KIRSCHNER v. J.P. Morgan Chase Bank, N.A.

IN THE UNITED STATES BANKRUPTCY COURT

FOR THE DISTRICT OF DELAWARE

In re:

Chapter 11

MILLENNIUM LAB HOLDINGS II, LLC, et al.,

Case No. 15-12284 (LSS)

Debtors.

MARC S. KIRSCHNER solely in his capacity as

TRUSTEE OF THE MILLENNIUM CORPORATE

CLAIM TRUST,

Plaintiff,

Adv. No. 17-51840 (LSS)

v.

Re: Docket Nos. 247, 253 & 255

J.P. MORGAN CHASE BANK, N.A., CITIBANK

N.A., BMO HARRIS BANK, N.A., and

SUNTRUST BANK,

Defendants.

OPINION

Plaintiff's Motion for Partial Summary Judgment Regarding

Defendants’ Affirmative Defenses [Docket No. 247]

Plaintiff's Daubert Motion to Exclude the Testimony of

Defendants’ Proposed Expert Branka Matevich [Docket No. 253]

Plaintiff’s Daubert Motion to Exclude the Testimony of

Defendants’ Proposed Expert Amy Hutton [Docket No. 255]

On March 12, 2025, I issued that certain Opinion! denying Defendants’ Motion for

Summary Judgment and Daubert motion. Now, I turn to Plaintiffs motions,

' Kirschner v. J.P. Morgan Chase Bank, N.A., Adv. No. 17-51840, 2025 WL 794311 (Bankr, D. Del.

March 12, 2025).

By way of reminder, this is an action seeking to avoid and recover a $35.3 million

arrangement fee paid by Debtor to Defendants in connection with the Dividend

Recapitalization Transaction as either an actual or constructive fraudulent conveyance. The

background, procedural posture and legal standard have been fully set forth in the Opinion.

I adopt those sections here by this reference. I also adopt the defined terms in the Opinion.

I. Trustee’s Motion for Partial Summary Judgment Relating to Certain Affirmative

Defenses

Collectively, Defendants assert twenty-four defenses, all of which are the subject of

Plaintiff's summary judgment motion. Nonetheless, all parties agreed that I need rule on

only two: the “reasonable good faith” and “publicly available information” defenses.’

Rule 8(c)(1) provides that “[i]n responding to a pleading, a party must affirmatively

state any avoidance or affirmative defense. .. .”* The rule lists eighteen separate affirmative

defenses, but the list is not exhaustive. The rule does not provide guidance on what else

might constitute an avoidance or defense.‘

An affirmative defense is ‘“‘[a] defendant’s assertion of facts and arguments that, if

true, will defeat the plaintiff's or prosecution’s claim, even if all the allegations in the

complaint are true.”° ‘To determine whether something is a defense, courts look to “the

? Letter from Lara Samet Buchwald to the Court (Feb. 1, 2023), ECF No. 338.

3 Fed. R. Civ. P. 8(c)(1).

4 2. Moore’s Federal Practice § 8.08[5] (3d ed. 1997); Sterten v. Option One Mortg. Corp. (In re Sterten), 546

F.3d 278, 284 (3d Cir. 2008) (discussing affirmative defenses in the context of waiver for failing to

assert in answer).

> Affirmative Defense, Black’s Law Dictionary (12th ed. 2024); see also Nat’l Union Fire Ins. Co. of

Pittsburgh, Pa. v. City Savings, F.S.B., 28 F.3d 376 (3d Cir. 1994).

relationship between the defense in question and the plaintiff's primary case.”° The

governing substantive law informs this question.’ Further, the court must distinguish

between a defense and a general denial:

When we are asking whether a particular defense is an affirmative defense,

what we are really asking is whether that defense is adequately asserted merely

by denying the allegations in the complaint, or whether more is required. To

answer that question, we need to determine whether the defense notes issues

not raised, even by implication, in the complaint.’

