Plants, referred to as the “A
and B Tapes.”53
8. In addition, Debtor, OR Holding, and ATF Services entered an Amended and Restated
Operating Agreement for ATF Services (the “Amended Operating Agreement”).54 Under the
Amended Operating Agreement, Debtor held 50 Class B Units in ATF Services and OR Holding held
50 Class A Units.55 Debtor had a “conversion option” to relinquish its Class B Units and purchase
one-half of OR Holding’s Class A Units prior to July 1, 2019 (the “Conversion Option”). The
Conversion Option was conditioned on Debtor’s first paying OR Holding 50% of all loans that OR
49 Doc. No. 427, Defendants’ Ex. 26, §§ 10, 11, 18a.
50 Doc. No. 427, Defendants’ Ex. 26, § 18a; Doc. No. 370, ¶ 144.
51 Doc. No. 427, Defendants’ Ex. 26, § 18e.
52 Mr. Simmons was appointed acting president of Debtor as of March 1, 2013, and served as President of
Debtor as of December 2013 through at least December 2015. Doc. No. 370, ¶ 121.
53 Doc. No. 464, February 16 Trial Transcript, pp. 152-153.
54 Doc. No. 427, Defendants’ Ex. 26, pp. 82-103, Amended and Restated Operating Agreement of Attorneys’
Title Fund Services, LLC, attached as Exhibit F to the Amended JVA.
55 Doc. No. 427, Defendants’ Ex. 26, Article VI, § 2.
Holding had made to ATF Services and 50% of the interest that had accrued on the loans on the date
of the exercise of the Conversion Option “regardless of whether such loans and interest have been
repaid or remain outstanding.”56
9. Article VIII of the Amended Operating Agreement governed the dissolution of ATF
Services. It provided that ATF Services would be dissolved upon termination of the JVA and that
upon dissolution, Debtor and OR Holding would each receive a copy of the Title Plant and related
software, provided that all obligations of ATF Services to OR Holding were satisfied before any
obligations of ATF Services to Debtor were satisfied.57
10. In other words, Debtor’s right to receive a copy of the Title Plant under the Amended
JVA and Amended Operating Agreement was conditioned on
(a) the dissolution of ATF Services by an event requiring dissolution under the Florida
Limited Liability Company Act or the termination of the Amended JVA and the payment of all debts
owed by ATF Services to OR Holding; or
(b) Debtor’s exercise of its Put Option upon the conditions set forth in the Amended JVA
or OR Holding’s exercise of its Call Option.
F. The Master Agreement
1. After entering into the JVA and the Amended JVA, Debtor continued to service its
existing title insurance policies and to manage its policy-related claims. To maintain its insurance
license, Debtor was required by Florida law to maintain a surplus calculated at 10% of the value of
its assets over the amount of its liabilities.58
2. Beginning in late 2014, the value of Debtor’s surplus declined.59
56 Doc. No. 427, Defendants’ Ex. 26, Article VI, § 3.
57 Doc. No. 427, Defendants’ Ex. 26, Article VIII, §§ 1, 3.
58 Fla. Stat. § 624.408.
59 Doc. No. 360, ¶ 74.
3. In 2015, Debtor’s President, John Simmons, contacted OR Title and requested that OR
Title make a proposal to reinsure all of Debtor’s title policy exposure.60 OR Title authorized Debtor
to seek similar arrangements with other insurance companies.
4. The OR Defendants were aware that a transfer of Debtor’s assets in connection with
OR Title’s agreement to reinsure Debtor’s title policy liabilities could be open to attack as a fraudulent
transfer. For example, OR Title’s attorney’s notes from an October 2015 meeting recommend that
certain transactions be completed before Debtor is insolvent and state that “Ted [Conner] knows that
OR will get sued.”61
5. On October 1, 2015, SOBC Corp. (“SOBC”) offered to purchase 100% of Debtor’s
stock in exchange for the payment of $1.00 and $100,000.00 to cover Debtor’s expenses in
documenting the transaction.62
6. By the fall of 2015, the value of Debtor’s surplus was nearing zero.63
7. As of December 2015, Debtor had not given OR Holding notice of intent to terminate
the Amended JVA in advance of the Amended JVA’s initial term or any renewal term; Debtor and
OR Holding had not terminated the Amended JVA by mutual agreement; Debtor had not exercised
its Put Option; OR Holding had not exercised its Call Option; and ATF Services had not been
dissolved under Florida law or the Amended Operating Agreement.
8. As of December 2015, OR Holding had advanced over $40 million to ATF Services
under its loan agreements in order to cover ATF Services’ reported losses.64 In addition, in his
Answers to Contention Interrogatories, Plaintiff does not contend that in December 2015, Debtor
