Third Circuit Pronounces a Damages Formula for Fraudulent Entireties Transfers
Bankruptcy Judge Thomas P. Agresti of Erie, Pa., was given the supreme compliment by the Third Circuit: The appeals court saluted his “prescient thinking” in devising a formula for calculating damages in a complex fraudulent transfer suit.
A man had been a partner in a law firm that went out of business. He was saddled with millions of dollars of liability for his guarantee of his “old” firm’s lease. While working at a “new” firm, he was hit with a multimillion-dollar judgment in favor of the landlord.
To avoid having income from his “new” firm garnished, he directed the firm to deposit his income directly into an entireties account in his name and his wife’s. Because the wife was not liable on the judgment, the landlord could not attach the joint bank account.
The man was forced into bankruptcy by the judgment. The trustee sued the debtor and his wife to recover fraudulent transfers under the Pennsylvania Uniform Fraudulent Transfer Act.
Eventually, the bankruptcy judge entered judgment against the debtor and his wife, calculating damages of about $275,000 under a formula suggested by the Third Circuit. The district court affirmed. Both the couple and the trustee appealed.
In an opinion on February 20, Circuit Judge Thomas L. Ambro upheld the judgment. In the process, he lauded Judge Agresti for recommending a formula for calculating damages resulting from fraudulent transfers into entireties accounts.
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