SUSAN V. KELLEY, Bankruptcy Judge.
The Archdiocese of Milwaukee (the "Debtor") filed a voluntary petition under Chapter 11 of the Bankruptcy Code on January 4, 2011. The statute of limitations for pursuing avoidance claims, such as preferences and fraudulent transfers, will expire on January 4, 2013. See 11 U.S.C. § 546(a). On May 25, 2012, the Official Committee of Unsecured Creditors (the "Committee") filed a Motion for an Order (I) Authorizing the Committee to Assert, Litigate, and Settle an Adversary Proceeding on Behalf of the Bankruptcy Estate to Avoid and Recover Fraudulent Transfers Relating to Transfers from the Debtor's Parish Deposit Fund and (II) Compelling Debtor to Identify to the Committee the Recipients and Amounts and Dates of the Transfers.
The parties do not dispute that this Court has authority to enter a final order deciding the Committee's Motion. The Committee and the Debtor both expressly consented and raised no objection to the Court's consideration and entry of a final order on the Motion. If the Court granted the Committee derivative standing to file Complaints against the Parishes, the Court's authority to enter final orders in the ensuing adversary proceedings would need to be revisited.
Section 544 of the Bankruptcy Code vests the bankruptcy trustee with "avoiding powers." "An avoiding power is the power of the trustee to undo certain voluntary or involuntary transfers of the debtor's interests in property in order to bring the property back into the bankruptcy estate for distribution purposes." Susan V. Kelley, GINSBERG & MARTIN ON BANKRUPTCY, § 8.01 (5th ed. Supp. 2012). In a Chapter 11 case, unless a trustee has been appointed, the debtor in possession exercises the avoiding powers. 11 U.S.C. § 1107. If a debtor in possession or trustee unjustifiably refuses to bring an avoidance action, the creditors' committee, with approval of the bankruptcy court, may do so. See, e.g., Fogel v. Zell, 221 F.3d 955, 965 (7th Cir.2000) ("If a trustee unjustifiably refuses a demand to bring an action to enforce a colorable claim of a creditor, the creditor may obtain the permission of the bankruptcy court to bring the action in place of, and in the name of, the trustee."). The standing of a committee to exercise the trustee's avoiding powers is called "derivative standing." The parties agree that the Committee should be granted derivative standing if two tests are met: (1) the claim is colorable; and (2) the Debtor unjustifiably refuses to pursue it.
A claim is colorable if it could survive a motion to dismiss. Fail-Safe LLC
And, in discussing the evaluation of a committee's request for derivative standing, the bankruptcy court in G-I Holdings, Inc. v. Those Parties Listed On Exhibit A (In re G-I Holdings, Inc.), 313 B.R. 612, 631 (Bankr.D.N.J.2004), explained:
With these principles in mind, the Court evaluates the allegations made by the Committee to determine whether the Committee has stated a colorable claim. The Committee contends that either one of two avoiding power provisions authorizes the recovery of the alleged fraudulent transfer: 11 U.S.C. § 544(a)(2) or § 544(b).
Section 544(a) is known as the "strong arm clause," and the trustee is said to be exercising the "strong arm power." Generally the strong arm power comes into play when a transferee claims title to or an interest (such as a security interest) in the debtor's real or personal property, and the trustee tries to attack the claim because of
The Committee would prefer to proceed under § 544(a)(2), which provides:
11 U.S.C. § 544(a)(2) (emphasis added).
Steven Boyce explained the history and operation of § 544(a)(2) in his article, Koch Refining and In re Ozark: The Chapter 7 Trustee's Standing to Assert an Alter Ego Cause of Action, 64 AM. BANKR.L.J. 315, 321-22 (1990):
Although Wisconsin previously recognized the creditor's bill, that equitable remedy has been displaced by Chapter 816 of the Wisconsin Statutes. In Crown Castle USA, Inc. v. Orion Constr. Group, LLC, 2012 WI 29, 339 Wis.2d 252, 811 N.W.2d 332, the Wisconsin Supreme Court traced the history of the statute back to the creditor's bill. The court stated that the statute completely replaced the creditor's bill, and it strictly construed the language of the statute. The court refused to imply a statutory right when the legislature had not afforded it:
Id. ¶ 18.