The determination is also informed by the purpose of the requirement to plead affirmative

defenses: to avoid surprise and to provide the plaintiff an opportunity to respond.’ Here, as

both counts of the Complaint are brought under § 548, the Bankruptcy Code and federal law

interpreting fraudulent conveyances informs the inquiry. The element of surprise is not a

factor as each of the challenged defenses were raised.

a. Reasonable Good Faith

Citi, BMOC and SunTrust each assert as a defense that they “acted reasonably and

in good faith at all times based on all relevant facts and circumstances known by it at the

time it so acted.”!° This defense is separate and apart from the § 548(c) defense each

raises.'!

6 Sterten, 546 F.3d at 284.

7 2 Moore’s Federal Practice § 8.08[5].

8 Sterten, 546 F.3d at 284.

Sterten, 546 F.3d at 285; 2 Moore’s Federal Practice § 8.08[5].

0 Def. Citibank, N.A.’s Answer and Affirm. Defenses to P1.’s Compl. § 125, ECF No. 62 (“Citi

Answer”); Answer of Def. BMO Harris Bank, N.A. 18, ECF No. 64 (“BMOC Answer”); Def.

SunTrust Bank’s Answer & Defenses to Compl. 18, ECF No. 66 (“SunTrust Answer”).

Citi Answer J 118 (“The payments were made to CBNA for value and in good faith and therefore

CBNA has a lien on or may retain an interest in in the payments pursuant to the Bankruptcy Code,

including 11 U.S.C. § 548(c), and applicable state law”); BMOC Answer 17 (“The Trustee’s claims

Trustee argues that a defendant’s “reasonable good faith” is an incomplete element

of a § 548(c) defense.” Citi, BMOC and SunTrust respond that Trustee has failed to meet

his burden of establishing their lack of entitlement to the good faith defense as a matter of

law because Trustee cites no authority for such a proposition.'* Trustee replies that Citi,

BMOC and SunTrust ask him to prove a negative, which he cannot do because the

purported defense is “not recognized as a defense to the cause of action.”

Whether a defense exists “is a question of law for the court and is particularly

appropriate for resolution on a motion for summary judgment.” Indeed, “the showing of a

‘genuine issue for trial’ is predicated upon the existence of a legal theory which remains

viable under the asserted version of the facts... .”'° “Ifa claimed affirmative defense is an

are barred, in whole or in part, because BMO Harris acted in good faith and payments made to

BMO Harris were for value. Pursuant to 11 U.S.C. § 548(c), BMO Harris is entitled to retain the

payments that would otherwise by avoidable under 11 U.S.C. § 548(a) or (b).”); SunTrust Answer 17

(“Plaintiff's claims are barred because the payments were made to SunTrust for value and in good

faith and, therefore, SunTrust has a lien or may retain an interest in the payments pursuant to the

Bankruptcy Code, including 11 U.S.C. § 548(c) and applicable state law.”),

12 Pl.’s Mem. of Law in Supp. of Its Mot. for Partial Summ. J. Regarding Defs.’ Affirm. Defenses

23-24, ECF No. 247-1 (“Pl. Summ. J. Br.”).

3 Defs.’ Opp’n to P1.’s Mot. for Partial Summ. J. Regarding Defs.’ Affirm. Defenses 10-11, ECF

No. 278 (Defs.’ Summ, J. Br.”).

P],’s Reply to Defs.’ Opp’n to Pl.’s Mot. for Partial Summ. J. Regarding Defs.’ Affirm. Defenses 2

(quoting United States v. Gilead Scis., Inc., 515 F. Supp. 3d 241, 248 (D. Del. 2021)), ECF No. 298.

5 10B Wright & Miller’s Federal Practice & Procedure § 2734 n.6 (4th ed. 2025) (citing Kenney v. Scripps

Howard Broadcasting Co., 259 F.3d 922 (8th Cir. 2001)).

