Daniel Stermer, the Creditor Trustee for the bankrupt title insurer ATIF, Inc., sued Old Republic National Title Insurance Company and related entities, alleging they received assets from ATIF without paying reasonably equivalent value. The dispute centered on a 2015 Master Agreement where ATIF transferred its title plant rights and intellectual property to Old Republic in exchange for the insurer assuming ATIF's title policy liabilities. Stermer argued this transaction was a fraudulent transfer intended to hinder creditors and that the entities involved were alter egos or successors liable for ATIF's debts. The bankruptcy court conducted a bench trial, excluding Stermer's expert testimony on asset valuation and finding that the transaction was for legitimate business purposes and provided reasonably equivalent value. The district court affirmed, leading to this appeal.
The Eleventh Circuit affirmed the lower courts on three primary grounds. First, regarding the exclusion of expert testimony, the court held that the bankruptcy court did not abuse its discretion under Federal Rule of Evidence 702 and the Daubert standard. The expert, Allen Pfeiffer, used a 'premium over tangible equity' method that the court found unreliable because it was not based on accepted textbooks, failed to value assets separately, and included assets ATIF no longer owned at the time of the transfer. The court noted that Pfeiffer's opinion was 'ipse dixit' and lacked a justified relationship to the pertinent facts. Second, on the fraudulent transfer claim, the court analyzed the 'badges of fraud' under Florida law. While some factors like the transfer of substantially all assets were present, the court found no concealment because the Florida Office of Insurance Regulation approved the deal, and the transaction was conducted at arm's length. Crucially, the court found the debtor received reasonably equivalent value because the liabilities assumed by Old Republic ($45-57.2 million) were comparable to the tangible assets transferred ($47.5 million). The court emphasized that the transfer served a legitimate purpose: reinsuring policy liabilities to protect policyholders. Third, on successor liability and alter ego claims, the court found that ATFS and Old Republic did not qualify as successors because the debtor and the new entities did not share common ownership or assets, and the debtor did not dissolve. For the alter ego claim, the court found that while Old Republic may have controlled ATFS, there was no evidence that the corporate form was used for an improper purpose or to harm creditors, noting that commingling funds alone is insufficient to pierce the corporate veil absent fraud.
The decision reinforces the requirement that bankruptcy trustees must rely on reliable, methodologically sound expert testimony to prove fraudulent transfers. It clarifies that a transfer of substantially all assets does not automatically constitute fraud if the debtor receives reasonably equivalent value and the transaction serves a legitimate business purpose. The ruling also sets a high bar for piercing the corporate veil in bankruptcy, requiring proof of both control and an improper purpose that harms creditors, rather than mere commingling of funds or shared management.