Chapter 816 of the Wisconsin Statutes does not provide a creditor with the right to pursue a fraudulent transfer. Because Bankruptcy Code § 544(a)(2) limits the Committee to the powers of a creditor with an execution returned unsatisfied, and in Wisconsin, such a creditor is confined to the powers spelled out in Chapter 816, and Chapter 816 does grant the right to institute a fraudulent transfer suit, the Committee cannot use § 544(a)(2) to avoid the transfer. At the hearing, the Committee argued that any creditor can bring an action under Wis. Stat. § 242.04(1)(a), not just a creditor with an execution returned unsatisfied. However, the strong arm power of § 544(a)(2) does not belong to any creditor; it specifically equips a creditor with an execution returned unsatisfied. After the Crown Castle case, that particular type of creditor has limited rights in Wisconsin. The Court is not suggesting that a creditor can no longer pursue fraudulent transfers in Wisconsin, but rather that a trustee in bankruptcy cannot use § 544(a)(2) as a predicate for pursuing a creditor's fraudulent transfer claim.
Assuming, arguendo, that the Committee could pursue a fraudulent transfer claim using the strong arm power of § 544(a)(2) (or using § 544(a)(1) pursuant to the Committee's amended Motion), the next issue is whether the introductory phrase of the strong arm clause — "without regard to any knowledge of the trustee or of any creditor," — nullifies the statute of limitations for fraudulent transfers. The Committee relies for support on Collins v. Kohlberg & Co. (In re Southwest Supermarkets, LLC), 325 B.R. 417, 426-27 (Bankr.D.Ariz.2005), in which Judge Haines stated: "Actions brought by trustees under § 544(a), unlike those assertable under § 544(b), are assertable `without regard to any knowledge of the trustee or any creditor.' Consequently, if the limitations on such an action is subject to a discovery rule, such as the discovery rule for actual fraudulent transfers, the action is assertable on behalf of the hypothetical creditor who is hypothesized to have had no knowledge of the wrongdoing." In this case, the applicable statute of limitations contains a discovery rule. Wis. Stat. § 893.425 provides that an action for the recovery of a transfer made with the actual intent to defraud creditors must be brought "within 4 years after the transfer is made ... or, if later, within one year after the transfer ... is or could reasonably have been discovered by the claimant." Under the Southwest Supermarkets court's interpretation of the strong arm clause, this discovery rule does not apply, because even if a creditor could have discovered or did discover the fraudulent transfer, the trustee wielding the strong arm power is not deemed to know about it. The logical end of the argument is that no statute of limitations applies to an intentional fraudulent transfer.
The Southwest Supermarkets court did not cite any precedent or legislative history supporting this startling proposition. The court did not address the long line of cases in which the distinction is drawn between "actual knowledge" — like a debtor in possession has of its own transactions — and "constructive notice," which is implied in various transactions. For example, in In re Sandy Ridge Oil Co., 807 F.2d 1332, 1336 (7th Cir.1986), the Seventh Circuit Court of Appeals distinguished between actual knowledge and constructive notice of a real estate deed. In fact, it certified the question of whether a certain defect would destroy constructive notice. The court in Southwest Supermarkets played down the evisceration of the statute of
It appears that a discovery rule does apply to fiduciary self-dealing claims in Delaware, and the lack of such a limitation does not support the Southwest Supermarkets court's reading of the strong arm clause.
As the Debtor points out, Judge Clevert held in In re Standard Law Enforcement Supply Co., 74 B.R. 608 (Bankr. E.D.Wis.1987), that the hypothetical lack of actual knowledge did not strip a judgment lien creditor of constructive notice. In discussing the rights of a judicial lien creditor (not a bona fide purchaser, a distinction that the Committee relies on some cases to make), Judge Clevert said: "Although § 544(a) vests a trustee with the power to avoid transfers regardless of the trustee's actual knowledge, the trustee is still bound by constructive or inquiry notice." Id. at 612 (emphasis added); see also In re Suggs, 355 B.R. 525, 528-29 (Bankr.M.D.N.C.2006) (judgment lien creditor subject to constructive notice of lis pendens). This Court concludes that either § 544(a) does not give the Committee the right to bring a fraudulent transfer action at all based on Wisconsin law, or if it does, it still is subject to the "discovery rule" of the Wisconsin statute of limitations.