© 10A Wright & Miller’s Federal Practice & Procedure § 2727.2 (quoting McGuire v. Columbia

Broadcasting System, Inc., 399 F.2d 902, 905 (9th Cir. 1968)).

insufficient defense, or even if proved it is not a material fact, summary judgment may be

granted.”'’

At this stage there are facts from which I can infer, when viewing the facts in the

light most favorable to Defendants, that they received the Arrangement Fee in good faith.

However, such a factual finding alone would not entitle them to a ruling in their favor. As

Trustee contends, good faith is just one part of the enumerated statutory defense/remedy

embodied in § 548(c).'® Section 548 does not suggest other defenses exist to defeat a claim

for fraudulent transfer and Citi, BMOC and SunTrust do not point to any other provision of

the Code or to decisional law providing for their asserted “reasonable good faith” defense.

Further, Citi, BMOC and SunTrust argue that this defense “defeats” Trustee’s

allegations regarding evidence of Debtor’s state of mind in entering into the Dividend

Recapitalization Transaction.” In essence, this “defense” is a denial of Trustee’s allegations

that the Dividend Recapitalization Transaction constitutes an actual fraudulent conveyance.

10B Wright & Miller’s Federal Practice and Procedure § 2734 n.3 (citing Off & Prof, Emp. Int’l Union,

Local. No. 9, AFL-CIO v. Allied Indus. Workers Int'l Union, 397 F. Supp. 688 (E.D. Wis. 1975), affd

without opinion, 535 F.2d 1257 (7th Cir. 1976)).

8 11 U.S.C. § 548(c) provides

Except to the extent that a transfer or obligation voidable under this section is voidable

under section 544, 545, or 547 of this title, a transferee or obligee of such a transfer or

obligation that takes for value and in good faith has a lien on or may retain any interest

transferred or may enforce any obligation incurred, as the case may be, to the extent that

such transferee or obligee gave value to the debtor in exchange for such transfer or

obligation.

See, e.g., 11 U.S.C. § 546 (limitations on avoiding powers).

20 Defs.’ Summ. J. Br. 11.

In the absence of any cited decisional authority or even any analogous case law, Iam

not inclined to create a new defense specific to a Code-created cause of action.”! Moreover,

Citi, BMOC and SunTrust essentially concede this “defense” is more properly categorized

as a denial.” Therefore, partial summary judgment is granted in favor of Trustee on the

purported “reasonable good faith” defense.

b. Publicly Available Information

Citi and BMOC also assert as a defense that “|'Trustee] is not entitled to any recovery

because the substance of the allegedly omitted or misstated information was disclosed and

publicly available.””

Trustee argues that “publicly available information” is not an affirmative defense,

noting that he has been unable to identify any federal court decision recognizing it as such.™

Trustee further contends that the public availability of any information is just one of many

factors that could combine to negate an actual fraudulent transfer claim, but it is not

sufficient to defeat such a claim alone.

Citi and BMOC cite Kuptez v. Wolf® to suggest that the public nature of the

transaction is an absolute bar to recovery on a fraudulent conveyance. But, the availability

of financial information about the debtor (to post-transaction creditors) was one of several

1 Congress could have created defenses. Compare 11 U.S.C. § 548 with 11 U.S.C. § 547(c)

(providing exhaustive list of defenses to a preference action).

2 Defs.’ Summ. J. Br. 11.

23 Citi Answer 127; BMOC Answer 18.

74 Pl. Summ. J. Br. 24.

5 845 F.2d 842 (9" Cir. 1988).

factors the court considered in its analysis—not a lone determining factor.*® More to the

point, Citi and BMOC contend that “one of [Trustee]’s core theories in this litigation is that

certain facts were concealed from Millennium’s creditors” such that Trustee has put the

disclosure of information regarding the Dividend Recapitalization Transaction “at issue”

and therefore the public availability of the information is “relevant” to the case.*’ These

contentions are a tacit acknowledgement that this “defense” is actually a denial of Trustee’s

affirmative case.

