In re Plotkin v. Pomona Valley Imports, Inc.
United States Bankruptcy Appellate Panel of the Ninth Circuit
199 B.R. 709 (1996)
Debtor Stanley Cohen (Cohen) ran a Ponzi-style scheme promising buyers luxury cars at below-market prices, using their advance payments to buy as many cars as possible from dealers at full retail price and directing delivery to designated buyers, while other buyers were left with nothing once the scheme collapsed. After Cohen's bankruptcy, the trustee (Plotkin) sued 17 dealers, including Pomona Valley Imports, Inc. (Pomona), to recover the transfers as fraudulent — seven transactions under § 548 of the Bankruptcy Code and ten under California's Uniform Fraudulent Transfers Act (UFTA) — arguing each transfer to a dealer was fraudulent to the extent of the gap between Cohen's phony price and the car's true value. The dealers moved for summary judgment, and the bankruptcy court ruled for them, finding the transfers were good-faith exchanges for fair value.
Whether, under both § 548(c) of the Bankruptcy Code and § 8(a) of the Uniform Fraudulent Transfers Act, a fraudulent transfer is recoverable against a transferee who takes for reasonably equivalent value and in good faith.