60 Doc. No. 360, ¶ 77.
61 Doc. No. 435-1, Plaintiff’s Ex. 390; Doc. No. 462-9, Plaintiff’s Ex. 408.
62 Doc. No. 360, ¶ 81; Doc. No. 457, Defendants’ Ex. 158.
63 Doc. No. 360, ¶ 82.
64 Doc. No. 464, February 16 Trial Transcript, pp. 156-157.
could have raised the equity capital necessary to satisfy any of the financial requirements to terminate
the Amended JVA, dissolve ATF Services, or exercise its Put Option.65
9. On December 1, 2015, the Florida OIR notified Debtor that it would refer Debtor to
the Florida Department of Financial Services (“DFS”) for DFS to commence a state court receivership
proceeding against Debtor.66 In order to avoid a receivership proceeding, Debtor, OR Holding, and
OR Title discussed entering into a proposed “master agreement.”67
10. OR Title’s CFO, Gary Horn,68 testified at trial regarding notes he prepared for a
presentation of the proposed master agreement to OR Title’s board of directors.69 His notes include
the following:
Why are we doing this: Our [ATF Services] operation is nicely profitable for us -
it’s working exactly as intended [note: this is despite ATF Services’ reported
losses]. By doing the deal, we’re avoiding any potential negative impact that a
receivership might have on our business. Also, ATIF has certain ongoing rights to
the title plant and certain other assets that we want to keep out of our competitors
(sic) hands. The deal eliminates all of those ongoing rights - so it really strengthens
our hand.70
11. On December 12, 2015, Debtor, ATIF Trust, OR Holding, OR Title, and ATF Services
entered into a master agreement (the “Master Agreement”).71 The Master Agreement states that OR
Title was willing to reinsure Debtor’s title policies under the terms of the attached Title Insurance
Reinsurance Assumption Contract (the “Reinsurance Contract”),72 in exchange for Debtor and ATIF
Trust’s transfer of certain assets to OR Title.
65 Doc. No. 432, Defendants’ Ex. 417.
66 Doc. No. 360, ¶ 90.
67 Doc. No. 360, ¶¶ 92-98.
68 Doc. No. 360, ¶ 18; Doc. No. 466, February 18 Trial Transcript, p. 36.
69 Doc. No. 466, February 18 Trial Transcript, pp. 12-18.
70 Doc. No. 435-8, Plaintiff’s Ex. 39 (italicized note added).
71 Doc. No. 435-4, Plaintiff’s Ex. 501, pp. 1-14.
72 Doc. No. 435-4, Plaintiff’s Ex. 501, pp. 15-25.
12. Under the Master Agreement, Debtor agreed to transfer the following assets to OR
Title:
(a) all of Debtor’s cash and cash equivalents, except $1.5 million in cash and other limited
cash assets;
(b) all of Debtor’s rights in intellectual property, as defined in the attached Intellectual
Property Assignment (the “IP Assignment”); and
(c) the Headquarters Property and an adjacent vacant parcel of land.73
13. Under the IP Assignment, Debtor and ATIF Trust agreed to transfer to OR Title a list
of intellectual property, including the Marks, together with the Title Plant “and all software, data,
documentation relating thereto and all copies thereof.”74
14. The Florida OIR approved the Master Agreement.75
15. Thereafter, the transfers provided for in the Master Agreement were effectuated.
Debtor’s President, Mr. Simmons, caused Debtor to deliver to OR Title the A and B Tapes of the
Title Plant that had been in Debtor’s possession.76
16. After Debtor executed the transfers provided for in the Master Agreement, its
remaining assets consisted of $1,500,000.00; Debtor retained its liabilities that were not related to
title policy claims.77
II. THE BANKRUPTCY CASE AND THE ADVERSARY PROCEEDING
In March 2017, less than 14 months after transferring nearly all its assets to OR Title, Debtor
retained Gerard McHale as its Chief Restructuring Officer. On March 2, 2017, Mr. McHale, in his
73 Doc. No. 435-4, Plaintiff’s Ex. 501, §§ 1(a), (c).
74 Doc. No. 435-4, Plaintiff’s Ex. 501, pp. 37-43.
75 Doc. No. 360, ¶ 100.
76 Doc. No. 464, February 16 Trial Transcript, pp. 151-152, 158.
77 Doc. No. 435-4, Plaintiff’s Ex. 501, § 1(a)(i); Doc. No. 370, ¶ 131.
capacity as Chief Restructuring Officer caused Debtor to file a Chapter 11 petition.78 The Office of
the United States Trustee appointed an Official Committee of Unsecured Creditors.79
On July 5, 2018, the Court entered an Order Confirming Second Amended Chapter 11 Plan
Filed by Official Committee of Unsecured Creditors, and Plaintiff was appointed as the Creditor
Trustee.80
On October 16, 2018, Plaintiff, in his capacity as Creditor Trustee, commenced this adversary
proceeding, and on February 26, 2020, Plaintiff filed the Corrected Third Amended Adversary
Complaint (the “Complaint”).81
In the Complaint, Plaintiff generally alleges that under the Master Agreement, OR Title
assumed Debtor’s title policy claims liability in exchange for Debtor’s cash and investments,
intellectual property, and real estate, but that OR Title “paid nothing” for the intellectual property and
the real estate.82 The Complaint contains twelve counts: Counts I through IV are actions against OR
Title to recover actual and constructive fraudulent transfers under 11 U.S.C. § 548;83 Counts V
through VIII are actions against OR Title to recover actual and constructive fraudulent transfers under
Fla. Stat. §§ 726.105 and 726.106; Count IX is an action for a declaratory judgment that ATF Services
is the alter ego of OR Holding and OR Companies; and Counts X through XII are actions for successor
liability against OR Holding and OR Companies.84
78 Main Case, Doc. No. 1.
79 Main Case, Doc. Nos. 51, 67.
80 Main Case, Doc. No. 338.
81 Doc. No. 162.
82 Doc. No. 162, ¶¶ 49-62.
83 Unless otherwise stated, statutory references are to the United States Bankruptcy Code, 11 U.S.C. § 101, et
seq.
