RECOMMENDED FOR FULL-TEXT PUBLICATION

Pursuant to Sixth Circuit Rule 206

File Name: 12a0328p.06

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT _________________

In re: GLOBAL TECHNOVATIONS

INCORPORATED; ONKYO AMERICA

INCORPORATED,

Debtors.

_____________________________________

ONKYO EUROPE ELECTRONICS GMBH;

ONKYO MALAYSIA SDN BHD; ONKYO

CORPORATION,

Appellants,

v.

GLOBAL TECHNOVATIONS INCORPORATED,

Appellee.

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No. 11-1582

Appeal from the United States District Court

for the Eastern District of Michigan at Detroit.

No. 2:10-cv-12781—Marianne O. Battani, District Judge.

Argued: May 31, 2012

Decided and Filed: September 13, 2012 

Before: BOGGS, NORRIS, and KETHLEDGE, Circuit Judges.

_________________

COUNSEL

ARGUED: Michael R. Limrick, BINGHAM McHALE LLP, Indianapolis, Indiana, for

Appellants. Glenn M. Kurtz, WHITE & CASE LLP, New York, New York, for

Appellee. Jeffrey A. Clair, UNITED STATES DEPARTMENT OF JUSTICE,

Washington, D.C., for Amicus Curiae ON BRIEF: Michael R. Limrick, John F.

McCauley, BINGHAM McHALE LLP, Indianapolis, Indiana, for Appellants. Glenn M.

Kurtz, WHITE & CASE LLP, New York, New York, Charles C. Kline, Jason R.

Domark, WHITE & CASE LLP, Miami, Florida, for Appellee. Sarang V. Damle,

UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C., for Amicus

Curiae.

1
No. 11-1582 Onkyo Eur. Elec., et al. v. Global Technovations Page 2

_________________

OPINION

_________________

BOGGS, Circuit Judge. Global Technovations Incorporated (“GTI”) went

bankrupt after it purchased Onkyo America Incorporated (“OAI”), a subsidiary of Onkyo

Corporation (“Onkyo”). GTI had purchased OAI for $13 million in cash and $12 million

in three-year promissory notes. Onkyo attempted to recover the remainder of the

purchase price from GTI’s bankruptcy estate by filing a proof of claim for $12 million.

GTI responded by suing Onkyo under the theory that the OAI purchase was a fraudulent,

voidable transaction. The bankruptcy court agreed. The court found that OAI was worth

$6.9 million at the time of the transaction, not $25 million. As a result, the court voided

GTI’s obligation to pay the remainder of the purchase price. It also ordered Onkyo to

repay GTI $6.1 million—the difference between the $13 million GTI had paid and the

$6.9 million the bankruptcy court determined that OAI was worth.

The United States District Court for the Eastern District of Michigan affirmed

the bankruptcy court’s decision. After wrestling with a debate about the extent of the

bankruptcy court’s jurisdiction to order relief, we also affirm.

I

A

OAI, an Indiana-based supplier of car-stereo equipment, was a subsidiary of

Onkyo and two of its other subsidiaries, Onkyo Europe and Onkyo Malaysia. In the late

1990’s, Onkyo began trying to sell OAI. Onkyo’s chairman and CEO, Naoto Otsuki,

wanted to take Onkyo public and selling OAI would allow Onkyo to realize a gain,

which in turn would allow it to utilize a tax-loss carryforward languishing on its books.

Onkyo management approached GTI about buying OAI because the companies

had done business before. Onkyo told GTI that OAI had strong cash flows and

generated approximately $6.9 million in revenue per year.
No. 11-1582 Onkyo Eur. Elec., et al. v. Global Technovations Page 3

GTI needed cash—its primary investor no longer wanted to invest with the

company and it was not generating sufficient revenue. GTI was in danger of being

delisted by the American Stock Exchange, a consequence it wished to avoid. Therefore,

GTI expressed interest when Onkyo approached it about purchasing OAI.