That the Dividend Recapitalization Transaction or aspects of it (or the existence of

certain litigation) may have been public is not dispositive of whether the Dividend

Recapitalization Transaction was an actual or constructive fraudulent conveyance; it is only

one of many factors the Court will consider at trial. For these reasons, and because the

“publicly available information” defense is actually a general denial of Trustee’s claims,

summary judgment is granted in favor of Trustee on the purported “publicly available

information” defense.

26 Td. at 847-850, In that vein, I note that secrecy/concealment is one of the badges of fraud often

used to show actual intent to defraud. The badges of fraud include (1) the relationship between the

debtor and the transferee; (2) consideration for the conveyance; (3) insolvency or indebtedness of the

debtors; (4) how much of the debtor's estate was transferred; (5) reservation of benefits, control or

dominion by the debtor over the property transferred; and (6) secrecy or concealment of the

transaction. Off Comm. of Unsecured Creditors of Fedders N. Am., Inc. v. Goldman Sachs Credit Partners

L.P. (In re Fedders N. Am., Inc.), 405 B.R. 527, 545 (Bankr. D. Del. 2009). “No single badge of fraud

is dispositive, and the court may consider other factors.” Zazzali v. AFA Fin. Grp., LLC (In re DBSI,

Inc.), 477 B.R. 504, 509 (Bankr. D. Del. 2012).

27 Defs.’ Summ. J. Br. 9-10.

II. Trustee’s Motions to Exclude the Testimony of Defendants’ Experts

Trustee filed separate Daubert motions seeking to exclude the testimony of Branka

Matevich”® and Amy Hutton.”

A. Branka Matevich

Defendants retained Branka Matevich to respond to Austin Smith’s expert report.

Matevich holds a bachelor’s degree in psychology from Loyola University and an MBA

from North Central College. Matevich’s professional experience spans over forty years, the

last twelve of which she spent focusing on drug testing.*® Her experience involves hospital

and non-hospital laboratories and encompasses a variety of roles ranging from medical

technician performing tests to CEO of a clinical laboratory. For a time, Matevich served as

Director of Strategy and Solutions at Quest Diagnostics Inc.—one of the comparable

companies identified by both Vantage Point and Austin Smith.*' She considers herself an

expert in the clinical lab industry with a recent focus on UDT toxicology lab testing.”

Matevich evaluates Austin Smith’s modifications to the management’s projections.

She focuses on Austin Smith’s adjustments relating to the specimen volume growth rate,

commercial payor custom profiles, medically unlikely edits and the local coverage

8 Pl.’s Daubert Mot. to Exclude the Test. of Defs.’ Proposed Expert Branka Matevich, ECF No. 253.

29 Pl.’s Daubert Mot. to Exclude the Test. of Defs.’ Proposed Expert Amy Hutton, ECF No. 255.

30 Expert Report of Branka Matevich 1-2, App. A, ECF No. 254-3 (“Matevich Report”).

31 Matevich Report 1; Decl. of Grant L. Johnson in Opp’n to Defs.’ Daubert Mot. to Exclude the

Test. Of Pl.’s Proposed Expert Yvette Austin Smith Ex. 1 (Expert Report of Yvette Austin Smith), at

96, ECF No. 285-1 (“Austin Smith Report”); Johnson Decl. Ex. 6 (Vantage Point Advisors Report),

at VP_ML_00015735 (Guideline Public Company Summary), ECF No. 285-1.