84 Doc. No. 162, ¶¶ 86-155. “OR Companies” is defined in the Complaint as Old Republic Title Companies,
Inc., a Delaware corporation created in 2016 as an “intermediary holding company” between OR Holding and
ATF Services (Doc. No. 162, ¶ 10).
During trial, Plaintiff filed a Motion to Amend the Complaint to Conform to Evidence (the
“Motion”) in order to include a claim for the avoidance of Debtor’s 2011 transfer of its trade and
service marks to ATIF Trust.85 Plaintiff filed the Motion under Fed. R. Civ. P. 15(b). Rule 15(b)
provides that the Court “should freely permit an amendment when doing so will aid in presenting the
merits and the objecting party fails to satisfy the court that the evidence would prejudice that party’s
action or defense on the merits.”86 The OR Defendants filed a response and objection to the Motion.87
III. PLAINTIFF’S FRAUDULENT TRANSFER CLAIMS
Plaintiff’s fraudulent transfer claims are brought under § 548 and Chapter 726 of the Florida
Statutes. Under § 548, transfers may be avoided if they were made within two years of the filing of
the bankruptcy petition. Actions under Chapter 726 must be filed within four years after the transfer
was made.88 A trustee’s state law fraudulent transfer claims are analogous in form and substance to
fraudulent transfer claims under § 548 and may be analyzed contemporaneously. “The only material
difference between the state and bankruptcy provisions is the favorable four-year look-back period
under the Florida law.”89
Under § 548(a)(1)(A), a trustee may avoid a transfer of a debtor’s property if the debtor made
the transfer with actual intent to hinder, delay, or defraud a creditor.90 Under Fla. Stat.
§ 726.105(1)(a), a transfer made by a debtor is actually fraudulent as to a creditor if the debtor made
the transfer “with actual intent to hinder, delay, or defraud any creditor of the debtor.”91 In
determining whether a debtor made a transfer with actual fraudulent intent, courts generally look to
85 Doc. No. 442.
86 Fed. R. Civ. P. 15(b)(1), as made applicable in this proceeding by Fed. R. Bankr. P. 7015.
87 Doc. No. 446.
88 Fla. Stat. § 726.110.
89 In re Pearlman, 515 B.R. 887, 894 (Bankr. M.D. Fla. 2014)(citations omitted).
90 11 U.S.C. § 548(a)(1)(A).
91 Fla. Stat. § 726.105(1)(a).
“badges of fraud,” such as (1) whether the transfer was made to an insider, (2) whether the debtor
retained possession or control of the property after the transfer, (3) whether the transfer occurred
shortly after a substantial debt was incurred, and (4) whether the value received by the debtor for the
transfer was reasonably equivalent to the value of the asset transferred.92
Under § 548(a)(1)(B), a trustee may avoid any transfer of a debtor’s property if the debtor
received less than reasonably equivalent value for the transfer and was insolvent or became insolvent
as a result of the transfer.93 Under Fla. Stat. § 726.105(1)(b), a transfer is constructively fraudulent as
to present and future creditors if the debtor made the transfer “without receiving a reasonably
equivalent value in exchange,” and the debtor was engaged in a business for which its remaining
assets were unreasonably small or reasonably believed that it would incur debts beyond its ability to
pay.94 Under § 726.106, a transfer is constructively fraudulent as to present creditors if the debtor
made the transfer “without receiving a reasonably equivalent value in exchange” and the debtor was
insolvent or became insolvent as a result of the transfer.95
The trustee bears the burden of proof on each of the elements of an actually or constructively
fraudulent transfer claim by a preponderance of the evidence.96 For example, in order to avoid a
transfer as constructively fraudulent, a trustee must prove that the debtor did not receive reasonably
equivalent value in exchange for the transfer; likewise, if a trustee asserts “lack of reasonably
equivalent value” as a badge of fraud evidencing an actually fraudulent transfer, the trustee bears the
burden of proof on that issue.97
92 United States v. Winland, 2017 WL 6498074, at *5 (M.D. Fla. Dec. 1, 2017)(citing Fla. Stat. § 726.105(2)).
93 11 U.S.C. § 548(a)(1)(B).
94 Fla. Stat. § 726.105(1)(b).
95 Fla. Stat. § 726.106(1).
96 See In re Universal Health Care Group, Inc., 560 B.R. 594, 601 n. 17 (Bankr. M.D. Fla. 2016); and In re
American Way Service Corporation, 229 B.R. 496, 525-26 (Bankr. S.D. Fla. 1999).
97 In re Kane & Kane, 479 B.R. 617, 628 (Bankr. S.D. Fla. 2012).
IV. REASONABLY EQUIVALENT VALUE
The linchpin of Plaintiff’s claims is his contention that Debtor received less than reasonably
equivalent value in exchange for the transfer of its assets under the Master Agreement. Because
neither the Bankruptcy Code nor Florida law defines the term “reasonably equivalent value,” courts
generally consider factors such as the “good faith of the parties, the disparity between the fair value
of the property and what the debtor actually received, and whether the transaction was at arm’s
length.”98 But “the essential examination is a comparison of ‘what went out’ with ‘what was
received.’”99
Plaintiff contends that the value of the assets that Debtor gave up under the Master Agreement
exceeded the value that it received by $59 million.100 The OR Defendants contend that Debtor’s
transfer of assets under the Master Agreement constituted “an even exchange” of value.101
A. The Consideration Received by Debtor Under the Master Agreement
The parties agree that the value that Debtor received under the Master Agreement is measured
by the amount of Debtor’s title policy liabilities that were assumed by OR Title under the Reinsurance
Contract.102
Plaintiff asserts that based on OR Title’s own valuation of the assumed liabilities on the date
of the Master Agreement, OR Title assumed liabilities in the amount of $46.2 million. The notes that
OR Title’s CFO, Gary Horn, testified he prepared in advance of his presentation to OR Title’s Board
regarding the proposed Master Agreement state that OR Title’s “claims people have done extensive
98 In re Universal Health Care Group, Inc., 560 B.R. at 602(citation omitted).
99 United States v. Winland, 2017 WL 6498074, at *5(quoting In re Leneve, 341 B.R. 53, 57 (Bankr. S.D. Fla.
2006)).