The Committee stands on firmer ground in asserting the fraudulent transfer claim under Bankruptcy Code § 544(b). That provision allows the trustee to "avoid any transfer of an interest of the debtor in property or any obligation incurred by the debtor that is voidable under applicable law by a creditor holding an unsecured claim...." 11 U.S.C. § 544(b). The trustee's rights under § 544(b) are limited to the "rights of an existing unsecured creditor because § 544(b) rights are completely derivative of those of an actual unsecured creditor." Lippe v. Bairnco Corp., 225 B.R. 846, 852 (S.D.N.Y.1998) (citations and quotations omitted). Further, the trustee will be able to attack the transfer only to the extent a creditor with an allowable claim can avoid the transfer under applicable
The Committee alleges that the Debtor's transfer of the Parish Deposit Fund was made with actual intent to hinder, delay, or defraud a creditor and therefore is avoidable under Wis. Stat. § 242.04(1)(a). As noted above, the statute of limitations for bringing an action under this provision is "within 4 years after the transfer is made... or, if later, within one year after the transfer ... is or could reasonably have been discovered by the claimant." Wis. Stat. § 893.425. Since the transfer in this case was made in June 2005, more than four years have passed, and the "discovery rule" applies. The Committee argues that a creditor could not reasonably have discovered the transfer, but the Debtor disagrees.
The Debtor submitted the Affidavit of Kim Kasten who, since 2000, has been the Debtor's employee responsible for processing and accounting for all contributions and redemptions to and from the Parish Deposit Fund. (Kasten Affidavit ¶ 4). According to Ms. Kasten, the Parish Deposit Fund was created as an optional pooled investment fund for Catholic entities, and the Debtor and the Parishes contributed funds. (Id. ¶ 3). Due to the economies of scale, the Parish Deposit Fund offered interest rates that were far in excess of what the individual Parishes could achieve investing their own funds. (Id. ¶ 6). The Parish Deposit Fund was held in a segregated account, and the funds invested by the Parishes never passed through the Debtor's general bank accounts. (Id. ¶ 9). The Parishes could make periodic investments into the Parish Deposit Fund and receive all or a portion of their money back, upon request, with minimal delay. (Id. ¶¶ 7, 10). The Parish Deposit Fund's existence was disclosed and published in the Debtor's audited financial statements, which have been posted on the Debtor's website since 2002. (Id. ¶ 17). The 2004 audited financial statement (attached to the Committee's Motion as Exhibit B-1) contained a note describing the Parish Deposit Fund as follows:
(6/22/12 Debtor's Obj. at 13).
The Debtor relies on the public disclosure of the transfer of the Parish Deposit Fund to the Parishes and the Southeastern Parish Trust to counter the Committee's argument that the transfer could not reasonably have been discovered. However, the disclosures do not really go as far as the Debtor intimates; close review of the financial statements merely reveals the existence of the Parish Deposit Fund and then its closure in 2005. From the public disclosures, without the benefit of Ms. Kasten's explanation, it is difficult to know what happened to the Parish Deposit Fund. A reader would know that the Parish Deposit Fund was "closed," not necessarily that it was transferred to the Parishes or the Southeastern Parish Trust.
The Committee cites Fid. Nat'l Title Ins. Co. v. Howard Sav. Bank, 436 F.3d 836 (7th Cir.2006), but this case is distinguishable. In Fidelity, owners of a title company caused the company to remove money from escrow accounts to buy certificates of deposit ("CDs") from banks. The owners then pledged the CDs for personal loans and authorized the banks to apply the CDs in satisfaction of the personal loans. Five years later, Fidelity, which insured the escrow accounts, discovered that money was missing and sued one of the banks. At that time, Fidelity interviewed the title company's controller, who told Fidelity that office "scuttlebutt" was that CDs occasionally were pledged for personal use. Within a month, Fidelity learned the identity of additional banks that received the CDs, but Fidelity did not sue the other banks for more than a year after it interviewed the controller. Under the same one-year discovery rule applicable here,
In this case arguably there was something "fishy" about the transfer: over $35 million was removed from the Debtor's balance sheet in 2005 when the Debtor was being sued for priest sex abuse and it had publicly started a mediation program for sex abuse victim/survivors. The Debtor's financial statements disclosing the existence and then closing of the Parish Deposit Fund were readily available on the internet. The Committee posited that only by publicly disclosing the alleged intent of the transfer ("shelter the Parish Deposit Fund"; a/k/a, according to the Committee, "defraud the abuse survivors") would the discovery clock start ticking. But this reads too much into Fidelity. As Judge Posner pointed out, it is not necessary to know the particular fraudulent transfers that occurred to trigger the duty of inquiry.