32 Matevich Deposition Excerpts 32:6-18; 37:3-21, ECF No. 254-4.

determination.» Matevich brings her experience to bear on her analysis to opine that

Austin Smith’s assumptions (and, therefore, adjustments) are unsupported by the facts and

derived from misunderstandings and mischaracterizations of the laboratory services

industry.* For example, Matevich explains that Austin Smith’s reduction to net revenue

per specimen based on the possibility of future Medicare denials does not account for

Millennium’s ability to adapt to the Medicare changes and reduce its billing practices in the

future in order to recover a portion of similar claims instead of nothing.* As another

example, Matevich states Austin Smith’s adjustments to medically unlikely edits in

Medicare claims evince a misunderstanding of Medicare’s claim review and appeals

process.*©

In moving to exclude Matevich’s testimony, Trustee contends Matevich’s experience

does not make her an expert in the areas on which she opines and her opinions exceed her

expertise. Trustee also argues that Matevich’s opinions are based on unreliable

methodologies and insufficient facts specific to Millennium’s business operations.*’

Defendants counter that Trustee’s arguments go to weight not admissibility and assert

33 Matevich Report 3-4.

4 Td. at 3-4; see also id, at 3 (“Ms. Austin Smith’s assumptions and resulting adjustments are flawed

for a variety of reasons, including because they rely on misunderstandings and mischaracterizations

of the laboratory services industry, and are inconsistent with my experience preparing financial

projections for laboratory services companies.”).

3 Id. at 4, 29-31 (“In my experience, once a laboratory is aware that claims are denied and are in fact

non-recoverable, the laboratory would adapt its practices to ensure that MUE limits are not breached

in future claims.”).

36 Id. at 4.

37 Pl.’s Opening Br. in Supp. of Its Daubert Mot. to Exclude the Test. of Defs.’ Expert Branka

Matevich 3, ECF No. 254.

Matevich is qualified to opine that Austin Smith did not appropriately consider the relevant

facts in the industry when making her adjustments to Millennium’s projections.* In reply,

Trustee contends Defendants failed to address his arguments and narrowed the scope of

Matevich’s opinion.”

I will not exclude Matevich’s testimony. Rather, I conclude that Defendants are

correct—the question is how much weight Matevich’s testimony should be given.

Matevich’s experience in the industry supplies her with the credentials to qualify her as an

expert in the clinical laboratory industry, generally. As to Trustee’s specific concerns that

Matevich’s testimony is based in facts inconsistent with Millennium’s business operations,

this can be explored on cross-examination with the benefit of the record made. Further, to

the extent Matevich attempts to narrow or change her opinion and/or the basis of it, this,

too, can be addressed by the Court in the trial context.”

B. Amy Hutton

Defendants also retained Amy Hutton to respond to Austin Smith’s report. Hutton

has a Ph.D. in business administration from the Simon Business School at the University of

Rochester. She is a professor of business administration at Boston College’s Carroll School

of Management and previously served as an associate professor at the Tuck School of

38 Defs.’ Mem. of Law in Opp’n to Pl.’s Daubert Mot. to Exclude the Test. of Defs,’ Expert Branka

Matevich 9-12, ECF No. 283.

% PI.’s Reply in Further Supp. of Pl.’s Daubert Mot. to Exclude the Test. of Branka Matevich 1-3,

ECF No, 296,

“ CR Bard, Inc. v. AngioDynamics Inc., Case No. 1:15CV218, 2018 WL 3130622, at *10-12 (D. Del.

June 26, 2018) (determining expert issues can be properly addressed at trial, and noting at footnote 2

that “a Daubert motion is not intended to be a mini trial. It is intended to discern if the expert is

qualitied to testify. The parties in all three of these Daubert motions have attempted to try many

aspects of their case in these motions. This is not the proper way to argue Daubert motions.”).

10

Business at Dartmouth College and Harvard Business School. For one year she worked at

Chemical Bank in its investment banking group, doing work on several large transactions,

mostly leveraged buyouts. She served as a director on the board of Bandag, Inc. and later as

chair of the audit committee. Her work has appeared in numerous publications and her

research focuses on several topics including “empirical assessments of valuation methods,

methods for detecting ‘earnings management’ (a term connoting exploitation of

opportunities to make accounting decisions that change reported income), [and] effective

corporate disclosure strategies... .”"!

