BearingPoint trustee complaint against yale University

8/14/2019 BearingPoint trustee complaint against yale University

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UNITED STATES BANKRUPTCY COURTSOUTHERN DISTRICT OF NEW YORK

In re

BEARINGPOINT, INC., et al.,

Debtors.

Chapter 11 Case No.

09-10691 (REG)

(Jointly Administered)

JOHN DEGROOTE SERVICES, LLC, asliquidating trustee of the BearingPoint, Inc.Liquidating Trust

Plaintiff,-v-

Yale University

Defendant.

Adv. Proc. No. 10-____

COMPLAINT (I) TO AVOID TRANSFERS, PURSUANT TO11 U.S.C. 544(b), 547 AND 548, (II) TO RECOVER PROPERTY

TRANSFERRED, PURSUANT TO 11 U.S.C. 550, AND (III) OBJECTINGTO THE ALLOWANCE OF CLAIMS, PURSUANT TO 11 U.S.C. 502(d)

1. Plaintiff John DeGroote Services, LLC (the Trustee or Plaintiff) is a limitedliability company organized under the laws of Delaware, with its principal place of business at

100 Crescent Court, Suite 700, Dallas, Texas 75201, and the Court-appointed Trustee for the

BearingPoint, Inc. Liquidating Trust (the Liquidating Trust).

2. Defendant Yale University (Yale or Defendant) is a specially charteredConnecticut corporation and nonprofit educational organization described in section 501(c)(3) of

the Internal Revenue Code of 1986, with its principal place of business in New Haven,

Connecticut 06520.

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JURISDICTION AND VENUE

3. This Court has jurisdiction over this proceeding under chapter 11 of theBankruptcy Code pursuant to 28 U.S.C. 151, 157 and 1334, and under Article XI of the Plan.

4. The Plaintiff commences this adversary proceeding pursuant to rule 7001, et seq.of the Federal Rules of Bankruptcy Procedure (the Bankruptcy Rules) and sections 544, 547,

548 and 550 of the Bankruptcy Code.

5. Venue in this Court is proper pursuant to 28 U.S.C. 1408 and 1409 becausethis adversary proceeding arises under and in connection with a case pending in this district

under the Bankruptcy Code.

6. This is a core proceeding pursuant to 28 U.S.C. 157(b)(2)(F) and (H).BACKGROUND

7. Plaintiff has succeeded to the causes of action asserted in this Complaint, and isauthorized to bring them.

8. On December 22, 2009, this Court entered an order (the Confirmation Order)confirming the Debtors Modified Second Amended Joint Plan Under Chapter 11 of the

Bankruptcy Code, dated December 17, 2009 (the Plan). The Plan became effective on

December 30, 2009.

9. The Liquidating Trust has the right to prosecute any and all Causes of Action,including, but not limited to, any and all avoidance . . . actions, recovery causes of action and

objections to Claims. Confirmation Order 37; Plan 5.7(g), 10.9; Liquidating Trust

Agreement 6.1(b)((iv). All Causes of Action were retained by the Liquidating Trust.

Confirmation Order GGG, 37. The Trustee was appointed pursuant to the Confirmation

Order.

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The Collaboration Agreement

10. Prior to the commencement of the chapter 11 cases, BearingPoint, Inc.(BearingPoint) and Yale entered into that certain Educational Collaboration Agreement dated

November 28, 2006 (the Education Collaboration Agreement). The parties entered into that

certain First Amendment to the Education Collaboration Agreement dated as of February 27,

2008 (the First Collaboration Agreement Amendment). The parties entered into that Second

Amendment to the Education Collaboration Agreement dated as of November 12, 2008, (the

Second Collaboration Agreement Amendment, and together with the Education Collaboration

Agreement and the First Collaboration Agreement Amendment, the Collaboration

Agreement).1 The Court authorized the rejection of the Collaboration Agreement by order

dated June 9, 2009.

11. Pursuant to the First Collaboration Agreement Amendment, BearingPoint andYale scheduled multiple sessions for employee training and education programs for 2008.

12. Payment terms for sessions covered under the First Collaboration AgreementAmendment during (a) the first quarter of 2008 were net 15 days and (b) the second, third and

fourth quarters of 2008 were net 45 days.

13. Upon information and belief, during the fourth quarter of 2008, including duringthe ninety (90) day period (the Preference Period) prior to February 18, 2009 (the Petition

Date), despite the payment terms set forth under the First Collaboration Agreement

Amendment, Yale billed BearingPoint for 50% of the cost of each program in advance prior to

the start date of such programs and for the remaining 50% balance after completion of such

programs (the Altered 2008 Payment Terms).