Moreover, Fidelity confirmed that there is no fraudulent transfer unless the transferee either "suspected that the money they were getting had a tainted origin or provided no consideration for receiving the money." Id. at 840. Here, the Parish Transferees could not have suspected that they were receiving tainted money because they thought they were getting their own money back. And they gave good consideration — the release of any claim against the Debtor for the return of the money. In short, Fidelity does not support the Committee's argument that a creditor reasonably could not have discovered the transfer prior to one year before the bankruptcy petition.
The Committee also attempts to spin the facts here so they fall within the exception to the discovery rule announced in cases like Lippe and G-I Holdings, supra. Those cases involved tort claimants afflicted with asbestos-related injuries who did not manifest symptoms until the statute of limitations arguably had run. The court in Lippe found the fraudulent transfer claims timely because the tort claimants could not have known they had a claim to avoid a fraudulent transfer if they did not know they were creditors of the debtor. The court held: "Accordingly, asbestos-victim claimants who were unaware of any asbestos injury prior to the two years before Keene filed for bankruptcy are not barred from asserting an actual fraud claim against any of the corporate defendants because the actual fraud claim is not time-barred. This category of claimants can be considered `actual creditors' pursuant to § 544(b)...." Lippe, 225 B.R. at 855.
At first blush, the claims of the asbestos claimants and abuse survivors appear analogous. Like the asbestos claimants with delayed symptoms, some abuse survivors were injured many years ago, but only recently became aware of their claims. However, in John BBB Doe v. Archdiocese of Milwaukee, 211 Wis.2d 312, 565 N.W.2d 94 (1997), the Wisconsin Supreme Court unambiguously answered the question of when an abuse survivor's claim accrues. As Justice Abrahamson summarized in her dissent: "A plaintiff who while a minor was sexually assaulted by a person in a position of trust (such as a clergyperson) is, as a matter of law, irrebuttably presumed to have discovered the injury and the cause thereof at the moment of the assault, regardless of whether the plaintiff repressed all memory of the assault or the plaintiff did not know and should not have reasonably known of the injury or cause thereof." John BBB Doe, 211 Wis.2d at 367, 565 N.W.2d at 116. Therefore, under Wisconsin law, unlike the asbestos claimants, the abuse survivors' claims are deemed to have accrued at the time of the abuse. Accordingly, they share the same
At bottom, the inquiry is whether an unsecured creditor of the Debtor reasonably could have discovered the transfer before January 5, 2010 (within one year of the Debtor's petition). On one hand, the financial statements disclosing the existence and closing of the Parish Deposit Fund were public, and the disappearance of a large "noncurrent asset" was available for investigation, at a time when the abuse survivors were filing lawsuits and involved in a mediation program with the Debtor. On the other hand, the bald statement "the Parish Deposit Fund was closed," does not suggest by itself that millions of dollars were transferred to the Parishes, and the 2003 Finance Council minutes declaring "[c]urrently, we are working on setting up a Trust Fund to shelter the Parish Deposit Fund" was not revealed until the discovery process in the Debtor's bankruptcy case. Although an extremely close case is presented, the Court concludes that the Committee has stated a plausible claim that a creditor reasonably could not have discovered the transfer.
Section 242.08(1) of the Wisconsin Statutes provides a defense to a "person who took in good faith and for a reasonably equivalent value." The Debtor argues that the Parishes easily satisfy this defense; after all, they merely were receiving a transfer of their own money. The Committee contends that, because of the interlocking leadership of the Parishes and the Debtor, the Archbishop's knowledge of the allegedly fraudulent transfer taints the Parishes. The only Wisconsin case that the Committee cites is Grove Holding Corp. v. First Wis. Nat'l Bank, 12 F.Supp.2d 885, 895 (E.D.Wis.1998). In that case, the court stated that knowledge of a corporate officer is imputed to a corporation relating to any matter over which the officer has management or control. In its Memorandum Decision on the Committee's Motion for Standing on Alter Ego and Substantive Consolidation Claims, issued December 7, 2012, this Court reviewed the provisions of Wis. Stat. § 187.19 dictating the requirements of Wisconsin law for parishes within the Roman Catholic church. Under that statute, the bishop is the president of the parish corporation, and the pastor is the vice-president. Under Wis. Stat. § 187.19(5), the bishop, vicar-general, pastor, treasurer (a lay person), and secretary (a lay person) constitute the board of directors of the parish corporation, and their unanimous consent is required to incur debt in excess of $300 or to sell or mortgage parish property. Although the Archbishop has a title and position within each Parish corporation, as the Court noted in the prior Memorandum Decision:
(1/4/11 Marek Affidavit, Docket No. 6) (emphasis added).
