Rajala v. Garnder

Plaintiff-Appellant Eric Rajala, Trustee of the bankruptcy estate of Generation Resources Holding Company, LLC (GRHC), appealed a district court order which granted motions by Defendants-Appellees FreeStream Capital, LLC (FreeStream) and Lookout Windpower Holding Co., LLC (LWHC) to distribute approximately $9 million held in escrow. The amount represented part of the purchase price of a wind power project allegedly developed by GRHC. The Trustee claimed that GRHC had been left with $5 million in debt while the individual Defendants-Appellees and their affiliated entities received some $13 million in proceeds from the sale of several wind power projects, unburdened by the debt. The issue on appeal before the Tenth Circuit was what constituted property of the bankruptcy estate and whether allegedly fraudulently transferred property was subject to the Bankruptcy Code's automatic stay before a trustee recovers the property through an avoidance action. The district court held that allegedly fraudulently transferred property was not part of the bankruptcy estate until recovered and therefore was beyond the reach of the automatic stay. Upon review, the Tenth Circuit affirmed: "[i]n the end, we need not pass upon the constitutionality of such a broad reading. . . . This interpretation gives Congress's chosen language its ordinary meaning, and abides by the rule against surplusage. Further, our reading does not undermine the Bankruptcy Code's goal of equitable distribution, as there exist[s] alternative means of protecting estate assets." View "Rajala v. Garnder" on Justia Law