The trustee of a litigation trust formed from the bankruptcy of Idearc, Inc. sued its former parent, Verizon, alleging billions of dollars in damages in connection with its spinoff. After a bench trial and several other orders, the district court ruled in favor of defendants, and the Fifth Circuit affirmed in U.S. Bank, N.A. v. Verizon Communications, No. 13-10752 (revised Sept. 2, 2014).
The opinion, while lengthy, still only hints at the complexity of the case, and much of its analysis is fact-specific. Some of the issues addressed include:
1. A bankruptcy litigation trust does not have a right to jury trial on a fraudulent transfer claim, when the defendant creditor has filed a proof of claim in the bankruptcy, and the bankruptcy court must resolve whether a fraudulent transfer occurred to rule on that claim (analyzing and applying Langemkamp v. Culp, 498 U.S. 42 (1990), in light of Stern v. Marshall, 131 S. Ct. 2594 (2011)).
2. In the context of determining whether the district court reviewed an earlier ruling correctly, on pages 26-27, the Court provided crisp definitions of the basic concepts of dictum and holding.
3. In the course of rejecting an argument about the refusal to admit several pieces of evidence, the Court noted that the trustee “does not discuss how each specific piece of evidence was likely to affect the outcome of the trial, in light of all the evidence presented.”
4. A defense expert, without experience in the particular industry, was still qualified to speak to valuation methodology in the bench trial, and “we cannot reverse the district court for adopting one permissible view over the other.”
5. The Court thoroughly reviewed the fiduciary duties owed from a parent to a subsidiary under Delaware law, while affirming the district court’s conclusions about causation associated with their alleged breach.