100 Doc. No. 466, February 18 Trial Transcript, pp. 159-160; Doc. No. 469, February 23 Trial Transcript, p.
41.
101 Doc. No. 469, February 23 Trial Transcript, pp. 51-52.
102 Doc. No. 435-4, Plaintiff’s Ex. 501, pp. 15-25.
due diligence on [Debtor’s] existing claims” and “run actuarial models to get comfortable with the
future exposure,” and determined that OR Title would assume $48 million in claims exposure under
the Reinsurance Contract.103
In addition, Mr. Horn testified with respect to a document titled ATIF Assumed Reinsurance
Contract Summary December 12, 2015104 that was created after the Master Agreement (the
“Reinsurance Contract Summary”).105 The Reinsurance Contract Summary notes that Debtor had
ceased issuing new title policies in 2009106 and states that the “liabilities assumed consist primarily
of insurance reserves (case basis reserves, SPR/IBNR, and unallocated loss adjustment expenses).”107
A section of the Reinsurance Contract Summary titled “Valuation” states that the balance of the “case
basis claims” was $14.836 million, and that the value of the “IBNR and ULAE” was $31.3 million.108
Together, the $14.836 million and the $31.3 million total $46,136,000.00, which approximates
Plaintiff’s assertion of the value of the title insurance liabilities assumed.
However, the OR Defendants assert that the value of the assumed title policy liabilities was
at least $57.2 million. The OR Defendants’ expert witness, Lauren Cavanaugh, an actuary in the
insurance industry, testified at trial that she had conducted an actuarial analysis of the reinsurance
transaction between Debtor and OR Title.109 Ms. Cavanagh opined that under the Master Agreement
and Reinsurance Contract, OR Title assumed liabilities ranging from $45 million to approximately
$57.2 million, and that it would also be reasonable for OR Title to have charged an additional amount
103 Doc. No. 435-8, Plaintiff’s Ex. 39.
104 Doc. No. 462-2, Plaintiff’s Ex. 34.
105 Doc. No. 466, February 18 Trial Transcript, p. 30.
106 Doc. No. 462-2, Plaintiff’s Ex. 34, p. 3.
107 Doc. No. 462-2, Plaintiff’s Ex. 34, p. 2.
108 Doc. No. 462-2, Plaintiff’s Ex. 34, p. 5.
109 Doc. No. 468, February 22 Trial Transcript, pp. 138-142.
for risk and profit margins.110 Ms. Cavanaugh testified that an “actuarial central estimate” of
$50,889,000.00 was the market value for the reinsurance of Debtor’s title policy liabilities.111
B. The Valuation of the Assets Transferred by Debtor Under the Master Agreement
The assets that Debtor and ATIF Trust agreed to transfer to OR Title under the Master
Agreement included tangible assets, such as Debtor’s cash and cash equivalents and real estate, and
intangible assets that included Debtor’s intellectual property and the Title Plant.112 As demonstrated
below, whether Debtor received reasonably equivalent value for its transfers to OR Title under the
Master Agreement hinges, in large part, on the value of Debtor’s intangible assets.
1. The Value of Debtor’s Tangible Assets
The parties have stipulated that the value of “certain cash, cash equivalents, short term
investments, bonds and accrued investment income” transferred by Debtor to OR Title was
$30,361,074.00 as of December 12, 2015.113 The parties have also stipulated that the value of the
Headquarters Property and adjacent vacant land transferred by Debtor to OR Title was $17.21 million
as of December 12, 2015.114 Accordingly, the stipulated value of Debtor’s tangible assets is
$47,571,074.00.
2. The Value of Debtor’s Intangible Assets
Plaintiff contends that the intangible assets transferred by Debtor under the Master Agreement
included the Title Plant. The threshold issue before the Court is whether in 2015, six years after the
JVA, Debtor retained any rights to the Title Plant that it transferred under the Master Agreement. By
