BG Law Team obtains $8 million settlement on Behalf of Liquidating Trustee for the New Meatco Liquidating Trust
A BG Law team led by Steven Gubner and Jason Komorsky obtained an $8 million settlement of claims on behalf of Howard Grobstein, Liquidating Trustee for the New Meatco Liquidating Trust in an adversary proceeding against former owners of Meatco Provisions, Inc. The operative complaint alleged both actual and constructive fraudulent transfers, illegal shareholder dividends pursuant to Section 500 of the California corporations code and breach of fiduciary duty arising from the leveraged buyout (“LBO”) and subsequent bankruptcy filing by Meatco Provisions, Inc.’s successor in interest and wholly owned subsidiary, the debtor, New Meatco Provisions, LLC. As alleged in the operative complaint, Meatco’s books reflected a positive net worth the day before the LBO but, as a result of the significant debt load associated with the LBO was in the red by more than $20 million immediately after the LBO. As further alleged, when vendors ultimately found out about the financials involved in the LBO, they began to place restrictions on New Meatco’s credit, which the Trustee alleged led to New Meatco’s ultimate downfall. This complex case raised significant issues revolving around choice of law—California or Delaware—and the application of the safe harbor provisions of 11 U.S.C. section 546(e) to private LBOs. As part of the settlement, no defendant admitted liability or the truth of any of the allegations.