Stroock Special Bulletin
The Insolvency Opinion of the Bankruptcy Court in Iridium v. Motorola: the Market is a Proper Proxy for Determining the Solvency of a Transferor Entity in Fraudulent Conveyance and Preference Actions
On September 20, 2007, Judge James M. Peck of the Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”) entered a Final Judgment with respect to certain counts in the complaint filed by The Statutory Committee of Unsecured Creditors (the “Committee”) on behalf of Iridium Operating LLC, Iridium Capital Corp., Iridium IP LLC, Iridium LLC, Iridium Roaming LLC, and Iridium (Potomac) LLC (collectively, “Iridium”) against telecommunications giant Motorola, Inc. (“Motorola”) in an adversary proceeding related to Iridium’s jointly administered chapter 11 cases. This Final Judgment is based on the findings of fact and conclusions of law set forth in the Bankruptcy Court’s Opinion on Insolvency and Unreasonably Small Capital, 2007 WL 2471798 (Bankr. S.D.N.Y. Aug. 31, 2007) (the “Insolvency Opinion”).
In its complaint, the Committee, among other things, sought to recover approximately $3.7 billion from Motorola on the grounds of fraudulent conveyance, preferential transfers, breach of fiduciary duty, abetting breach of fiduciary duty, breach of contract, and equitable subordination. After a lengthy trial and extensive post-trial briefing, the Bankruptcy Court issued the long-awaited Insolvency Opinion and subsequently entered the Final Judgment dismissing the Committee’s fraudulent conveyance and preference claims arising under the District of Columbia’s Fraudulent Conveyance Statute and sections 547 and 548 of the Bankruptcy Code against Motorola. The remaining counts of the Committee’s complaint are scheduled to be tried later this year. The Insolvency Opinion is the first reported decision in the Second Circuit that cites and examines the recent ruling handed down by the Court of Appeals for the Third Circuit in VFB, LLC v. Campbell Soup, Co., 482 F.3d 624 (3d Cir. 2007).