Hutton opines that “Austin Smith’s analysis of Millennium’s solvency and her

conclusions rely on unsupported assumptions, suffer from hindsight bias, and reflect flawed

applications of widely accepted valuation principles.”” Hutton contends Austin Smith

improperly included a company specific risk premium and a small company risk premium

in her discount rate.” Hutton believes Austin Smith’s adjustments to Millennium’s

projected revenue and operating expenses are unsupported and unreliable.“ Hutton says

Austin Smith’s adoption of a beta derived from five “comparable” companies is inconsistent

with her opinion that the companies were “not sufficiently comparable to Millennium to

provide a reliable estimate of value.”*’ For these reasons and others included in her report,

Hutton opined that Austin Smith’s assertion that “‘Millennium was clearly rendered

4! Expert Report of Amy Hutton 4-5, App. A, ECF No. 256-2.

= Td

43 Id.

“4 Td. at 8.

Td. at 20 (quoting Austin Smith Report 152).

11

balance sheet insolvent as of the 2014 Transaction’ is based on flawed and unreliable

analyses.’”*°

Trustee contends “Hutton’s opinion should be excluded because it is not based on

sufficient facts and is not the product of the reliable application of the facts to accepted

methodologies.”*’ Defendants respond that Hutton is a rebuttal expert whose opinion is

limited to identifying flaws in Austin Smith’s analyses, Trustee’s arguments go to weight not

admissibility and Trustee otherwise fails to show that any of Hutton’s opinions are

unreliable.® Trustee replies that, although Hutton is called as a rebuttal expert, her report

includes calculations and conclusions unsupported by the facts which render her opinions

therein unreliable and inadmissible.”

In the Opinion, I refused to exclude Austin Smith’s valuation testimony and

specifically ruled that her inclusion of risk premiums in her determination of the WACC

would be ripe for cross-examination or a counter expert opinion. Hutton is that counter

expert. Similarly, Defendants’ critique that Hutton’s other opinions ignore facts on the

ground or are based on an incorrect understanding of the facts can be explored on cross-

46 Td. at 7 (quoting Austin Smith Report 4 145).

47 PI.’s Opening Br. in Supp. of Its Daubert Mot. to Exclude the Test. of Defs.’ Proposed Expert

Amy Hutton 10, ECF No. 256.

48 Defs.’ Mem. of Law in Opp’n to P1.’s Daubert Mot. to Exclude the Test. of Defs.’ Proposed

Expert Amy Hutton 7-10, ECF No, 282.

PI.’s Reply in Further Supp. of Pl.’s Daubert Mot. to Exclude the Test. of Amy Hutton 1-2, ECF

No, 297.

12

examination. Though criticized as an “academic,” Hutton is qualified to rebut Austin

Smith’s valuation. Trustee’s arguments primarily go to weight. This is classic trial fodder.”

Conclusion

For the foregoing reasons, Trustee’s Motion for Summary Judgment is GRANTED.

Trustee’s two Daubert motions are DENIED.

Dated: June 27, 2025 ( Mate chet hivecb

Laurie Selber Silverstein

United States Bankruptcy Judge

°° Goldman v. Standard Ins, Co., 341 F.3d 1023, 1036 (9th Cir.2003) (denying summary judgment

because determination of “who is correct in this battle of experts is not for [the Court] to decide”);

Osseo Imaging, LLC v. Planmeca USA Inc., CA. No. 17-1386-LPS, 2020 WL 6318724, at *11 (D. Del.

Oct. 28, 2020) (denying motion to exclude portions of expert testimony where “each parties’ experts

[were] pointing the finger at each other’s methodologies as incorrect[,]” and holding “[t]he experts’

criticisms of one another may be explored at trial and go to the weight and not admissibility of their

opinions.”).

13