IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF TEXAS

FORT WORTH DIVISION

MC ASSET RECOVERY, LLC § 

§ 

V. § ACTION NO. 4:06-CV-013-Y

§ 

§ 

COMMERZBANK AG, ET AL. § 

ORDER DENYING MOTION TO DISMISS BUT

GRANTING CONVERTED MOTION FOR SUMMARY JUDGMENT

Pending before the Court are the United States Bankruptcy Court’s Proposed Findings of

Fact and Conclusions of Law (doc. 46) (“findings and conclusions”), filed July 20, 2010. After

reviewing the findings and conclusions, the parties’ objections and responses, and conducting the

mandated de-novo review, this Court accepts in part and rejects in part the findings and conclusions.

See Fed. R. Bankr. P. 9033(d). Thus, this Court DENIES Defendants’ Motion to Dismiss (Bankr.

R. 2271) and GRANTS Defendants’ converted Motion for Summary Judgment (Bankr. R. 5188).

I. BACKGROUND

This case has a long and tortured history in this Court as well as the bankruptcy court.

Although the factual and procedural histories have been recounted multiple times in numerous

orders, this Court believes that reciting the facts and procedures again would be helpful to the parties

and to this Court as a reminder of the current posture of this case and the import of this order.

A. FACTUAL BACKGROUND

In December 2000, Mirant Asset Development and Procurement B.V. (“Mirant Europe”),

an indirect, wholly-owned subsidiary of Mirant Corporation (“Mirant”), entered into an agreement

with General Electric Company and General Electric International, Inc. (collectively, “GE”), for the

manufacture and purchase of nine equipment packages to be used in power-generation facilities in
2

Europe (“the master agreement”). Mirant executed a guaranty in favor of GE to secure Mirant

Europe’s obligations under the master agreement. European Power Island Procurement B.V.

(“EPIP”) was created to act as the owner of the power-generation facilities. Stichting European

Power Island (“Stichting”) was created to hold the corporate stock of EPIP. 

Before making any payments under the master agreement with GE, Mirant Europe entered

into a temporary off-balance-sheet financing transaction (“the bridge facility”) with Westdeutsche

LandesBank Girozentrale (“West LB”). The bridge facility was refinanced through another offbalance-sheet financing transaction, the € 1.1 billion power-generation-facilities acquisition. These

facilities consisted of facility I (a revolving facility that was the source of funding for progress

payments under the master agreement) and facility II. Facility II would be drawn against only (1)

if facility I was fully drawn down or (2) to fund certain facility II early-funding events. Defendants

Commerzbank AG, New York and Grand Cayman Branches; ABN AMRO, N.V.; IntesaBci, S.p.A.;

ING Bank; Royal Bank of Scotland; Danske Bank A/S; Australia and New Zealand Banking Group,

Limited; Barclay’s Bank; and BNP Paribas acted as lenders with respect to facility I. Commerzbank

AG, Grand Cayman Branch; ABN AMRO; IntesaBci; and Credit Lyonnais acted as investors with

respect to facility I. Commerzbank, New York and Grand Cayman Branches, and ABN AMRO

acted as lenders with respect to the facility II loan. Commerzbank, Grand Cayman Branch, and

ABN AMRO acted as investors with respect to facility II. 

On February 15, 2001, Mirant Europe and West LB entered into an owner-assignment-andassumption agreement, assigning all of Mirant Europe’s interest in the master agreement to West

LB. On May 25, EPIP and West LB entered into a purchase-option-and-assumption agreement (“the

West LB assignment”) assigning all of West LB’s interest in the master agreement to EPIP. That

same day, Mirant Europe, EPIP, Stichting, the lenders and investors in the facilities, and

Commerzbank, New York Branch, as administrative agent, entered into a participation agreement
3

to finance the construction of the power-generation facilities. As part of the participation agreement,

Mirant executed and delivered a guaranty in favor of Commerzbank, New York Branch. Mirant

unconditionally guaranteed to Commerzbank all amounts payable by Mirant Europe under the

participation agreement and the West LB assignment. 

On August 13, Commerzbank syndicated the financing. Thus, Mirant Europe; EPIP;

Stitching; the lenders and investors in the facilities; Commerzbank, New York Branch, as lead

arranger, book manager, and administrative agent; and ABN AMRO, as co-lead arranger and

syndication agent, entered into an amended participation agreement. The amended participation

agreement required Mirant Europe to acquire the power-generation facilities from EPIP for a

purchase price equal to the amount outstanding under the facilities. Mirant’s guaranty remained in

effect for all amounts due under the amended participation agreement. Under the amended

participation agreement, advances were made to EPIP as the owner of the power-generation

facilities. Both the original participation agreement and the amended participation agreement

contained a jury-trial waiver. The parties agree that New York law governs the interpretation of the

participation agreements. (Bankr. R. 5.)

 In 2003, Mirant Europe decided that it could not use the power-generation facilities. Before

GE had completed construction, Mirant Europe bought back its rights in the master agreement from

EPIP under the purchase option. Mirant Europe then ended further construction under the master

agreement. Mirant, either directly or through certain subsidiaries, paid Defendants €136,873,950

in connection with the power-generation facilities. 

B. PROCEDURAL HISTORY

On July 14, 2003, Mirant filed a voluntary petition for Chapter 11 bankruptcy protection. 

On July 13, 2005, Mirant, as debtor-in-possession, filed a complaint in its underlying bankruptcy

case against the entities involved in the master agreement, the participation agreements, and the
1

The defendants in Mirant’s adversary action are Commerzbank, AG; Commerzbank AG, New York and Grand

Cayman Branches; ABN AMRO, N.V.; IntesaBci, S.p.A.; ING Bank; Australia and New Zealand Banking Group

Limited; ANZ Investment Bank; Barclay’s Bank PLC; BNP Paribas; Credit Lyonnais; Danske Bank, A/S; ING Bank;

Stitching; Mirant Europe; and The Royal Bank of Scotland, PLC. The Court collectively will refer to these parties as

“Defendants.” Mirant also sued GE; however, Mirant voluntarily dismissed its claims against GE with prejudice after

they settled. (Bankr. R. 5928-29.) 

4

guaranty, arguing that the payments made under these agreements were fraudulent transfers.1 On

December 9, 2005, the bankruptcy court entered a confirmation order adopting a plan of

reorganization, out of which emerged a reorganized Mirant (“New Mirant”). As part of the

reorganization plan, plaintiff MC Asset Recovery (“MCAR”) was formed as the litigation substitute

to pursue the avoidance actions as successor to Mirant and as the representative of the Mirant

debtors. See 11 U.S.C.A. § 1123(b)(3)(B) (West 2004). In the confirmation order, the bankruptcy

court stated that “all Causes of Action, including Avoidance Actions . . . shall, upon occurrence of

the Effective Date, be transferred to, and be vested in, New Mirant for the benefit of the Debtors and

their Estates.” (Bankr. R. 14805.) Defendants filed a jury demand and moved this Court to

withdraw the automatic reference of MCAR’s adversary proceeding to the bankruptcy court. See

28 U.S.C.A. § 157(d) (West 1993); N.D. Tex. Misc. Order 33. 

On December 17, 2007, while the motion to withdraw the reference was still pending in this

Court, Defendants filed a motion under Federal Rule 12(b), parts (1) and (6), respectively, to dismiss

MCAR’s complaint for lack of subject-matter jurisdiction and for failure to state an actionable claim.

