Generally, there is a specific statute of limitations governing trustee avoidance actions in a bankruptcy case. Thus, it would have been fair for most defendants to believe that if a claim had not been asserted prior to the expiration of the statutory deadline, none would be forthcoming. However, in light of a recent decision by the U.S. Bankruptcy Court for the District of Delaware, that may no longer be the case. In Burtch v. Opus LLC (In re Opus East LLC), No. 11-52423, 2013 Bankr. LEXIS 3150 (Aug. 6, 2013), U.S. Bankruptcy Judge Mary F. Walrath found that a debtor's failure to list certain transfers in the statement of financial affairs filed with its bankruptcy petition constituted concealment, thereby equitably tolling the statute of limitations for their avoidance.
As a result, and even though there was no accusation or finding that the newly-added defendants themselves committed wrongdoing, the court permitted the Chapter 7 trustee to amend his complaint well after the statute of limitations expired to add new defendants and new transfers, totaling over $33 million. This decision highlights the unfortunate possibility that circumstances outside the control of a potential defendant could dramatically alter its potential exposure. Bankruptcy practitioners should take note of this decision and be sure to identify all prepetition transfers to their clients, whether pleaded before or after the statute of limitations has expired, to avoid risking a game-changing surprise well into the litigation.