110 Doc. No. 468, February 22 Trial Transcript, pp. 171-172.
111 Doc. No. 468, February 22 Trial Transcript, p. 166.
112 Doc. No. 435-4, Plaintiff’s Ex. 501.
113 Doc. No. 149.
114 Doc. Nos. 137, 141.
agreement of the parties, Plaintiff and the OR Defendants presented their evidence on this issue on
the first and second days of trial.115
The Court announced its ruling on this threshold issue on the second day of trial.116 The Court
had considered the parties’ evidence and the provisions of the 2011 Amended JVA and the 2011
Amended Operating Agreement the conditions under which Debtor was entitled to receive a copy of
the Title Plant. Under the 2011 Amended JVA, Debtor was entitled to a useable and working copy of
the Title Plant “upon the dissolution or liquidation of [ATF Services], or upon exercise of a put or
call.”117 And under the 2011 Amended Operating Agreement, Debtor was entitled to receive a copy
of the Title Plant upon the dissolution of ATF Services, provided that all obligations owed by ATF
Services to OR Holding had first been satisfied.118 As of December 2015, the Amended JVA had not
been terminated, ATF Services had not been dissolved, and the “evidence is that in December 2015,
ATF Services owed OR Holding approximately $42 million,”119 an obligation that ATF Services was
required to repay before Debtor could receive a copy of the Title Plant.120
The Court concluded that although Debtor only held a right to receive a copy of the Title Plant
upon the occurrence of certain conditions that had not occurred, Debtor had “rights or an interest in
the Title Plant that the Debtor transferred to OR Title under the 2015 Master Agreement” and that
[w]hether Plaintiff could recover against the OR Defendants depended upon the value of the assets
that [Debtor] transferred, including the value of Title Plant.”121
115 Doc. No. 464, February 16 Trial Transcript, and Doc. No. 465, February 17 Trial Transcript.
116 Doc. No. 465, February 17 Trial Transcript, at p. 80.
117 Doc. No. 427, Defendants’ Ex. 26, Amended JVA, § 18a.
118 Doc. No. 465, February 17 Trial Transcript, pp. 82-83; Doc. No. 427, Defendants’ Ex. 26, pp. 82-103,
Amended Operating Agreement, attached as Exhibit F to the Amended JVA, Article VIII, §§1, 3.
119 Doc. No. 465, February 17 Trial Transcript, p. 83.
120 Doc. No. 464, February 16 Trial Transcript, pp. 156-157.
121 Doc. No. 465, February 17 Trial Transcript, p. 84.
a. Plaintiff’s Expert Testimony on the Value of Debtor’s Intangible Assets
Plaintiff’s valuation expert, Allen Pfeiffer, holds a master’s degree in Business Administration
from Columbia Business School and is currently a managing director at Duff & Phelps, as well as
that firm’s global leader of complex valuation and bankruptcy litigation.122 Mr. Pfeiffer opined that
Debtor’s intangible assets, consisting of the Title Plant, the trade name “The Fund,” its workforce,
patents, software, technology, know-how, and “those types of assets [that] are not on the balance
sheet,”123 were valued as of December 2015 at $80 million.124
At trial, Mr. Pfeiffer testified that of the three approaches to valuation (the “market approach,”
the “replacement cost approach,” and the “discounted cash flow approach”), he used the market
approach to value Debtor’s intellectual property and the replacement cost approach to value the Title
Plant.125
Mr. Pfeiffer testified that to determine the market value of Debtor’s total intangible assets, he
used a multiple based on a “premium over tangible equity.”126 Mr. Pfeiffer testified that his first step
was to determine “comparable companies” in the title insurance industry.127 He determined that
Stewart Title, a title insurance company that is much larger than Debtor, and ITIC, a much smaller
title insurance company, were companies that were comparable to Debtor.128
Next, Mr. Pfeiffer determined the total enterprise value of Stewart Title and ITIC by
multiplying the number of their outstanding shares by their publicly traded share prices and then
adding the companies’ outstanding debt; Mr. Pfeiffer then subtracted the tangible equity—the
122 Doc. No. 466, February 18 Trial Transcript, pp. 107, 110.
123 Doc. No. 466, February 18 Trial Transcript, pp. 142, 158.
124 Doc. No. 466, February 18 Trial Transcript, p. 149.
125 Doc. No. 466, February 18 Trial Transcript, pp. 121-122.
126 Doc. No. 466, February 18 Trial Transcript, pp. 144-145; Doc. No. 467, February 19 Trial Transcript, p.
30.
127 Doc. No. 466, February 18 Trial Transcript, pp. 125-126.
128 Doc. No. 466, February 18 Trial Transcript, pp. 138, 144-145.
companies’ balance sheet values for their tangible assets “like cash, receivables, inventory, equipment
and the like”—leaving him with the value of the intangible assets such as patents, software, work
force, and know-how, that are not reflected on a company’s balance sheet.129 Mr. Pfeiffer described
the process as this:
So, here we look at ITIC as the first example, and we see that ITIC market cap, which
is not a debatable number. That’s their publicly traded market cap. It’s $171 million.
If you look at their balance for ITIC, you would see their tangible book equity is $138
million. Those are tangible assets. And you take that premium over tangible equity in
the second column, it’s $33 million. That means the difference between their market
cap and their tangible value is their intangible value. Their intangible value is $33
million. That’s their premium over tangible equity, otherwise known as intangible
value.
I took that $33 million and I divided by my revenue, $125 million of revenue -- that’s
how much revenue ITIC had in the twelve months prior to our valuation date -- and I
derived a multiple of 33 divided by 125, which is .26. That’s the multiple. Which means
for every dollar of revenue ITIC has, they’re generating public market cap value of 26
cents per dollar of intangible value for -- again, for the title insurance industry, and
ITIC is in that same industry.130
After arriving at ITIC’s multiple of .26, Mr. Pfeiffer performed the same calculation for
Stewart Title, a larger company, and arrived at a multiple of .28.131
Next, Mr. Pfeiffer estimated Debtor’s approximate income in 2015 by multiplying the total
title insurance premiums earned by title insurers in the State of Florida by Debtor’s historical average
share of the premiums earned by Debtor and OR Title, 71.6%, and arrived at $283 million. To the
$283 million, Mr. Pfeiffer added ATF Services’ 2015 income of $24 million to arrive at Debtor’s
“expected” total estimated income in 2015 of $308 million. Mr. Pfeiffer then multiplied the $308
129 Doc. No. 466, February 18 Trial Transcript, pp. 141-142.
130 Doc. No. 466, February 18 Trial Transcript, pp. 144-145.
131 Doc. No. 466, February 18 Trial Transcript, pp. 145-146.
million by his previously determined multiple of .28 and arrived at $80 million of value for Debtor’s
intangible property.132
Mr. Pfeiffer then used the replacement cost approach to determine the value in 2015 of the
Title Plant that Debtor had transferred to ATF Services in 2009 under the JVA.133 To start, Mr.