On December 19, 2008, the bankruptcy court converted part of Defendants’ motion to dismiss into

a motion for summary judgment. Specifically, because Defendants’ choice-of-law issue required

further discovery and the admission of proof outside the parties’ pleadings, the bankruptcy court

determined that this discrete portion of the dismissal motion should be treated as a motion for

summary judgment. See Fed. R. Civ. P. 12(d).

On March 27, 2009, this Court concluded that MCAR could not enforce the jury-trial waiver
2

It is unclear why the parties so stipulated because § 157 provides that a fraudulent-transfer action is a core

proceeding. See 28 U.S.C. § 157(b)(2)(H). 

5

against Defendants, but denied the motion to withdraw the reference without prejudice until the

completion of all pretrial proceedings. The Court stated that, if no other party to the waiver

provision asserted it, Defendant could again move for withdrawal of the reference, which this Court

would grant. 

At this point, the bankruptcy court turned to Defendants’ motion to dismiss and motion for

summary judgment. The bankruptcy court noted that the manner in which it addressed the motions

was an important query: “[S]hould this court enter an order granting or denying the motion (and thus

subject the parties to the appellate procedures set forth in 28 U.S.C. § 158), or should it submit

proposed findings of fact and conclusions of law to the District Court?” Ultimately, the bankruptcy

court concluded that proposed findings of fact and conclusions of law regarding the motions should

be submitted to this Court under Bankruptcy Rule 9033. See Fed. R. Bankr. P. 9033. This

conclusion is further supported by the fact that the parties stipulated that this adversary action is a

non-core proceeding (Bankr. R. 1476),2

 which mandates proposed findings and conclusions. See

id. 9033(a).

In its final analysis, the bankruptcy court recommended that this Court deny the motions.

The bankruptcy court’s findings and conclusions are centered around three main concepts:

 1. Because all of Mirant’s creditors were not paid in full, MCAR had standing to

prosecute the adversary action under 11 U.S.C. § 544(b).

2. Because the Federal Debt Collection Procedures Act (“the FDCPA”) does not apply,

a conflict-of-law analysis shows that New York law and not Georgia law applies to

MCAR’s ability to avoid the guaranty to Defendants.

3. Under New York law, MCAR’s amended complaint plausibly stated a claim of

fraudulent transfer.
6

No party was completely satisfied with the findings and conclusions; thus, MCAR and Defendants

filed objections and objection responses as provided by Bankruptcy Rule 9033(b). Based on these

objections, this Court will review the findings and conclusions de novo under Bankruptcy Rule

9033(d).

In addition to the findings recited above, the bankruptcy court found that if MCAR

successfully avoided the transfers to Defendants, Defendants would have an allowed claim to

recover the property from New Mirant under 11 U.S.C. § 502(h). New Mirant sought to intervene

in the action in order to object to this portion of the findings and conclusions. The bankruptcy court

denied the motion because MCAR adequately represented New Mirant’s position. New Mirant filed

an appeal from the intervention denial, which is the subject of a separate action. See Mirant Corp.

v. Commerzbank, AG, No. 4:10-CV-614-Y (N.D. Tex. Aug. 25, 2010).

II. STANDARDS OF REVIEW

Even under a de-novo review, this Court is bound by the settled review standards governing

motions to dismiss and motions for summary judgment. These standards easily can be skirted in a

case such as this where the facts and legal arguments occasionally and incorrectly entice fact

finding.

A. MOTION TO DISMISS UNDER RULE 12

Defendants move to dismiss MCAR’s amended complaint based on MCAR’s lack of

standing (Rule 12(b)(1)) and based on MCAR’s failure to state an actionable claim (Rule 12(b)(6)).

(Bankr. R. 2300-2317, 2335-2343.) These are two distinct motions with different standards.

1. Rule 12(b)(1)

A motion to dismiss under Rule 12(b)(1) challenges a federal court’s subject-matter

jurisdiction. If a plaintiff lacks standing to raise a claim, this Court has no subject-matter
7

jurisdiction over the claim. See Whitmore v. Arkansas, 495 U.S. 149, 154-55 (1990); see also

Barrett Computer Servs., Inc. v. PDA, Inc., 884 F.2d 214, 220 (5th Cir. 1989) (recognizing because

standing presents jurisdictional question, standing analyzed under standards applicable to court’s

subject-matter jurisdiction). This Court must presume that a suit lies outside its limited jurisdiction,

and the burden of establishing federal jurisdiction rests on the party seeking to invoke federal it. See

Howery v. Allstate Ins. Co., 243 F.3d 912, 916 (5th Cir. 2001). 

This Court may dismiss for lack of subject-matter jurisdiction based on (1) the complaint

alone, (2) the complaint supplemented by undisputed facts in the record, or (3) the complaint

supplemented by undisputed facts plus the court’s resolution of disputed facts. See St. Tammany

Parish ex rel. Davis v. Fed. Emergency Mgmt. Agency, 556 F.3d 307, 315 (5th Cir. 2009). Motions

under Rule 12(b)(1) are categorized as either a facial attack or a factual attack upon subject-matter

jurisdiction. See Naranjo v. Universal Sur. of Am., 679 F. Supp. 2d 787, 792 (S.D. Tex. 2010). A

facial attack requires this Court to inspect the pleadings, taking the allegations in the complaint as

true, and determine whether the claimant has sufficiently alleged subject-matter jurisdiction. See

McElmurray v. Consol. Gov’t of Augusta-Richmond Cnty., 501 F.3d 1244, 1251 (11th Cir. 2007).

In other words, a facial attack simply challenges the court’s subject-matter jurisdiction based on the

sufficiency of the pleadings. A factual attack, by contrast, denies or controverts the plaintiff’s

allegations of jurisdiction. See United States v. Ritchie, 15 F.3d 592, 598 (6th Cir. 1994). Only

uncontroverted factual allegations are accepted as true, and the plaintiff must establish subjectmatter jurisdiction (in this case, standing) by a preponderance of the evidence. See Cedars-Sinai

Med. Ctr. v. Watkins, 11 F.3d 1573, 1583 (Fed. Cir. 1993); Irwin v. Veterans Admin., 874 F.2d 1092,

1096 (5th Cir. 1989), aff’d sub nom. Irwin v. Dep’t of Veterans Affairs, 498 U.S. 89 (1991). 

2. Rule 12(b)(6)

The scope of the standard under Rule 12(b)(6) is more exacting than the standard for a Rule
8

12(b)(1) factual attack. Rule 12(b)(6) only authorizes the dismissal of a complaint that fails “to state

a claim upon which relief can be granted.” This rule must, however, be interpreted in conjunction

with Rule 8(a), which sets forth the requirements for pleading a claim for relief in federal court.