1 A copy of the Collaboration Agreement is attached hereto as Exhibit A.

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14. Pursuant to the Second Collaboration Agreement Amendment, BearingPoint andYale scheduled multiple leadership skills workshops and training programs for 2009.

15. Under the Second Collaboration Agreement Amendment, 50% of the cost of eachindividual program was due in advance (the day prior to the scheduled program start date), with

the balance due ninety (90) days after completion of each such program.

16. Upon information and belief, the 50% advance payments under the SecondCollaboration Agreement Amendment were made late, and the payments for the 50% remaining

balance were made far earlier than required under the Second Collaboration Agreement

Amendment and just prior to the Petition Date.

17. Upon information and belief, there was no ordinary course of business governingthe date on which Yale issued its invoices for the cost of the programs during the Preference

Period.

18. Upon information and belief, each of the payments set forth on Exhibit B wasmade outside of the ordinary course of business.

19. For example, on October 20, 2008, Yale issued four invoices unto BearingPointunder the Altered 2008 Payment Terms: (a) the first invoice covered the 50% balance of the cost

of a program completed in or around September 28, 2008, (b) the second invoice covered the

50% balance of the cost of a program completed in or around October 12, 2008, (c) the third

invoice covered the 50% advance payment for a program scheduled to begin on or around

November 16, 2008, and (d) the fourth invoice covered the 50% advance payment for a program

scheduled to begin on or around December 7, 2008. BearingPoint paid each of the four October

20, 2008 invoices on December 4, 2008.

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The Commitment Agreement

20. Prior to the Petition Date, BearingPoint and Yale entered into that certainCommitment Agreement dated as of November 28, 2006. The parties entered into that certain

Amendment 1 to the Commitment Agreement dated as of June 21, 2007 (the First Commitment

Agreement Amendment, and together with the Commitment Agreement, the Commitment

Agreement).2

21. Pursuant to the Commitment Agreement, BearingPoint committed $30 million toYale to be paid over a seven year period beginning in the first quarter of 2007 and Yale provided

BearingPoint with certain naming opportunities.

22. Pursuant to the Commitment Agreement, the first $2 million paid by BearingPointto Yale was used to fully fund in perpetuity an endowed chair at Yale.

23. Pursuant to the Commitment Agreement, so long as BearingPoint funded itscommitment and satisfied the conditions thereunder, Yale provided BearingPoint certain naming

opportunities including the naming of a hall, and a wing and auditorium in a new building at

Yale. If BearingPoint failed timely and fully to fund the commitment in accordance with the

schedule set forth in the First Commitment Agreement Amendment, Yale would, in its

discretion, withdraw the BearingPoint name from any building or portion thereof.

24. No material consideration flowed to BearingPoint, and no benefit to its businessor assets was derived from the endowing of chairs or the naming of buildings at Yale.

2 A copy of the Commitment Agreement is attached hereto as Exhibit C.

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COUNT I

AVOIDANCE AND RECOVERYOF PREFERENTIAL TRANSFERS -- 11 U.S.C. 547

25. The Plaintiff re-alleges and re-asserts the allegations set forth in Paragraphs 1through 24 as full set forth herein.

26. The Plaintiff has attached hereto and incorporates by reference Exhibit B, whichis a schedule of transfers made to the Defendant on or within the Preference Period pursuant to

the Collaboration Agreement (the aggregate amount of such transfers of property of $2,072,774

is referred to herein as the Preference Transfers) by one or more of the Debtors (the Transfer

Debtor(s)).

27. The Preference Transfers were transfers of an interest in property of one or moreof the Transfer Debtor(s).

28. The Preference Transfers were made to or for the benefit of the Defendant, acreditor of one or more of the Transfer Debtor(s).

29. The Preference Transfers were made for or on account of an antecedent debtowed by one or more of the Transfer Debtor(s) to the Defendant before the Preference Transfers

were made.

30. Upon information and belief, the Preference Transfers were made while one ormore of the Transfer Debtor(s) was or were insolvent.

31. The Preference Transfers were made on or within the Preference Period.32. Upon information and belief, the Preference Transfers enabled the Defendant to

receive more than the Defendant would have received if (a) the Debtors chapter 11 cases were

cases under chapter 7 of the Bankruptcy Code, (b) the Preference Transfers had not been made,

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and (c) the Defendant had received the Preference Transfers to the extent provided by the

Bankruptcy Code.

