In Official Committee of Unsecured Creditors of TOUSA v. Citicorp North America (In re TOUSA Inc.),1 U.S. Bankruptcy Judge John K. Olson of the Southern District of Florida ruled that hundreds of millions of dollars of liens and obligations incurred by subsidiaries of TOUSA Inc. (TOUSA) to settle a pre-bankruptcy lawsuit against TOUSA could be avoided as fraudulent transfers and preferences.
In so doing, Judge Olson raised numerous significant issues regarding fraudulent conveyance law and remedies, casting doubt on the evidentiary value of solvency opinions that examine total enterprise value, condemning savings clauses as unenforceable, and imposing liability on fraudulent transferees for the diminution in value of collateral subject to fraudulently incurred liens.
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