Rule 8(a)(2) calls for “a short and plain statement of the claim showing that the pleader is entitled

to relief.” FED. R. CIV. P. 8(a)(2); see also Swierkiewicz v. Sorema N.A., 534 U.S. 506, 508 (2002)

(holding Rule 8(a)’s simplified pleading standard applies to most civil actions). As a result, “[a]

motion to dismiss for failure to state a claim is viewed with disfavor and is rarely granted.” Kaiser

Aluminum & Chem. Sales v. Avondale Shipyards, Inc., 677 F.2d 1045, 1050 (5th Cir. 1982). This

Court must accept as true all well-pleaded, non-conclusory allegations in the complaint and liberally

construe the complaint in favor of the plaintiffs. See id. In considering a motion to dismiss for

failure to state a claim, “courts must limit their inquiry to the facts stated in the complaint and the

documents either attached to or incorporated in the complaint.” Lovelace v. Software Spectrum, Inc.,

78 F.3d 1015, 1017-18 (5th Cir. 1996). 

The plaintiff must, however, plead specific facts, not mere conclusory allegations, to avoid

dismissal. See Guidry v. Bank of LaPlace, 954 F.2d 278, 281 (5th Cir. 1992). Indeed, the plaintiff

must plead “enough facts to state a claim to relief that is plausible on its face,” and its “factual

allegations must be enough to raise a right to relief above the speculative level, . . . on the

assumption that all the allegations in the complaint are true (even if doubtful in fact).” Bell Atl.

Corp. v. Twombly, 550 U.S. 544, 547, 556 (2007). The plaintiff must plead facts “plausibly

showing” its right to relief on each claim asserted. Ashcroft v. Iqbal, 129 S. Ct. 1937, 1952 (2009).

In other words, the plaintiff must “nudge[] [its] claims across the line from conceivable to

plausible.” Twombly, 550 U.S. at 570.

B. SUMMARY JUDGMENT AS TO CHOICE OF LAW

Which state’s substantive law governs an issue is a question of law for this Court to decide.
9

See Tow v. Rafizadeh (In re Cyrus P’ship), 413 B.R. 609, 612 (Bankr. S.D. Tex. 2008). But

determining which state’s contacts or interests control involves a factual determination. See Hughes

Wood Prods., Inc. v. Wagner, 18 S.W.3d 202, 204 (Tex. 2000). Summary judgment is appropriate

when the record establishes “that there is no genuine issue as to any material fact and that the

movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(c)(2). A party seeking

summary judgment must show that there is no genuine issue of material fact as to fact questions

necessary to determine the choice-of-law issue. See Hughes Wood, 18 S.W.3d at 204. Material facts

are facts that could affect the outcome of the action or could allow a reasonable fact-finder to find

in favor of the opposing party. See DIRECTV, Inc. v. Budden, 420 F.3d 521, 529 (5th Cir. 2005). 

MCAR does not argue that there are material fact issues precluding summary judgment.

Rather, MCAR and Defendants assert that the import of the largely-undisputed facts uncovered

during discovery mandate different results. Thus, this Court’s inquiry on summary judgment mainly

is a legal one. Cf. Grupo Televisa, S.A. v. Telemundo Commc’ns Group, Inc., 485 F.3d 1233, 1239

(11th Cir. 2007) (holding conflict-of-law issue presents legal question).

III. DISCUSSION

A. MCAR’S STANDING: RULE 12(B)(1)

A motion to dismiss for lack of subject-matter jurisdiction must be considered before any

other challenge because jurisdiction must be present before this Court may determine the validity

of a claim. See Goldin v. Bartholow, 166 F.3d 710, 714 (5th Cir. 1999); Moran v. Kingdom of Saudi

Arabia, 27 F.3d 169, 172 (5th Cir. 1994). Defendants argue that MCAR does not have standing to

avoid the disputed transactions because Mirant’s creditors were paid in full under Mirant’s Chapter

11 plan of reorganization. Thus, Defendants raise a factual attack on this Court’s jurisdiction.

As noted by the bankruptcy court, Defendants’ argument arises under an umbrella of unusual
10

procedural facts:

In its plan of reorganization, Mirant provided that unsecured creditors would

receive New Mirant stock and an interest in the recoveries of MCAR. Before Mirant

confirmed its plan, [Bankruptcy] Judge Michael Lynn conducted a lengthy valuation

hearing, after which he concluded that Mirant was solvent. Judge Lynn’s valuation,

coupled with rising prices in the energy market, generated significant interest in

Mirant claims and equity. By the effective date of Mirant’s plan, New Mirant’s

stock price supported an argument that unsecured creditors had been or would be

paid in full on the basis of the stock alone.

The issue of whether creditors had been paid in full began to arise in Mirant’s

bankruptcy case. Professionals who filed fee applications sought to justify their fees

on the ground, among others, that creditors had been paid in full. . . . When Mirant

sought approval of a settlement with Potomac Electric Power Company (“Pepco”),

Mirant argued that certain objectors had no standing to oppose the settlement

because their claims had been paid in full. . . .

. . . MCAR . . . became concerned that Mirant’s paid-in-full argument would

undermine MCAR’s [fraudulent-transfer] causes of action. . . . MCAR appeared at

the hearing on Mirant’s motion to settle with Pepco and urged Judge Lynn to

exercise caution in ruling on the paid-in-full issue. . . . 

Judge Lynn approved Mirant’s settlement with Pepco. In doing so, he ruled

that the objecting creditors had standing to object under [§] 1109 of the Bankruptcy

Code, even though creditors had been “satisfied in full” by Mirant’s plan. Judge

Lynn elaborated [that] what he meant by “satisfied in full” [was that stock valuation

as of the effective date of the plan under § 1129(b)(2)(B)(i) should have no bearing

on whether creditors are deemed fully satisfied for other purposes].

(Findings & Conclusions 11-12.) Based on these facts, Defendants assert that the doctrines of law

of the case and judicial estoppel operate to deprive MCAR of standing. They further assert that the

bankruptcy court’s confirmation of Mirant’s reorganization plan bars MCAR’s avoidance claims

by res judicata. (Defs. Obj. 7.) The bankruptcy court and Defendants agree that if Mirant’s creditors

were paid in full, MCAR lacks standing to prosecute the § 544(b) claims. (Defs. Obj. 7; Findings

& Conclusions 14-16.) MCAR asserts that a debtor’s avoidance powers vest on the petition date

and any post-petition satisfaction of unsecured creditors does not affect a trustee’s standing.

(MCAR Obj. 6-7.)

The bankruptcy court held that Article III’s limitation of federal-court jurisdiction to actual
11

cases or controversies demands that full payment of the debtor’s creditors during the course of the

debtor’s case or under a plan confirmation renders any injury to those creditors conjectural or

hypothetical. Indeed, this Court’s jurisdiction is predicated on there being a case or controversy

between the parties within the meaning or Article III. See U.S. Const. art. III, § 2; Warth v. Seldin,

422 U.S. 490, 498-99 (1975). Such a case or controversy must exist throughout the litigation, i.e.,

the case cannot become moot and continue to establish standing. See Samnorwood Indep. Sch. Dist.

v. Tex. Educ. Agency, 533 F.3d 258, 264 (5th Cir. 2008).

But MCAR’s argument finds support in the bankruptcy statutes and the majority of the

applicable law. A bankruptcy trustee, for the benefit of the entire estate, may avoid any transfer of

the interest of a debtor in property or any obligation incurred by the debtor that is voidable by a

creditor holding an unsecured claim that is allowable under the Bankruptcy Code. See 11 U.S.C.

