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Ninth Circuit Insulates Corporate Insider from Preference Liability
“A corporate insider who personally guaranteed” the debtor's loan was not liable on a bankruptcy trustee's preference claim when the corporate debtor repaid its lender, held the U.S. Court of Appeals for the Ninth Circuit on May 6, 2015. In re Adamson Apparel, Inc., 2015 WL 2081575 (9th Cir. May 6, 2015) (2-1).
The trustee had alleged that the insider guarantor defendant (“G”) had received an indirect benefit of $4.9 million when the debtor (“Adamson”) repaid its obligation to the lender and that this benefit was a preference under Bankruptcy Code (“Code”) ' 547(b). According to the trustee, the insider guarantor had been relieved of his guarantee liability when Adamson repaid its primary obligation.
Affirming the dismissal of the trustee's claim by the bankruptcy court and the district court, the Ninth Circuit reasoned that G had “previously waived his indemnification rights against” Adamson in good faith and had taken “no subsequent actions to negate the economic impact of that waiver.” Id. at *1. Because G was not a creditor ' an essential element of a preference claim (“to or for the benefit of a creditor”) ' he could not be held liable.
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