33. By reason of the foregoing, the Preference Transfers constituted avoidablepreferences, and the Plaintiff is entitled to an order and judgment avoiding the Preference

Transfers under section 547 of the Bankruptcy Code.

COUNT II

AVOIDANCE AND RECOVERY OFFRAUDULENT TRANSFER -- 11 U.S.C. 548(a)(1)

34. The Plaintiff re-alleges and re-asserts the allegations set forth in paragraphs 1through 24, as if fully set forth herein.

35. The Plaintiff has attached hereto and incorporates by reference Exhibit D, whichis a schedule of transfers made to the Defendant on or within two years prior to the Petition Date

pursuant to the Commitment Agreement (the aggregate amount of such transfers of property of

$6,000,000 is referred to herein as the Fraudulent Transfers) by one or more of the Transfer

Debtors. The Fraudulent Transfers were transfers of an interest in property of one or more of the

Transfer Debtor(s).

36. The Fraudulent Transfers were transfers of an interest in property of one or moreof the Transfer Debtor(s).

37. The Defendant received the Fraudulent Transfers on or within two years prior tothe Petition Date.

38. The Transfer Debtor(s) received less than reasonably equivalent value inexchange for the Fraudulent Transfers.

39. Upon information and belief, the Transfer Debtor(s) (i) was or were insolvent onthe date(s) the Fraudulent Transfers were made, (ii) was or were engaged in business or a

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transaction, or was or were about to engage in such business or a transaction, for which any

property remaining with the Transfer Debtor(s) was an unreasonably small capital, or

(iii) intended to incur, or believed each would incur, debts that would be beyond the ability of the

Transfer Debtor(s) to pay as such debts matured.

40. By reason of the foregoing, the Fraudulent Transfers constitute avoidablefraudulent transfers, and the Plaintiff is entitled to an order and judgment avoiding the

Fraudulent Transfers pursuant to section 548(a)(1) of the Bankruptcy Code.

COUNT III

AVOIDANCE AND RECOVERY OF FRAUDULENTCONVEYANCE - 11 U.S.C. 544(b) AND N.Y. DEBT. & CRED. 273

41. The Plaintiff re-alleges and reasserts the allegations set forth in paragraphs 1through 24 and 34 through 40, as if fully set forth herein and, in the alternative, pleads as

follows:

42. The Plaintiff has attached hereto and incorporates by reference Exhibit D, whichis a schedule of transfers made to the Defendant. It has been (a) approximately thirty-four (34)

months since the Defendant received the first Fraudulent Transfer on or about May 1, 2007,

(b) approximately thirty (30) months since the Defendant received the second Fraudulent

Transfer on or about August 29, 2007, and (c) approximately twenty-three (23) months since the

Defendant received the third Fraudulent Transfer on or about April 1, 2008, which Fraudulent

Transfers were made by one or more of the Transfer Debtor(s). The aggregate amount of the

Fraudulent Transfers is $6,000,000. The Fraudulent Transfers were transfers of an interest in

property of one or more of the Transfer Debtor(s).

43. The Fraudulent Transfers were transfers of an interest in property of one or moreof the Transfer Debtor(s).

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44. The Transfer Debtor(s) received less than reasonably equivalent value inexchange for the Fraudulent Transfers.

45. Upon information and belief, the Transfer Debtor(s) (i) was or were insolvent onthe date(s) the Fraudulent Transfers were made, (ii) was or were engaged in business or a

transaction, or was or were about to engage in such business or a transaction, for which any

property remaining with the Transfer Debtor(s) was an unreasonably small capital, or

(iii) intended to incur, or believed each would incur, debts that would be beyond the ability of the

Transfer Debtor(s) to pay as such debts matured.

46.

By reason of the foregoing, the Fraudulent Transfers constitute avoidable

fraudulent conveyances, and the Plaintiff is entitled to an order and judgment avoiding the

Transfers pursuant to section 544(b) of the Bankruptcy Code and section 273 of the New York

Fraudulent Conveyances Act.

COUNT IV

RECOVERY OF PROPERTY -- 11 U.S.C. 550

47. The Plaintiff re-alleges and re-asserts the allegations set forth in paragraphs 1through 46 as though fully set forth herein.

48. The Defendant is the initial transferee of the Preference Transfers and FraudulentTransfers, or the entity for whose benefit the Preference Transfers and Fraudulent Transfers were

made, or the immediate or mediate transferee of the initial transferee receiving such Preference

Transfers and Fraudulent Transfers.