§§ 544(b), 550(a). An “allowable” claim is determined “as of the date of the filing of the petition.”

Id. § 502(b). The avoidance statute places the trustee in the shoes of the debtor’s unsecured

creditors. See Acequia, Inc. v. Clinton (In re Acequia, Inc.), 34 F.3d 800, 809 (9th Cir. 1994). But

there is a separation between avoiding a transfer and recovering from the transferee. See id. Thus,

“after demonstrating the right to recover conveyances under [§] 544(b), a trustee must then establish

the amount of recovery under [§] 550(a) . . . , which provides that, ‘to the extent that a transfer is

avoided under [§] 544 . . . , the trustee may recover, for the benefit of the estate, the property

transferred.’” Id. (quoting 11 U.S.C. § 550(a)). The extent of the trustee’s recovery is governed by

§ 550(a), which enables the trustee to pursue avoidance actions under § 544(b) if recovery will

accrue “for the benefit of the estate.” 11 U.S.C. § 550(a). This has been interpreted to fix the rights

of holders of claims and interests as of the petition date. See Carrieri v. Jobs.com, Inc., 393 F.3d

508, 527 (5th Cir. 2004). Further, § 541(a)(1) includes as property of the estate any property
12

available to the estate as of the commencement of the case. See id. § 541(a)(1).

Several courts have determined that §§ 544(b) and 550(a) vest standing jurisdiction in a

trustee to avoid a transfer as of the date of the petition. See Stalnaker v. DLC, Ltd. (In re DLC, Ltd.),

376 F.3d 819, 823-24 (8th Cir. 2004); Acequia, 34 F.3d at 809-12; Silverman v. Sound Around, Inc.

(In re Allou Distribs.), 392 B.R. 24, 34-35 (Bankr. E.D.N.Y. 2008); Alberts v. HCA, Inc. (In re

Greater Se. Cmty. Hosp. Corp. I), 365 B.R. 293, 300-01 (Bankr. D.D.C. 2006); MC Asset Recovery,

LLC v. S. Co., No. 1:06-CV-417-BBM, 2006 WL 5112612, at *3-4 (N.D. Ga. Dec. 11, 2006).

Indeed, “[a] debtor may use the [§] 544(b) powers after confirmation even though all of the

unsecured creditors have been paid.” 5 Collier on Bankruptcy ¶ 544.06[1] (Alan N. Resnick &

Henry J. Sommer eds., 16th ed. 2010) (relying on Acequia and bankruptcy-appellate-panel order in

Stalnaker). This Court agrees with the bulk of the applicable case law and § 544(b) and concludes

that a trustee’s standing, in the context of avoidance actions to be exercised for the benefit of the

estate (which includes more than solely the unsecured creditors), is determined as of the

commencement of the adversary action. See generally Moore v. Bay, 284 U.S. 4 (1931) (allowing

trustee to stand in shoes of creditor to recover entire fraudulent-conveyance amount for benefit of

all creditors even though creditor who could have avoided it subsequently owed only fraction of

original amount). This conclusion is buttressed by the fact that the confirmation plan provided that

all avoidance actions expressly were vested in New Mirant as of the date of the confirmation.

(Bankr. R. 14805.) See Greater Se. Cmty. Hosp., 365 B.R. at 300-01 (finding standing based on

similar vesting language in reorganization plan). 

This Court disagrees with the bankruptcy court that §§ 544(b) and 550(a) essentially are

unconstitutional as applied based on a lack of standing when a trustee exercises its avoidance power

after one constituency of the estate (unsecured creditors) has been satisfied post-petition. (Findings
13

& Conclusions 10-16.) Section 544(b)’s provision that a trustee may avoid an unsecured claim that

is “allowable” under § 502(e) dictates that the date of the commencement of the action is the

operative date for determining standing. (MCAR Obj. 6-17.) Further, because the underlying basis

for a trustee’s standing to pursue an avoidance action derives from an injury to the estate, this Court

determines that such injury continues even if the unsecured creditors are satisfied. (MCAR Obj. 17-

32.)

Finally, and most importantly, the fact that the creditors were paid in New Mirant stock

confers standing on MCAR to pursue the avoidance action based on the indirect benefit to the

creditors from a more financially sound estate. See Adelphia Recovery Trust v. Bank of Am., N.A.,

390 B.R. 80, 95, 97 (Bankr. S.D.N.Y. 2008), aff’d, 379 Fed. Appx. 10 (2d

 Cir. 2010); see also

Acequia, 34 F.3d at 811-12 (discussing broad interpretations of “benefit the estate” in context of

avoidance actions and fact that equity stake to creditors results in benefit to estate). The bankruptcy

court relied on Adelphia to support its conclusion that if creditors are paid in full under a

reorganization plan, a debtor has no standing to pursue avoidance actions. (Findings & Conclusions

15-16.) But Adelphia is distinguishable. The Adelphia court held that, because the creditors were

paid in full with interest in cash (and not in shares of the reorganized corporation), it was impossible

to conclude that the creditors would benefit by way of a more financially sound estate; thus, the

recovery trust did not have standing to pursue an avoidance action. See Adelphia, 390 B.R. at 95,

97. In the instant case, the creditors were paid in stock; thus, the prospect of a more financially

sound estate would provide MCAR with standing. 

Article III is not offended by the bankruptcy statutes regarding avoidance actions. MCAR

has standing to pursue the avoidance action; thus, Defendants’ motion to dismiss under Rule
3

Although the bankruptcy court recommended that the motion to dismiss based on standing be denied, the

bankruptcy court based its recommendation on the fact that all inferences must be drawn in favor of MCAR in

determining whether all creditors were paid in full. (Findings and Conclusions 17-19.) The Court need not address this

recommendation. However, the Court notes that it appears the bankruptcy court reviewed Defendants’ 12(b)(1) standing

arguments under the review standard for motions raised under Rule 12(b)(6). Specifically, the bankruptcy court held

that, by drawing all inferences in favor of MCAR’s standing, it could not conclude that MCAR lacked standing. In a

Rule 12(b)(1) analysis as opposed to a Rule 12(b)(6) review, however, the court must resolve disputed issues of fact and

not draw all inferences in favor of MCAR’s standing, especially in a factual attack. But the Court agrees with the

bankruptcy court that the creditors were not paid in full because they were paid in stock and because the plan expressly

stated any avoidance action vested in MCAR for the benefit of Mirant and its debtors. (Bankr. R. 14875.)

14

12(b)(1) is denied.3

B. CHOICE OF LAW: RULE 56

The Court now turns to the portion of Defendants’ motion to dismiss that the bankruptcy

court converted into a summary-judgment motion: choice-of-law determination regarding avoidance

of the guaranty. As the bankruptcy court explained:

MCAR’s case depends on its ability to avoid the guaranty to Commerzbank.

MCAR concedes that the guaranty provides value for the payments made by Mirant

to the defendants. Consequently, unless the guaranty is avoided, the payments made

pursuant to it are insulated from [a fraudulent-conveyance] attack. Mirant delivered

the guaranty more than one year prior to its petition in bankruptcy; thus, [§] 548

provides no basis for its avoidance. Therefore, MCAR must rely on an “applicable

law” that it can access via [§] 544(b).

