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Barry M. Klayman and Mark E. Felger Barry M. Klayman and Mark E. Felger

In Jalbert v. Flanagan (In re F-Squared Investment Management), Adv. No. 17-50738-LSS (Bankr. D. Del. May 7, 2019), the trustee of a liquidating trust sought to avoid bonus payments by the debtors as fraudulent conveyances. Defendants moved to dismiss the fraudulent conveyance counts on the single ground that the trustee had failed to sufficiently plead lack of reasonably equivalent value, because the sole allegations in the complaints regarding value were that the bonuses were discretionary. The trustee argued that, as a matter of law, the payment of a discretionary bonus not tied to a previously enunciated metric was a per se fraudulent conveyance if made while the debtors were insolvent. In rejecting the trustee’s argument, U.S. Bankruptcy Judge Laurie Silverstein of the District of Delaware held that whether the payment conferred value on the debtors was a factual question, and since the trustee did not intend to offer any further evidence in support of his claims, the motions to dismiss should be granted.

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