11th Circuit today

In the haze of these summer months, we have been remiss in bringing you recent cases on a day-to-day basis. In the interest of bringing you the newest of the news, we will pick up with today's cases and keep moving forward to keep you abreast of the latest legal developments. Meanwhile, we will also periodically bring you summaries cases decided in the last several weeks that merit special attention.

We have two 11th Circuit cases today -- one is a Chapter 11 case analyzing a fraudulent transfer, and the other addresses calculation of the value of counterfeit goods in a sentencing case.

In a case involving the bankruptcy of Advanced Telecommunication Network, Inc., an apparent victim of telecom boom and bust, the debtor sought to recover allegedly fraudulent transfers of $6 million to the Allen brothers, both of whom were stockholders, and one of whom controlled 50% of the voting stock. The transfer was made pursuant to an agreement in settlement of litigation between the Allens and Gary Carpenter, who controlled the other 50% of the voting stock; subsequently, however, the payments were recharacterized as "loans" financing Carpenter's purchase of the brothers' stock. Moreover, the "loans" were funded from prepaid customer accounts. Fast forward about four years, when ATN, which Carpenter sold to another company, finally declared bankruptcy. ATN sought to recover the $6 million transfer, but the bankruptcy court held that it was barred by New Jersey's statute of limitations, and that it did not qualify as a fraudulent transfer because ATN was solvent at the time of the transfer, and it received "reasonably equivalent value" for the transfer.

The Eleventh Circuit found that New Jersey's statute of limitations did not bar the claim. It went on to find that the bankruptcy court correctly found ATN was presumptively insolvent, but incorrectly applied the burdens of proof to find that the evidence nevertheless established that ATN was actually solvent based on a balance sheet test. Additionally, the Eleventh Circuit found the bankruptcy court erred in finding that there was any value received at the time of the transfer, other than the mere cessation of the litigation between the Allens and Carpenter (which apparently was not enough to meet the test).

In USA v. Herman Alberto Lozano, the defendant was the owner of Suplimet Corp., a Miami based wholesale distributor of cell phone parts and accessories -- including, apparently, a lot of counterfeit goods. At issue was whether the value of the goods to be considered for sentencing purposes was the retail value of the infringed item as opposed to the infringing item, and whether the retail value in the market where the goods were intended to be sold (Latin America) or the retail value in the U.S. was the operative value. The Eleventh Circuit affirmed the district court's use of the retail value of the infringed item in the U.S. as the operative value for sentencing purposes, because the controlled purchases were made in the U.S. (even if the majority of Suplimet's sales were in Latin America, where the trademark holders did not sell).