(Findings & Conclusions 19). Thus, this Court must determine whether Defendants have

established, as a matter of law, the futility of MCAR’s avoidance action. 

1. “Applicable Law”: FDCPA 

 Section 544(b) permits a trustee to “avoid any transfer of an interest of the debtor in

property or any obligation incurred by the debtor that is voidable under applicable law by a creditor

holding an unsecured claim.” 11 U.S.C. § 544(b) (emphasis added). The bankruptcy court first

determined that the Federal Debt Collection Procedures Act (“the FDCPA”) was not “applicable

law” under § 544(b) because it is a remedy available solely to the United States in its debt-collection
4

The FDCPA provides that its procedures to avoid fraudulent transfers apply “as to a debt to the United States”

and provide remedies to the United States. 28 U.S.C. §§ 3304(a)-(b), 3306(a).

5

The parties have adduced into evidence the product of “significant discovery” on the choice-of-law issue,

mandating the conversion of this portion of the motion to dismiss into a motion for summary judgment. See Fed. R. Civ.

P. 12(d). (Findings & Conclusions 4.) 

15

efforts. (Findings & Conclusions 20-30.) MCAR objects and asserts, among other arguments, that

the disputed language in the FDCPA4

 means that the FDCPA is the exclusive remedy for the United

States and not that the FDCPA is for the exclusive use of the United States. Defendants persuasively

argue why the bankruptcy court was correct to hold that the FDCPA does not contain a private right

of action. (Defs. Resp. 16-27.) There is no need to repeat Defendants’ arguments here. This Court

agrees with the bankruptcy court and Defendants that the FDCPA is a remedy for the exclusive use

of the United States; thus, the FDCPA is not applicable law to MCAR’s avoidance action.

2. “Applicable Law”: Georgia UFTA, Georgia section 18-2-22, or New York law

Because the FDCPA does not apply to MCAR’s avoidance actions, it must be determined

what law applies under § 544(b) in deciding MCAR’s avoidance action. Defendants argue section

18-2-22 of the Official Code of Georgia applies. MCAR asserts either Georgia’s Uniform

Fraudulent Transfer Act (“UFTA”) law, which replaced section 18-2-22 on July 1, 2002, or New

York law applies. MCAR acknowledged in the bankruptcy court that because Georgia’s section 18-

2-22 does not provide for the avoidance of guaranties, MCAR’s avoidance claim would be barred

if that section applies and neither the UFTA nor New York law applies. (Findings & Conclusions

3.) Both the UFTA and New York law provide for the avoidance of guaranties. This Court,

therefore, is faced with a possibly case-dispositive, choice-of-law analysis in the context of a

summary-judgment motion.5

After applying the choice-of-law factors provided by sections 6 and 145 of the Second

Restatement of Conflict of Laws, the bankruptcy court concluded that although section 18-2-22 was
6

MCAR does not object to the bankruptcy court’s conclusion that Georgia’s UFTA does not apply. MCAR

focuses its objections on the bankruptcy court’s analysis of the section 145 factors. (MCAR Obj. 63-64.)

7

Defendants object and assert that, in a tort action, a court should look only to section 145 to determine which

law applies. (Defs. Obj. 27-29.) However, Texas courts have consistently held that the most-significant-relationship

test considers both section 6 and section 145. See Cates v. Creamer, 431 F.3d 456, 465 (5th Cir. 2005); Torrington Co.,

46 S.W.3d at 848; Gutierrez v. Collins, 583 S.W.2d 312, 318 (Tex. 1979); see also Restatement (Second) Conflict of

Laws § 145 cmt. b; James P. George, False Conflicts and Faulty Analyses: Judicial Misuse of Governmental Interests

16

the applicable law of Georgia,6 New York law should apply to MCAR’s avoidance action under

sections 6 and 145 because New York law best serves the fundamental purpose of fraudulenttransfer law: the protection of creditors. (Findings & Conclusions 31-54.) Defendants object to this

conclusion and assert Georgia’s section 18-2-22 applies to bar MCAR’s avoidance action. (Defs.

Obj. 31-40.)

a. Basic choice-of-law principles

As discussed by the bankruptcy court, federal choice-of-law principles apply to this case:

“The federal choice-of-law rule is the ‘independent[-]judgment’ test, which is a ‘multi-factor,

contacts analysis’ that applies the law of the state with the most significant relationship to the

transaction at issue. In re Consol. Capital Equities Corp., 143 B.R. 80, 85 (Bankr. N.D. Tex.

1992).” (Findings & Conclusions 31-32.) Texas applies the Restatement’s most-significantrelationship test to decide choice-of-law issues. See Torrington Co. v. Stutzman, 46 S.W.3d 829,

848 (Tex. 2000). The independent-judgment test and the most-significant-relationship test are the

same; thus, this Court will consult Texas law in determining which law applies to MCAR’s

avoidance action. Cf. Tow, 413 B.R. at 614-15 (concluding federal choice-of-law rules apply to

fraudulent-transfer action brought in bankruptcy case and stating federal test and Texas test

synonymous).

 Fraudulent-transfer actions arise in tort; therefore, Texas courts rely on section 6 and

section 145 of the Restatement in determining choice-of-law issues arising in such an action.7

 See,
in the Second Restatement Conflict of Laws, 23 Rev. Litig. 489, 519-24 (2004). 

17

e.g., Faulkner v. Kornman (In re The Heritage Org., LLC), 413 B.R. 438, 462 (Bankr. N.D. Tex.

2009); Torrington, 46 S.W.3d at 848. Under section 6, the Restatement enumerates several

considerations relevant to a choice-of-law analysis: (1) the needs of the interstate and international

systems; (2) the relevant policies of the forum; (3) the relevant policies of other interested states and

the relative interests of those states in the determination of the particular issue; (4) the protection of

justified expectations; (5) the basic policies underlying the particular field of law; (6) certainty,

predictability, and uniformity of result; and (7) ease in the determination and application of the law

to be applied. See Restatement (Second) of Conflict of Laws § 6(2) (2010). In a tort case, such as

a fraudulent-transfer action, section 145 lists four inquiries to determine the applicable law: (1) the

place where the injury occurred; (2) the place where the conduct causing the injury occurred; (3) the

domicile, residence, nationality, place of incorporation, and place of business of the parties; and (4)

the place where the relationship, if any, between the parties is centered. See id. § 145(2) (2010).

These factors are to be evaluated qualitatively and quantitatively. See Cates, 431 F.3d at 464.

b. Application of sections 145 and 6

(1) section 145

(a) where injury occurred: Georgia 

First, this Court considers the place where the injury occurred. The injury sought to be

redressed is the alleged fraudulent transfers under the guaranty. The bankruptcy court concluded

that the injury occurred in Georgia, the location of Mirant’s headquarters. (Findings & Conclusions

37-38.) MCAR argues that the injury occurred in New York because the guaranty became effective

when all deliveries were made to Commerzbank’s New York counsel and because the loan was
18

closed, funded, and administrered in New York. (MCAR Obj. 67-73.) This Court agrees with

Defendants and the bankruptcy court that the injuries occurred in Georgia for the reasons stated by

the bankruptcy court and Defendants. (Findings & Conclusions 37-38; Bankr. R. 5978-79; Defs.