Pfeiffer relied on two prior appraisals of the Title Plant: a 2004 valuation performed by Regulatory
Research Corporation (“RRC”) that valued the Title Plant at $60,160,534 for regulatory purposes,134
and a 2009 valuation performed by D. Bello and Associates at OR Title’s request that valued the Title
Plant at $10.7 million.135 Mr. Pfeiffer testified:
So I have an RRC valuation done which, after adjusting it for passage of time, I
concluded on a $46.7 million valuation. And based on D. Bello, after adjusting it for
the passage of time, I concluded on $27.9 [million].
Although the average between 46.7 and 27.9 is significantly higher than 30, I arrived
on a conservative basis on a valuation of $30 million, which is slightly higher than the
D. Bello conclusion but significantly lower than the RRC conclusion.136
Mr. Pfeiffer testified that his $30 million valuation of the Title Plant is a component of his
$80 million valuation of all of Debtor’s intangible assets. He also testified that “the $80 million
valuation doesn’t change if the $30 million goes down to 20 [million], then the rest of the intangibles
are worth 60 [million].”137
On cross-examination, Mr. Pfeiffer admitted that he does not hold any certifications or
designations as an appraiser or a valuation expert and that, although he once valued a title company
132 Doc. No. 466, February 18 Trial Transcript, pp. 147-149.
133 Doc. No. 466, February 18 Trial Transcript, pp. 121-122.
134 Doc. No. 441, Deposition Transcript of Nelson Lipshutz, corporate representative of RRC, p. 32; Doc. No.
466, February 18 Trial Transcript, pp. 152-153.
135 Doc. No. 440, Deposition Transcript of Jeffrey Bates, corporate representative of D. Bello and Associates,
pp. 64-65; Doc. No. 466, February 18 Trial Transcript, pp. 150-155.
136 Doc. No. 466, February 18 Trial Transcript, p. 158.
137 Doc. No. 466, February 18 Trial Transcript, p. 158.
with a title plant component, he has never separately valued a title plant.138 Mr. Pfeiffer also
acknowledged that his written expert report did not identify any textbooks or valuation organizations
that use the multiple “premium over tangible equity” that he used in his valuation of Debtor’s
intangible assets.139 Finally, Mr. Pfeiffer acknowledged that his written expert report did not identify
a single textbook that he relied on, testifying instead that “I don’t rely on textbooks, I rely on doing
valuations the way I always I do it.”140 In sum, Mr. Pfeiffer did not testify or otherwise provide the
Court with any information regarding reliable principles, methods, and evaluation standards used in
appraising intangible assets or title plants.
b. Defendants’ Expert Testimony on the Value of Debtor’s Intangible Assets
The OR Defendants’ valuation expert, Steven J. Hazel, is a Certified Public Accountant and
holds valuation credentials as Accredited Senior Appraiser, Accredited in Business Evaluation, and
Certified Valuation Analyst.141 Mr. Hazel disputed Mr. Pfeiffer’s valuation methodology.
Mr. Hazel testified that the “premium over tangible equity” multiple utilized by Mr. Pfeiffer
is not an accepted multiple in the valuation community.142 However, like Mr. Pfeiffer, Mr. Hazel did
not testify or provide the Court with any information regarding reliable principles, methods, and
evaluation standards used in appraising intangible assets or title plants.
Mr. Hazel testified that Mr. Pfeiffer’s valuation of Debtor’s 2015 revenues was based on the
following flawed assumptions: (1) that a transferee of the intangible assets would produce $308
million in revenue on acquisition date, with no period to “ramp up” its operations; (2) that 71.6% of
OR Title’s revenues would shift to a transferee of Debtor’s intangible assets; (3) that all of ATF
