January 31, 2012

The debtor was one of many subsidiaries in a consolidated group of real estate companies which owned and operated commercial real estate. A centralized management team operated the parent and all subsidiaries. Revenues from all of the entities were swept daily into a cash management account which was used to pay expenses of all of the entities. The companies had consolidated financial statements and filed consolidated tax returns.

The (subsidiary) debtor's only asset was an apartment complex.

The bankruptcy court erred in finding that the debtor was not a single asset real estate debtor. There is no "consolidated enterprise" exception to the single asset rules. Under the plain language of the statute (11 USC 101(51B)) the debtor was a single asset debtor.

In an avoidance action, the debtor need not prove that it had legal title to the property transferred to the defendant. Legal title is not a threshold requirement for ownership. Control is more decisive than ownership. Specifically, control may be sufficient to show ownership in what is ultimately a fact-based inquiry that will vary according to the peculiar circumstances of each case.

January 30, 2012

States' sovereign immunity against claims asserted pursuant to 11 USC 544(b) (here, State fraudulent transfer law) was abrogated in 11 USC 106. It is within Congress' power to do so under the Bankruptcy Clause of the Constitution.

Hence, even though: (i) applicable State law does not permit an unsecured creditor to sue the State for fraudulent transfer, and (ii) section 544(b) requires that there be at least one actual unsecured creditor who can recover a fraudulent transfer under applicable State law, a debtor's claims against a State under section 544(b) remains viable.