49. Pursuant to section 550(a) of the Bankruptcy Code, and by reason of theforegoing, once the Preference Transfers and Fraudulent Transfers are avoided, the Plaintiff is

entitled to recover the Preference Transfers and Fraudulent Transfers plus interest.

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COUNT V

OBJECTION TO CLAIM

50. The Plaintiff re-alleges and re-asserts the allegations set forth in paragraphs 1through 49 as though fully set forth herein.

51. The Defendant has filed claim number 907, amending and superseding claimnumber 683.

52. Claim number 683 should be disallowed and expunged because it was amendedand superseded by claim number 907.

53.

Pursuant to section 502(d) of the Bankruptcy Code, the Court shall disallow any

claim of the Defendants because property is recoverable from the Defendants under sections 542,

543, 550, or 553 of title 11, or that is a transferee of a transfer avoidable under sections 522(f),

522(h), 544, 545, 547, 548, 549 or 724(a) of title 11, unless the Defendant pays the amount

recoverable.

54. Until such time as the Defendant returns the Preference Transfers and FraudulentTransfers to the Plaintiff, the Defendants claims, whether previously or subsequently scheduled,

filed or otherwise asserted or paid in the Debtors chapter 11 estates, should be disallowed in

their entirety.

55. In addition, the Defendants claims should be disallowed in their entirety becauseno consideration or other economic benefit of any monetary value has been provided to the

Debtors estates from the Defendant.

56. The Plaintiff reserves all other defenses, including defenses on the merits, as maybe available against the Defendants claims, and this complaint shall not constitute a waiver of

the same.

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RESERVATION OF RIGHTS

57. The Plaintiff hereby specifically reserves the right to bring any and all othercauses of action that it may maintain against the Defendant, including, without limitation,

(a) causes of action arising out of the same transaction(s) set forth herein, and (b) other bases for

objection to Yales proofs of claim, to the extent discovery in this action or further investigation

by the Plaintiff reveals such further causes of action.

WHEREFORE, the Plaintiff prays for a judgment granting the relief against the

Defendant as set forth below:

a.

Avoidance and recovery of the Preference Transfers, pursuant to

sections 547(b) and 550 of the Bankruptcy Code.

b. Avoidance and recovery of the Fraudulent Transfers, pursuant tosections 548 and 550 of the Bankruptcy Code.

c. Avoidance and recovery of the Fraudulent Transfers, pursuant tosections 544 and 550 of the Bankruptcy Code

d. Disallowing claim number 683 because it has been amended andsuperseded.

e. Disallowing any claims of the Defendant, including, without limitation,claim numbers 683 and 907, (i) until it turns over any Preference Transfers and

Fraudulent Transfers to the Plaintiff, pursuant to section 502(d) of the Bankruptcy Code

and/or (ii) for failure to provide consideration or economic benefit to the estates.

f. An award of prejudgment interest at the maximum legal rate as of the datehereof and an award of post-judgment interest at the maximum legal rate.

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g. An award of the costs of the suit herein.h. An award of such other and further relief the Court deems just and proper.

Dated: March 12, 2010 Bingham McCutchen LLP

By: /s/ Sabin WillettSabin Willett (pro hac vice)[email protected] J. Gallo (pro hac vice)[email protected] Federal StreetBoston, MA 02110Telephone: (617) 951-8000Facsimile: (617) 951-8736

-and-

Jeffrey S. [email protected] Park AvenueNew York, NY 10022Telephone: (212) 705-7000Facsimile: (212) 752-5378

Counsel for John DeGroote Services, LLC,

as Liquidating Trustee to the BearingPoint,

Inc. Liquidating Trust


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Exhibit A

Collaboration Agreement

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Exhibit B

Preference Transfers

Payment Date Payment Amount

12/04/2008 $486,312

12/04/2008 $170,341

12/04/2008 $163,817

01/05/2009 $16,244

01/08/2009 $243,156

01/08/2009 $6,212

01/23/2009 $243,156

01/23/2009 $366,768

01/30/2009 $10,000

02/12/2009 $366,768

TOTAL $2,072,774

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Exhibit C

Commitment Agreement

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Exhibit D

Fraudulent Transfers

Payment Date Payment Amount

5/1/2007 $2,000,000

8/29/2007 $2,000,000

4/1/2008 $2,000,000

TOTAL $6,000,000

Documents

BearingPoint trustee complaint against yale University