Resp. 27-30.) The degrading of the economic well-being of the transferor—the injury flowing from

the guaranty—occurred where Mirant had its principal place of business.

(b) where injury-causing conduct occurred: Georgia

Second is a determination of where the conduct causing the injury occurred. The bankruptcy

court determined that any culpable conduct occurred at Mirant’s headquarters in Georgia, where

Mirant’s management decided to issue the guaranty. (Findings & Conclusions 37.) MCAR asserts

that the conduct occurred in New York because the majority of the negotiations were conducted in

New York, most of the key documents were drafted in New York, the loan was closed and funded

in New York , and the guaranty was only effective upon delivery in New York. (MCAR Obj. 74-

77.) Defendants compellingly argue in their summary-judgment motion and in their response to

MCAR’s objections that the conduct leading to the injury occurred in Georgia. (Bankr. R. 5979-80;

Defs. Resp. 30-33.) The injury to the estate—Mirant’s failure to pay its debts—was caused by the

conduct of Mirant at its corporate headquarters in Georgia. Indeed, Defendants provided the funding

at Mirant’s request based on Mirant’s representations (which were grounded in Mirant’s superior

knowledge of its own financial condition) of its ability to pay debts as they became due. The

collection of loan documents by Defendants was merely ministerial and cannot be the conduct that

caused the alleged injury. Based on these reasons, this Court concludes that the culpable conduct

occurred in Georgia. (Findings & Conclusions 36-37.)

(c) location of parties: Georgia

Third, this Court looks to the domicile, residence, nationality, place of incorporation, and
19

place of business of the parties. The bankruptcy court concluded that Georgia law applied under this

factor. (Findings & Conclusions 33-34, 51.) This Court agrees that Mirant’s principal place of

business was in Georgia and that Defendants’ foreign domiciles and principal places of business do

not affect this inquiry. See Restatement (Second) Conflict of Laws § 145 cmt. e (stating in business

torts, place of business of parties is the more important contact). But the parties fought mightily on

the location of the creditors and whether creditors could even be considered in this analysis because

they were not parties to the guaranty.

MCAR proffered as summary-judgment evidence the affidavit of Carianne Basler who, after

reviewing the creditors’ proofs of claim, concluded that although New York creditors held 99.175%

of the dollar amount of claims against Mirant, a plurality (35.164%) of the claims were held by

Georgia claim holders. Defendants sought to strike Basler’s affidavit because (1) the affidavit was

not relevant to the choice-of-law issue, (2) the affidavit was not the best evidence of the location of

the creditors, and (3) Basler was not qualified to provide expert analysis. See Fed. R. Evid. 401,

702, 1002. (Bankr. R. 13544-59.) The bankruptcy court denied the motion, but reserved “the issue

of whether or not the information . . . is in fact relevant . . . as part of the ultimate summaryjudgment determination” and viewed the affidavit as a permissible summary under Rule 1006.

(Bankr. R. 16816-17.) In its findings and conclusions regarding the motion for summary judgment,

it appears that the bankruptcy court concluded that Basler’s affidavit was relevant and admissible,

but that this factor nevertheless militated in favor of the application of Georgia law because more

claim holders were located in Georgia. (Findings & Conclusions 34-36, 51.) Contrary to MCAR’s

objections, this conclusion is supported by the fact that the Restatement provides that in businessor financial-interest cases, the place of business is the more important contact regarding this factor.

See Restatement (Second) Conflict of Laws § 145 cmt. e. (MCAR Obj. 79-83.) 
20

Initially, this Court notes that consideration of the location of most of the transferor’s

creditors is appropriate in determining a choice-of-law issue. See 3 Howard J. Steinberg,

Bankruptcy Litigation § 17:112 (2010). As stated above, MCAR relied on Basler’s affidavit to

establish that New York law should apply under this factor based on the location of the creditors.

However, the bankruptcy court concluded that this factor weighs in favor of the application of

Georgia law based on Basler’s assertion that the number of creditors located in Georgia was greater

than the number of creditors located in New York. Because the bankruptcy court concluded that

Georgia law applied in the context of its section 145 analysis, there is no need to address

Defendants’ evidentiary objections to the Basler affidavit. In other words, because the bankruptcy

court ruled in Defendants’ favor regarding this factor of section 145, this Court need not discuss

Defendants’ objections to the affidavit because they are moot.

(d) center of relationship: Georgia

Finally, this Court considers the place where the relationship, if any, between the parties is

centered. The bankruptcy court held that this factor weighed in favor of neither Georgia nor New

York:

The parties disagree about the place where the relationship was centered.

Commerzbank focuses on the fact that its Atlanta agency was the relationship

manager with Mirant. MCAR focuses on the fact that the financing transaction was

centered in New York.

After giving due consideration to both the quantity and quality of the contacts

in Georgia and New York, the court cannot conclude that one set of contacts

dominates over the other. Moreover, as one court has pointed out the real parties-ininterest in a fraudulent conveyance, the creditors and the transferee, usually have not

dealt directly with each other at all. [See Ferrari v. Bus. Credit, Inc. (In re Morse

Tool, Inc.), 108 B.R. 384, 387 (Bankr. D. Mass. 1989)]. So, there is no

“relationship” to center upon. Accordingly, the court regards this factor as neutral.

(Findings & Conclusions 38-39.) But as noted by MCAR and Defendants, it would be “rare that the
8

This factor encompasses two considerations laid out by section 6: (1) the relevant policies of other interested

states and the relative interests of those states in the determination of the particular issue and (2) the basic policies

underlying the particular field of law.

21

injury, the conduct producing it, and the parties’ domiciles would point to the same . . . state, yet the

relationship would somehow be centered in [a different state].” CPS Int’l, Inc. v. Dresser Indus.,

Inc., 911 S.W.2d 18, 30 (Tex. App.—El Paso 1995, writ denied). (MCAR Obj. 83; Defs. Resp. 36.)

For the reasons espoused by Defendants in their summary-judgment motion and their response to

MCAR’s objections, this Court concludes that the relationship between the parties is centered in

Georgia. (Defs. Resp. 36-38; Bankr. R. 5966-73.)

(2) Section 6

In analyzing the section 6 factors, the bankruptcy court concluded that New York law applied

to the fraudulent-conveyance action. (Findings & Conclusions 39-51.) Defendants object and assert

that the factors actually point to the applicability of Georgia law. (Defs. Obj 31-40.) In tort cases,

the Restatement instructs that protection of justified interests and certainty of result are of lesser

importance than the other section 6 factors. See Restatement (Second) Conflict of Laws § 145 cmt.

b.