The Committee argues that given the Archbishop's ability to manage Parish assets and finances, the Archbishop's knowledge about the transfer should be imputed to the Parishes. But there is no evidence (or facts plausibly pled) that the Archbishop exercised any of that authority or control with respect to the Parish Deposit Fund. In fact, the Debtor sent a letter to all the Parishes giving them the opportunity to withdraw their funds or invest in the new Southeastern Parish Trust. If the Archbishop truly controlled the transfer from the Parishes' point of view, there would be no point to sending the letter. He simply would have decided to transfer all the money to the Southeastern Parish Trust or return all the money to the Parishes. In short, the status of the Archbishop as president and board member of the Parish corporations does not, without more, render the Parishes bad faith transferees of the Parish Deposit Fund transfer.
The Committee cites Leonard v. Coolidge (In re Nat'l Audit Def. Network), 367 B.R. 207 (Bankr.D.Nev.2007), as an example of a case in which a court imputed fraudulent intent and knowledge to a transferee. Before filing bankruptcy, the debtor, NADN, sold tax shelters and other products described by the court as "close to worthless," and the officers and other corporations they established "knowingly participated in a wide-ranging scheme which used NADN to extract money from NADN's customers for the ultimate benefit" of the officers. Id. at 213. The court described the lack of good faith in the corporate officers as follows:
Id. at 224.
The court then imputed this bad faith to the corporations that these individuals controlled. The instant case shares none of the elements of control and bad faith described in National Audit Defense. The only component the cases have in common is that the Archbishop is the sole member of the Debtor corporation, and he is an officer and board member of the Parish corporations. There is no fact alleged that the Archbishop controlled the receipt of the transfer by the Parishes — in fact, as shown by the Debtor's letter, the Parishes, independently of the Archbishop, had the option of return of their funds or participation in the new Southeastern Parish Trust. To impute allegedly fraudulent intent under these circumstances goes too far.
Similar to the question of whether the Parishes were good faith transferees of the Parish Deposit Fund is whether the Fund itself was the Debtor's property or the Parishes' property. In Begier v. IRS, 496 U.S. 53, 58-59, 110 S.Ct. 2258, 110 L.Ed.2d
The Parish Deposit Fund model was analyzed in another diocesan bankruptcy case. In Official Comm. of Unsecured Creditors v. Catholic Diocese of Wilmington, Inc. (In re Catholic Diocese of Wilmington, Inc.), 432 B.R. 135 (Bankr.D.Del. 2010), the creditors' committee sought a declaratory judgment that no trust relationship existed between the diocese and the parishes, charitable organizations, and schools with respect to a pooled investment account ("PIA"). The PIA and the Parish Deposit Fund feature many similarities, including the purpose, voluntary nature, ability of investors to withdraw their funds upon request, and belief by both the diocese and the investors that all funds within the PIA remained the property of the investors. The bankruptcy court in the Diocese of Wilmington concluded that the funds in the PIA were held in a resulting trust. Quoting the Restatement (First) of Trusts, the court defined a resulting trust as arising "where a person makes or causes to be made a disposition of property under circumstances which raise an inference that he does not intend that the person taking or holding the property should have the beneficial interest therein, unless the inference is rebutted or the beneficial interest is otherwise effectively disposed of." Id. at 149 (internal citations and emphasis omitted). The Diocese of Wilmington court found the following facts "overwhelming" in establishing a resulting trust:
Id. Having determined that a resulting trust existed, the court next determined whether the parishes could trace their funds in the PIA. The court noted that the transfers into the PIA were made into the diocesan operating account before being transferred into the PIA, and the Wilmington diocese transferred funds back and forth between its operating account and the PIA based on its own liquidity needs. Id. at 143. The parishes argued that for purposes of tracing the trust funds, the court should look solely to the debtor's meticulous accounting records. The court emphatically rejected the suggestion:
Id. at 159 (emphasis in original).
There was one exception to the court's ruling; one of the parishes, St. Ann's, had a formal trust agreement and deposited its funds directly into the PIA. Applying the lowest intermediate balance test, the court noted that the balance in the PIA never dipped below the amount that St. Ann's invested. Therefore, St. Ann's was able to trace its funds in the PIA, and those funds were not property of the estate.
