Rochelle McCullough, L.L.P. has been recognized by the National Law Journal for having the 10th largest verdict of 2013.
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Arkansas jury awarded $47.4 million to bankruptcy trustee on a claim for a fraudulent transfer.
On June 24, 2008, Plaintiff Equity Media Holdings sold its rights to the Retro Television Network, Inc., a network that broadcasted television programs from the 1960s, 70s, 80s and 90s. The rights were sold to Luken Communications, LLC for $18.5 million, at approximately 16 percent of what it had been valued at in a November 2007 valuation, which reported that the Retro TV network was worth approximately $115.8 million.
Immediately prior to the transfer, Henry Luken III was the CEO and Chairman of the Board of Equity Media Holdings Corp., a public corporation based in Little Rock, Arkansas that held ownership interests in multiple television stations throughout the United States. Mr. Luken was Equity Media's largest shareholder, owning 17 percent of the company's common stock. Equity Media began having financial difficulty; its August 2007 10-Q showed that the company had a working capital deficit of $48.6 million. On May 15, 2008, Mr. Luken presented a plan to purchase Retro TV from Equity Media, which was allegedly insolvent at the time of this planned sale. On June 24, Luken Communications bought Equity Media's interest in Retro Television Network, Inc. for $18.5 million.
On December 8, 2008, Equity Media commenced its voluntary petition for relief under Chapter 11 of Title 11 of the United States Bankruptcy Code. The trustee of the chapter 7 estate of Equity Media, M. Randy Rice, sued Luken Communications, LLC, as well as its owner Henry G. Luken, III, alleging that the June 24, 2008 selling of the Retro TV network constituted a fraudulent transfer, sold for far less than it was worth.
According to Equity Media’s expert CPA, the two valuation appraisals performed before the sale of Retro TV were reliable. The valuation reports performed on Retro TV showed that, in the best case, the network was worth approximately $165 million. The most conservative estimate of the network's value was approximately $69 million, which was much more than the $18.5 million Luken paid to acquire the company. Accordingly, the payment received by Equity Media Holdings was not a reasonable value for the asset purchased by Luken.
The jury rendered a verdict in favor of the Plaintiff, deciding that the transfer of Retro Television Network, Inc. to Luken Communications constituted a constructively fraudulent transfer, as according to 11 U.S.C §548. The jury decided that the actual damages to the Trustee equaled $47.4 million, which was determined by subtracting the amount Luken Communications paid for Retro TV from the most conservative valuation of Retro TV, approximately $69 million.
Plaintiffs awarded $34.8 million dollar verdict for breach of contract.
A Houston oil company was assessed $34.8 million dollars in damages for wrongfully using a jet in a gold smuggling scam, in violation of the terms of its lease of an aircraft owned by Southlake Aviation LLC. Plaintiff Southlake Aviation leased a GulfStream V jet to Defendant CAMAC International Corp. for travel between CAMAC’s headquarters in Houston and its oil operations in the Congo. In early 2011, Defendant flew the jet to the Congo to deliver $6.5 million of U.S. currency to Congolese warlord General Bosco Ntaganda in exchange for ten boxes of gold. The plane was then seized and impounded by government officials.
This exchange violated trade restrictions imposed by the U.S. Trading with the Enemy Act, which prevents American companies from conducting business transactions with international criminals, and by extension, constituted a breach of contract with Southlake Aviation. Upon confiscation, VFS Financing Inc., which financed Southlake’s purchase of the jet, accelerated its note. The jet was later released and returned to the United States, at which time, VFS repossessed the aircraft. Plaintiffs filed their lawsuit against the CAMAC parties for conversion, breach of lease, and negligence.
The Dallas County jury found that CAMAC operated, maintained, or allowed operation and maintenance of the aircraft in violation of a law, regulation, directive, or order of a governmental authority; that CAMAC violated insurance provisions under the lease by operating the plane in a hostile area that was not covered under the policies it carried; that CAMAC converted the aircraft; and that Southlake’s injuries were proximately cause by the negligence of CAMAC. Plaintiffs’ net recovery was approximately $33.8 million.