138 Doc. No. 466, February 18 Trial Transcript, p. 166.
139 Doc. No. 467, February 19 Trial Transcript, pp. 30-31.
140 Doc. No. 467, February 19 Trial Transcript, p. 32.
141 Doc. No. 468, February 22 Trial Transcript, pp. 12-13.
142 Doc. No. 468, February 22 Trial Transcript, p. 23.
Service’s workforce and all of OR Title’s attorney-agents, notwithstanding their relationship with
ATF Services and OR Title since 2009, would commence employment with a transferee of Debtor’s
intangible assets; and (4) that a transferee of the intangible assets would have the working capital
necessary to operate the business.143
Mr. Hazel testified that each of the intangibles should have been valued separately, and that
specific methodologies exist to value a trade name such as “The Fund” and assets such as a workforce
in place.144 Mr. Hazel also opined that the cost of employees, attorney-agents, and working capital to
develop infrastructure would outweigh any value that a transferee received from the intangible
assets.145 Consequently, Mr. Hazel concluded that there was no value to Debtor’s intangible assets;
the value of “the broad intangible assets, again, because the costs and all the risk outweighs any
potential value, even at the extreme numbers that Mr. Pfeiffer came up with, is still negative.”146
With respect to the Title Plant, Mr. Hazel testified that Mr. Pfeiffer’s valuation failed to
properly account for four overlapping types of obsolescence. These types of obsolescence are (1)
“technological obsolescence” due to the extensive changes in technology since the 2004 and 2009
appraisals (for example, in 2004, real property records were commonly stored on microfilm or flat
film, a storage technology that was longer used in 2015);147 (2) “physical obsolescence” because the
Title Plant’s computer hardware is no longer supported or has become difficult to maintain;148 (3)
“functional obsolescence” because, starting in 2015, Clerks of Court were required by Florida law to
maintain free, public, online, searchable databases of real property records;149 and (4) “economic
143 Doc. No. 468, February 22 Trial Transcript, pp. 25-35.
144 Doc. No. 468, February 22 Trial Transcript, pp. 35-36.
145 Doc. No. 468, February 22 Trial Transcript, pp. 29-30, 35.
146 Doc. No. 468, February 22 Trial Transcript, p. 36.
147 Doc. No. 468, February 22 Trial Transcript, pp. 40, 45.
148 Doc. No. 468, February 22 Trial Transcript, pp. 47-48.
149 Doc. No. 468, February 22 Trial Transcript, pp. 41, 48.
obsolescence” due to the lower costs of conducting real property searches online as compared to the
cost of maintaining a title plant.150
In addition, Mr. Hazel testified that Mr. Pfeiffer did not properly consider the cost to maintain
and modernize the Title Plant,151 and that Mr. Pfeiffer had utilized a broad consumer price index to
adjust for inflation between 2009 and 2015 rather than a technology-specific Consumer Price Index,
which resulted in the increase in the Title Plant’s value by $16 million.152 Based on his analysis of
the Title Plant under the cost approach, the market approach, and the income approach, Mr. Hazel
concluded that the value of the Title Plant was de minimis or, in a relative range of valuation, up to a
maximum of $1.1 million.153
3. Plaintiff did not meet his burden of proof.
After carefully considering the testimony and evidence presented at trial, the Court finds that
Plaintiff did not meet his burden of proof to establish that Debtor received less than reasonably
equivalent in exchange for the assets that Debtor transferred to OR Title under the 2015 Master
Agreement.
First, although Plaintiff’s expert, Mr. Pfeiffer, has years of experience in the valuation field
and appears to have the “specialized knowledge” that would help the Court “to understand the
evidence or to determine a fact in issue” (as required by Rule 702(a) of the Federal Rules of Evidence),
Mr. Pfeiffer did not establish that his testimony “is the product of reliable principles and methods” as
required by Evidence Rule 702(c).154 Mr. Pfeiffer admitted that his expert report did not refer to any
textbooks or treatises, and he testified that, “I don’t rely on textbooks, I rely on doing valuations the
150 Doc. No. 468, February 22 Trial Transcript, p. 48.
151 Doc. No. 468, February 22 Trial Transcript, pp. 50-51.
152 Doc. No. 468, February 22 Trial Transcript, pp. 52-53.
153 Doc. No. 468, February 22 Trial Transcript, pp. 20, 56-57.
154 Fed. R. Evid. 702.
way I always I do it.”155 In other words, Mr. Pfeiffer’s opinions are largely ipse dixit: the intangible
assets have the values stated because he said so.156
Second, Mr. Pfeiffer testified that his $80 million valuation of Debtor’s intangible assets
included “The Fund” trade name and Debtor’s workforce, know-how, patents, software, and
technology,157 with no breakdown of the individual intangible assets. Mr. Pfeiffer’s total valuation
specifically included Debtor’s workforce, know-how, and network of attorney-agents. But after the
2009 JVA, the vast majority of Debtor’s employees and a number of Debtor’s senior management
team were employed by ATF Services and most of Debtor’s attorney-agents had signed agency
agreements with OR Title.158 In other words, Debtor transferred its workforce, know-how, and
network of attorney-agents to ATF Services and OR Title in 2009, so that when Debtor entered into
the 2015 Master Agreement, it no longer had these intangible assets to transfer. And because Mr.
Pfeiffer did not value these intangible assets separately, the Court cannot determine what portion of
his $80 million valuation is attributable to them.
Third, even if the Court were to accept Mr. Pfeiffer’s valuation of the Title Plant, Plaintiff
failed to present evidence of the value of Debtor’s rights or interest in the Title Plant as of 2015.
Plaintiff presented no evidence on the value of Debtor’s contingent interest in the Title Plant as of
December 2015, how the value of the Title Plant should be discounted to account for the contingent
nature of Debtor’s interest, or whether the value of Debtor’s interest in the Title Plant would be
affected by OR Title’s right to a copy of the Title Plant.
155 Doc. No. 467, February 19 Trial Transcript, p. 32.
156 In re ICMfg & Associates, Inc., 602 B.R. 780, 786 (Bankr. M.D. Fla. 2018)(citing Black’s Law Dictionary
833 (7th ed. 1999) for explaining that the term is referred to as “[s]omething asserted but not proved;” and
Kumho Tire Co., Ltd. v. Carmichael, 526 U.S. 137, 157, 119 S. Ct. 1167, 143 L. Ed. 2d 238 (1999) for the
holding that “nothing in either Daubert or the Federal Rules of Evidence requires a district court to admit
opinion evidence that is connected to existing data only by the ipse dixit of the expert.”).