Unlike the majority of the investors in the Diocese of Wilmington case, all of the Parishes' funds in this case were deposited into one segregated bank account. (Kasten Affidavit ¶ 9). The funds were not commingled in the Debtor's operating account and transferred back and forth. (Id.). All the funds here were like the St. Ann's funds in Diocese of Wilmington — deposited into and segregated within the Parish Deposit Fund. The funds easily are traceable as a result. The facts here support the conclusion that the parties intended that the Parishes' money deposited into the Parish Deposit Fund at all times belonged to the Parishes. The program was voluntary, the Parishes could withdraw their funds on request, and, most importantly, the Debtor did not use these funds for operations, but rather maintained them in a segregated, independently audited account that never was found to have a shortfall. (Id. ¶ 12). Although the parishes in Wilmington, other than St. Ann's, were not able to trace their funds, given the segregated nature of the Parish Deposit Fund, and the lack of evidence that the balance in the account ever fell short of the amount necessary to refund their deposits to the Parishes, the Parishes here easily could do so. Accordingly, the Committee has not stated a plausible claim that transfer of the funds in the Parish Deposit Fund to the Parishes was made with the Debtor's property.
Assuming that the Committee's allegations could survive a Motion to Dismiss (a doubtful proposition given the preceding discussion), the Committee also must satisfy the Court that the Debtor unjustifiably refuses to bring the Claim. While cautioning that the court should not conduct a "mini-trial," the Eighth Circuit described the test to be applied and factors to be considered in PW Enters. v. N.D. Racing Comm'n (In re Racing Servs.), 540 F.3d 892, 901 (8th Cir.2008) (internal citations and quotations omitted):
The first element of a cost-benefit analysis is cost. Here, the Committee candidly concedes that prosecution of this litigation
Even assuming that the Committee prevailed in its lawsuits, the ever looming question of collectability remains. At the hearing on the Motion, the Debtor argued that some of the Parishes, schools, and other affiliates that received a return of their investment from the Parish Deposit Fund would be hard pressed to return this money. Presumably, these entities would look to their parishioners, students, and benefactors to help fund any judgment rendered against them. This would have an adverse effect on their continued support of the Debtor. Without the support of these individuals, the Debtor undoubtedly will struggle to meet its obligations and fund a Chapter 11 plan. In response to this bleak scenario, the Committee's counsel stated at the hearing: "Where is the money? I don't know where the $35 million is." In the Court's experience, many individuals and entities are worse off financially than they were in 2005. It is not unreasonable to surmise that a Parish that invested money in the Parish Deposit Fund and received the return of its investment in June 2005 no longer has the money and was unable to replenish it after the Great Recession of 2008. However, the Committee has not sought to confirm or deny this supposition; it stubbornly insists that the Debtor provide financial information on the Parishes, while the Debtor obstinately retorts that the Parishes are separate corporations, and the Committee should ask the Parishes for the information. The Debtor presumably properly took the issue of collectability into consideration when analyzing whether to bring these claims, and the Court cannot find the refusal to bring the claims as a result unjustifiable.
If the Committee avoided the transfer to the Parishes, and the Parishes returned the money to the bankruptcy estate, the Parishes would be entitled to file proofs of claim as creditors. See 11 U.S.C. § 502(d). Accordingly, the Committee's suggestion
In sum, due to the difficulties the Committee would face in proving a case of actual fraudulent transfer, and in light of the valid defenses that the Parishes could advance, not to mention the time, expense and drain on the Debtor's resources that would accompany this litigation, the cost does not outweigh the benefit to be attained. The Court concludes that the Debtor did not unjustifiably refuse to prosecute this avoidance claim against the Parishes.
The Debtor contends that if the Committee's arguments are correct, the outcome would require the Court to use the Bankruptcy Code to make the funds available to creditors in violation of the Religious Freedom and Restoration Act ("RFRA"). Because it has found that the Committee should not otherwise be granted standing to pursue its claims, the Court will leave this issue for another day.
Finding that the Parishes appear to be good faith transferees for value and that the money that the Parishes deposited into and received from the Parish Deposit Fund was not property of the Debtor, the Court concludes that the Committee has not stated a colorable claim that the transfer to the Parishes is an avoidable fraudulent transfer. Even assuming a colorable claim exists, the Debtor has not unjustifiably refused to bring this claim due to the enormous cost, delay, questions about collectability and adverse effect on the Debtor's reorganization that would ensue. The Committee's Motion for Standing on these fraudulent transfer claims should be denied. A separate order will be entered.