(a) basic policies of fraudulent conveyances 

and relevant policies of interested states: New York8

Fraudulent-transfer law in the bankruptcy context focuses on the preservation of the assets

of the estate, specifically to benefit unsecured creditors. See Bear, Stearns Sec. Corp. v. Gredd, 275

B.R. 190, 195 (S.D.N.Y. 2002); Brandt v. nVidia Corp. (In re 3dfx Interactive, Inc.), 389 B.R. 842,

863 (Bankr. N.D. Ca. 2008); Official Comm. of Equity Sec. Holders of Mirant Corp. v. Wilson Law

Firm, P.C. (In re Mirant Corp.), 334 B.R. 787, 798 n.27 (Bankr. N.D. Tex. 2005). The policy

undergirding a state’s fraudulent-transfer law, likewise, is the prevention of the diminution of a
9

The danger of heavily weighting the government’s interest in a conflict analysis has been aptly summarized:

[A] far larger problem in state and federal courts throughout the United States is significant deviation

from the Second Restatement’s multifactored test to single-factor tests, directly caused by the

persistence of two radically different methodologies—the First Restatement’s territorially fixed lex

locus test and Brainerd Currie’s governmental-interest analysis.

George, False Conflicts, supra, at 491. The governmental-interest analysis, which looks to policy concerns, cannot

overpower the most-significant-relationship test that this Court is bound to apply. 

22

debtor’s estate as viewed by the debtor’s creditors. See Lustig v. Weisz & Assocs., Inc. (In re

Unified Commercial Capital, Inc.), 260 B.R. 343, 352 (Bankr. W.D.N.Y. 2001). In short, this factor

considers the government’s interest; i.e., the purpose behind a state’s law is considered in the context

of choosing the governing law. See George, False Conflicts, supra, at 495, 511, 586 (arguing

government-interest analysis not separate test, but one element in Restatement’s multifactored test).

But this factor is not overriding and cannot negate or ignore the section 145 factors or the other

section 6 factors. See Restatement (Second) Conflict of Laws § 145 cmt. c (stating purpose of

applicable tort rule “must not be over-emphasized”); George, False Conflicts, supra, at 551-52

(noting skewing of conflicts analysis if policies or governmental interests are given too much focus).

This Court believes that the bankruptcy court, as Defendants point out, placed undue weight

on the fact that the purpose of New York’s fraudulent-transfer law protected the bankruptcy estate

while Georgia’s law did not. (Findings & Conclusions 44-47; Defs. Obj. 31-35.) Although the

bankruptcy court stated that it did not intend the policy considerations to overwhelm the section 145

factors, it concluded that New York law prevailed mainly because it most protected the bankruptcy

estate. (Findings & Conclusions 53-54.) Although this Court agrees with the bankruptcy court that

New York law best embodies the purpose behind fraudulent-transfer law in bankruptcy cases, this

Court will not give this factor determinative weight.9

 See id. Indeed, it appears that the bankruptcy

court’s approach “open[ed] a door to applying whichever state’s law provides the most expansive

rights for creditors to recover.” (Defs. Obj. 33.) This is an outcome not desired by the Restatement:
23

“A rule [that] exempts the actor from liability for harmful conduct is entitled to the same

consideration in the choice-of-law process as is a rule [that] imposes liability.” Restatement

(Second) Conflict of Laws § 145 cmt. c.

(b) relevant policies of the forum: not applicable

Texas fraudulent-transfer law is not a factor in this case. Texas’s only contact with this case

is being the place of trial; thus, Texas’s interest is limited to procedural issues. See id. § 6 cmt. e.

(c) protection of justified expectations: Georgia

This factor applies when one party has justifiably molded its conduct to conform to the

requirements of a particular law. See id. cmt. g. In a fraudulent-transfer action, however, the

creditors and the transferee have had no dealings with each other and, thus, would not have

anticipated the application of a certain forum’s law; but both have dealt with the debtor and the

debtor’s assets. See Morse Tool, 108 B.R. at 387. This Court reasonably would look to the location

of the debtor in determining the protection of justified expectations. See In re Revco D.S., Inc., 118

B.R. 468, 503 n.10 (Bankr. N.D. Ohio 1990); Morse Tool, 108 B.R. at 387. As previously stated,

Mirant was located in Georgia. Thus, all parties would expect that Georgia law would be the

governing law for any fraudulent-transfer action. (Defs. Obj. 35-36.)

(d) certainty, predictability, and uniformity of result: Georgia

The bankruptcy court, although recognizing that Morse Tool would point to the application

of Georgia law in the context of this factor, found that “greater predictability and uniformity can be

achieved by placing less emphasis on the location of the transferred asserts and more emphasis on

the policies underlying fraudulent[-]transfer law [because] it is far easier to identify the law that best

implements creditor protection than the state where the transferred assert was located.” (Findings
24

& Conclusions 49.) But this approach seems to conflate the predictability factor with the policies

factor discussed above. The bankruptcy court, thus, makes policy considerations the predominant

factor of its conflicts inquiry. As discussed above, this Court respectfully disagrees with this

approach. See George, False Conflicts, supra, at 585-86. Although the factors may be given

different weight in this Court’s ultimate qualitative analysis, the policy factor cannot be allowed to

overwhelm the others. See generally Restatement (Second) Conflict of Laws § 6 cmt. c (stating

“[v]arying weight will be given to a particular factor”). This Court agrees with Defendants that

predictability and foreseeability would be served best by the application of Georgia law. See Morse

Tool, 108 B.R. at 387. (Defs. Obj. 37.)

(e) ease of determination and application of law to be applied: New York

As noted by the bankruptcy court, the Restatement provides that “choice-of-law rules should

be simple and easy to apply.” Restatement (Second) Conflict of Laws § 6 cmt. j. (Findings &

Conclusions 49.) The Restatement goes on to caution that this factor “should not be

overemphasized, since it is obviously of greater importance that choice-of-law rules lead to desirable

results.” Id. 

The bankruptcy court concluded that this factor favored New York law because simplicity

and ease are “best served in fraudulent[-]transfer cases by applying that law that best fulfills the

underlying policies of fraudulent[-]transfer law.” (Findings & Conclusions 49.) Once again, the

bankruptcy court, by focusing primarily on policy considerations, appears to have fused the policy

factor with a separate section 6 factor. However, the Court agrees with the bankruptcy court’s

conclusion and MCAR’s reasoning that application of New York’s fraudulent-transfer law would

result in more ease and simplicity. (MCAR Obj. 93-94.) Cf. Seth v. Seth, 694 S.W.2d 459, 462-64

(Tex. App.—Fort Worth 1985, no writ) (applying Texas law in divorce case after conducting section
10Two of the section 6 factors point to the application of Georgia law. But, as stated above, these two factors

are to be given less weight in a fraudulent-transfer case.

25

6 conflicts analysis because applying Islamic law would produce a harsh result).

(f) needs of interstate and international systems: New York

This factor should “seek to further harmonious relations between states and to facilitate

commercial intercourse between them” and functions “to make the interstate and international

systems work well.” Restatement (Second) Conflict of Laws § 6 cmt. d. The bankruptcy court

concluded that this factor pointed to the application of New York law:

This factor also points to a choice-of-law rule that emphasizes facilitating the

underlying policies of the competing state, rather than merely defaulting to a

contacts-based analysis. If the fundamental policy of fraudulent[-]transfer law can

be fulfilled by applying a law that does not offend the underlying policies of either

state, then the law of that state should govern. Here, that law is New York law.

(Findings & Conclusions 51.) This Court agrees with MCAR that because the UFTA, which allows

the avoidance of obligations, has been adopted by the majority of states, the law that embodies the

UFTA applies under this factor. (MCAR Obj. 88.) Indeed, Georgia adopted the UFTA in 2002.

