United States Sixth Circuit

In a bankruptcy action concerning the derivative standing of a party seeking to recover funds that it alleges were fraudulently transferred from debtor to a third party, a district court order granting derivative standing is affirmed where: 1) the bankruptcy appellate-standing doctrine is not applicable to the second layer of appeal, from the district court to the court of appeals, when it is uncontested that the party who appealed the bankruptcy court's order to the district court had appellate standing; 2) when a bankruptcy trustee is delinquent, the bankruptcy court, or the district court of which it is a unit, is able to exercise its equitable powers to authorize a creditor to pursue recovery of fraudulently transferred property for the benefit of the estate; and 3) this power is not limited to Chapter 11 proceedings. District court order lifting an automatic stay is reversed where the party requesting the stay could now bring its fraudulent transfer claims derivatively on behalf of the estate.

Appellate Information

• Decided 02/06/2009
• Published 02/06/2009

Judges

• Before MERRITT, MOORE, and ROGERS, Circuit Judges.

Court

• United States Sixth Circuit

Counsel

• For Appellees:
  
• ARGUED:  John C. Hayworth, Walker, Tipps & Malone, Nashville, Tennessee, for Appellants.  Colin W. Wied, C.W. Wied Professional Corp., San Diego, California, for Appellee.   ON BRIEF:  John C. Hayworth, John L. Farringer IV, Walker, Tipps & Malone, Nashville, Tennessee, Paul G. Jennings, Bass, Berry & Sims, Nashville, Tennessee, for Appellants.  Colin W. Wied, C.W. Wied Professional Corp., San Diego, California, James E. Bailey III, Farris, Mathews, Branan, Bobango, Hellen & Dunlap, Memphis, Tennessee, for Appellee.