157 Doc. No. 466, February 18 Trial Transcript, pp. 142, 158.
158 Doc. No. 360, ¶¶ 32, 38-53; Doc. No. 370, ¶¶ 122-123.
Fourth, Debtor had transferred the Marks, including “The Fund” trade name, to ATIF Trust
(the “Initial Transfer”) in June 2011, four years before the Master Agreement.159 Under the 2015
Master Agreement and related IP Assignment, it was ATIF Trust—not Debtor—that transferred the
Marks to OR Title.160 In order to avoid the transfer of the Marks to OR Title, Plaintiff acknowledges
in his Motion to Amend the Complaint to Conform to Evidence161 that he must first avoid the Initial
Transfer. Plaintiff contends that the Initial Transfer is voidable because it was to an insider, was for
no consideration, and was hidden from creditors.162 Citing the bankruptcy court’s ruling in In re
Kipnis,163 Plaintiff also contends that he may step into the shoes of the Federal Deposit Insurance
Corporation, a creditor in this case, and use the FDIC’s six-year statute of limitations for commencing
a fraudulent transfer action.164
However, the OR Defendants contend that Plaintiff’s attempt to avoid the Initial Transfer is
futile because (1) the claim is time-barred under both the two-year limitations period of § 548 and the
four-year limitations period of Florida Statute § 726.110, (2) Plaintiff stipulated that Debtor was
solvent in 2011, and (3) the transfer was disclosed in the public records.165
The Court need not decide this issue because, even if Plaintiff were successful in avoiding the
Initial Transfer of the Marks, he has provided no evidence of their value at the time of the 2015 Master
Agreement. For example, Plaintiff presented no evidence regarding whether the value of the Marks
was affected by ATF Services’ use of “The Fund” trade name since 2009, a date well outside any
applicable look-back period.
159 Doc. No. 370, ¶ 129.
160 Doc. No. 370, ¶ 130.
161 Doc. No. 442.
162 Doc. No. 442; Doc. No. 469, February 23 Trial Transcript, pp. 14-18.
163 In re Kipnis, 555 B.R. 877, 883 (Bankr. S.D. Fla. 2016).
164 Doc. No. 442, p. 9, n. 5.
165 Doc. No. 446; Doc. No. 469, February 23 Trial Transcript, pp. 42-49.
V. CONCLUSION
Viewing the transactions between Debtor, ATIF Trust, OR Holding, ATF Services, and OR
Title in their entirety, there is little doubt that between 2009 and 2015, Debtor’s title insurance
business was transferred to OR Title. When Debtor entered into the 2009 JVA, it essentially
transferred all of its business operations to OR Title and ATF Services, and only retained the business
of “running off its claims tail.”166 In fact, Debtor expressly agreed in the JVA to take all reasonable
actions to ensure that its title insurance business “will shift” to OR Title and that “all ancillary”
business will be transferred to ATF Services.167 In furtherance of the JVA, Debtor (1) transferred its
Title Plant, workforce, management team, and know-how to ATF Services, and permitted ATF
Services to use “The Fund” trade name, and (2) agreed in the JVA that it would no longer engage in
the business of “title insurance underwriting or title insurance production”168 and encouraged its
attorney-agents to sign agency agreements with OR Title.
But Debtor’s transfers in 2009 are beyond any look-back period for avoiding fraudulent
transfers. By the time Debtor entered into the 2015 Master Agreement, Debtor’s only remaining assets
were its tangible assets, which Plaintiff has stipulated were worth $47,571,074.00, and its intangible
assets consisting of its contingent right to obtain a copy of the Title Plant, and—if Plaintiff first
succeeded in avoiding the Initial Transfer—the Marks, including the “The Fund” trade name.
The evidence before the Court is that under the 2015 Master Agreement, Debtor transferred
tangible assets having a value of $47,571,074.00 in exchange for OR Title’s assumption of Debtor’s
title insurance policy liabilities. These liabilities were contemporaneously valued by OR Title at
$46,136,000.00, and retrospectively valued by the OR Defendants’ expert witness as between $45
166 Doc. No. 360, ¶ 36.
167 Doc. No. 424, Defendants’ Ex. 10, § 8a(iii).
168 Doc. No. 424, Defendants’ Ex. 10, § 8a(ii).
million and $57.2 million, with an “actuarial central estimate” of $50,889,000.00, without
consideration of any additional risk premium or profit. Plaintiff has not presented admissible evidence
of the value in 2015 of Debtor’s intangible assets, such as its contingent right to obtain a copy of the
Title Plant or the Marks.
In other words, the evidence shows only that Debtor transferred assets to OR Title valued at
$47,571,074.00 in exchange for OR Title’s assumption of title policy liabilities in the range of $45
million to $57.2 million. The Eleventh Circuit has held that “[t]he concept of reasonably equivalent
value does not require a dollar-for-dollar transaction.”169 The Court concludes that Plaintiff has not
met his burden of proof to establish that Debtor’s transfers to OR Title under the 2015 Master
Agreement were for less than reasonably equivalent value.
Clerk’s Office to serve on interested parties via CM/ECF.
169 In re Northlake Foods, Inc., 715 F.3d 1251, 1257 (11th Cir. 2013), and In re Northlake Foods, Inc., 518 F.
App’x 604, 607 (11th Cir. 2013)(citing In re Advanced Telecommunication Network, Inc., 490 F.3d 1325, 1336
(11th Cir. 2007)).