Harmonious relations between the states would be fostered by application of New York law, which,

like the majority of states, allows the avoidance of obligations in this situation. 

c. Summary of choice-of-law conclusion: Georgia

Based solely on a quantitative analysis, the section 145 factors heavily weigh in favor of the

application of Georgia law, while the section 6 factors weigh in favor of New York law.10 However,

this Court should focus on the factors that “capture the parties’ more qualitative relationship in the

context of a fraudulent-transfer dispute.” ASARCO, LLC v. Americas Mining Corp., 382 B.R. 49,

64 (S.D. Tex. 2007). Additionally, the section 145 contacts are to be weighed according to the

principles of section 6, which provide basic policy considerations to aid the court in determining the
26

appropriate law. See Price v. Litton Sys., Inc., 784 F.2d 600, 603 (5th Cir. 1986); Estate of Pigorsch

ex rel. Martin v. York College, ____ F. Supp. 2d ____, 2010 WL 3328284, at *5 (N.D. Iowa Aug.

18, 2010); cf. ASARCO, 382 B.R. at 64 (failing to conduct section 6 analysis after section 145

analysis strongly pointed to application of Delaware law). It appears the section 145 factors are

narrower and more fact specific than the section 6 factors and, thus, should take a leading role in

determining choice of law, with section 6 providing a basic framework under which to qualitatively

analyze the section 145 factors. See, e.g., Bonn Operating Co. v. Devon Energy Prod. Co., No. 4:06-

CV-734-Y, 2009 WL 484218, at *7-8 (N.D. Tex. Feb. 26, 2009), aff’d on other grounds, 613 F.3d

532 (5th Cir. 2010); Moorehead v. Mitsubishi Aircraft Int’l, Inc., 639 F. Supp. 385, 390 (E.D. Tex.

1986), aff’d in part & rev’d in part on other grounds, 828 F.2d 278 (5th Cir. 1987); George, False

Conflicts, supra, at 519-21. Indeed, the bankruptcy court recognized that if the section 145 factors

point to one state, the section 6 factors must take a secondary role:

Any fraudulent transfer choice-of-law analysis should involve consideration

of the factors in section 145. If nothing else, that analysis should reduce the number

of states with significant contacts to a manageable number. In some cases the

contacts may point so overwhelmingly to one state that the policy considerations in

section 6 do not outweigh the significance of the physical contacts. See[,] e.g., Mayo

v. Hartford Life Ins. Co., 354 F.3d 400, 404-05 (5th Cir. 2004); Askanase v. Fatjo,

130 F.3d 657, 671 (5th Cir. 1997); Warfield [v. Carnie, No. 3:04-CV-633-R,] 2004

WL 1112591, at *8 [(N.D. Tex. Apr. 13, 2007)]; Consol. Capital Equities, 143 B.R.

at 85. 

(Findings & Conclusions 53-54.) However, this Court disagrees with the bankruptcy court’s

conclusion that because a fraudulent-transfer case in the bankruptcy context is brought to protect

the creditors, the policy considerations of section 6 should get “the nod.” (Findings & Conclusions

53-54.) This approach basically exempts fraudulent-transfer actions from the choice-of-law

provisions of section 145. As the bankruptcy court states, the contact factors of section 145 should

not be construed so as to become irrelevant. (Findings & Conclusions 53.) Looking at the quality
27

of the parties’ contacts, this Court concludes Georgia law should apply. As asserted by the

bankruptcy court, the parties’ contacts strongly favor applying Georgia law:

Here, the contacts of the parties favor Georgia law. Mirant has its principal place of

business in Georgia, the injury occurred there, and the conduct causing the injury

occurred there. Although the greatest percentage of claims is held by creditors in

New York, more claim holders are in Georgia than New York. Ultimately, both the

quantity and quality of contacts between the parties favor applying Georgia law.

(Findings & Conclusions 51.)

This Court is mindful of the fact that the choice-of-law issue arises in the context of a

bankruptcy action. As such, this Court must not ignore that the bankruptcy code embodies a policy

of obtaining a maximum and equitable distribution for creditors. See Stellwagen v. Clum, 245 U.S.

605, 617 (1918); Mut. Benefit Life Ins. Co. v. Pinetree, Ltd. (In re Pinetree, Ltd.), 876 F.2d 34, 36

(5th Cir. 1989). But to vault this policy over and above the section 145 choice-of-law factors would

be imprudent and would render the Restatement conflicts analysis toothless in bankruptcy cases.

In other words, such a choice-of-law analysis would deteriorate into a simple inquiry into which

state’s law would give the estate the maximum recovery. This Court is not willing to de-emphasize

section 145. Additionally, because section 6 seems to be a framework under which to evaluate the

contacts identified under section 145, the section 6 factors become less useful or relevant when the

section 145 inquiry identifies only one state with sufficient contacts to justify application of that

state’s law to the parties’ dispute. 

d. Which Georgia law: the UFTA or section 18-2-22

Now that this Court has determined that Georgia law should apply to the avoidance actions

under a conflicts analysis, it must be decided which law of Georgia applies: the UFTA, which allows

fraudulent-transfer actions, or section 18-2-22, which does not. At the time Mirant executed and
28

delivered its guaranty to Defendants, section 18-2-22 was in effect. As stated above, the bankruptcy

court concluded that section 18-2-22 applied to MCAR’s fraudulent-transfer actions if Georgia law

applied under a choice-of-law analysis. (Findings & Conclusions 43.) MCAR did not object to this

conclusion. Indeed, this Court agrees with the bankruptcy court that section 18-2-22 should govern

MCAR’s fraudulent-transfer action, which challenged transfers that occurred before the effective

date of the UFTA. Thus, MCAR’s fraudulent-transfer action is barred under section 18-2-22.

C. REMAINING ARGUMENTS: RULE 12(b)(6)

The bankruptcy court, after concluding New York law applied to MCAR’s fraudulenttransfer action, found the remaining arguments in Defendants’ motion to dismiss to be without merit:

1. MCAR’s amended complaint does not reflect that Mirant received fair consideration

for the transfer.

2. MCAR’s amended complaint does not reflect that Mirant was solvent at the time of

the transfer.

3. The plan confirmation does not bar MCAR’s fraudulent-transfer action under the resjudicata doctrine.

4. MCAR’s amended complaint does not reflect an absence of benefit to the estate.

5. MCAR’s amended complaint states a claim under § 550(a) as to two cash transfers

made to Mirant Investments, B.V.

6. MCAR’s amended complaint states a claim for relief under § 548.

(Findings & Conclusions 54-65.) But because this Court has concluded that Georgia law applies,

which does not allow MCAR to avoid the allegedly fraudulent transfers, the Court need not address

Defendants’ objections.
TRM/ah 29

IV. CONCLUSION

This Court determines that MCAR has standing to pursue its fraudulent-transfer action

against Defendants. But because Georgia law applies, MCAR cannot seek to avoid the pre-petition

transfers. Thus Defendants’ motion to dismiss is denied, but Defendants’ converted motion for

summary judgment is granted. MCAR’s fraudulent-transfer claims must be dismissed.

SIGNED December 22, 2010.

____________________________

TERRY R. MEANS

UNITED STATES DISTRICT JUDGE