Because OAI was a private company and no public information was available,

GTI relied on the assertions made by Onkyo management, specifically, president

Shinobu Shimojima and CFO Doug Pillow, during negotiations and due diligence. GTI

relied on OAI’s projection that as of August 31, 2000, the month of the sale, OAI’s

trailing-12-month earnings before interest, taxes, depreciation and amortization

(EBITDA) would be $6.8 million. However, as time passed, the numbers actually

earned came in below what OAI had projected. As a result, the price of the acquisition

was lowered and it was difficult for the parties to secure financing.

Once financing was secured, third-party due diligence was performed by Deloitte

& Touche. Deloitte & Touche reported that it believed OAI would remain solvent, but

it conditioned this conclusion on the accuracy and completeness of the information given

by OAI’s management, stating that it had taken no independent steps to verify the

information provided by OAI’s management. Deloitte & Touche also evaluated costsaving measures touted to GTI by OAI; however, Deloitte & Touche did not analyze the

feasibility of these measures—they “assumed the proposed cost saving measures were

viable, and confirmed the mathematical accuracy of the projected impact of the cost

savings on OAI’s financial statements.”

On August 23, 2000, Onkyo and GTI executed an amended Share Purchase

Agreement, a contract for sale. In exchange for all 569,000 shares of OAI’s common

stock, which was owned by Onkyo Europe, Onkyo Malaysia, and Onkyo Japan, GTI

agreed to pay $13 million in cash and to provide a $12 million obligation, payable in

August 2003. The obligation took the form of three promissory notes—one to Onkyo

Europe, one to Onkyo Malaysia, and one to Onkyo Japan, each in proportion to their

ownership of OAI.
No. 11-1582 Onkyo Eur. Elec., et al. v. Global Technovations Page 4

After the purchase, GTI made several unpleasant discoveries about OAI’s

financial health. First, accounting errors and adjustments reduced OAI’s trailing-12-

month EBITDA figure by 29%. Of the $1.3 million OAI’s management projected would

be earned in July and August, only $475,000 was actually achieved. The court agreed

with GTI’s expert witness that “the existence and severity of this miss [in earnings]

would have become apparent to OAI’s management in the course of their day-to-day

liquidity analysis . . . [and] establishes that the Onkyo Defendants either knew or should

have known about this significant and material performance miss before the closing of

the acquisition. But they failed to disclose the anticipated miss to GTI.” Another error

was a roughly $650,000 double counting of inventory. Pillow, OAI’s CFO, knew about

the double counting, but he chose not to disclose it to GTI.

Second, GTI discovered that the cost-saving measures projected by OAI’s

management—$2.7 million annually—were dramatically overstated. Neither OAI

management nor Deloitte & Touche analyzed the feasibility of these measures to

ascertain their true value. After the acquisition, it became apparent that most of the

savings were based on projections from measures that were not viable.

Third, OAI’s sales forecasts were not met. For example, OAI had projected a

$5.1 million increase in sales revenues for 2000, even though it had not met its prior,

lower, sales goals. An OAI sales manager had written to the OAI’s president to inform

him that the sales forecasts were “unreasonable and unattainable.” The increase in sales

failed to materialize.

Finally, GTI discovered that OAI’s management had undisclosed conflicts of

interest during the acquisition. Pillow, OAI’s CFO, was offered a one-time payment of

$100,000 by Onkyo’s management, if and only if OAI was sold to GTI. Pillow was paid

$100,000 after the acquisition. Also undisclosed was the fact that OAI’s president,

Shimojima, owned 300,000 shares of stock in Onkyo, and stood to benefit if Onkyo

improved its books and went public. Shimojima was also an active member of Onkyo’s

board of directors.
No. 11-1582 Onkyo Eur. Elec., et al. v. Global Technovations Page 5

Sixteen months after the acquisition, on December 18, 2001, GTI filed a

voluntary petition for bankruptcy under Chapter 11. The next day, OAI, now wholly

owned by GTI, did the same.

An entity’s act of filing a petition for bankruptcy operates as a “stay” of actions

that could have been filed against the entity to recover claims. 11 U.S.C.A. § 362(a).

Similarly, once a petition is filed, judgments cannot be enforced against the debtor, the

debtor’s property cannot be repossessed or foreclosed on, and liens cannot be perfected

or enforced against the debtor’s property. Ibid. Therefore, once GTI filed for

bankruptcy, Onkyo was unable to recover the $12 million obligation that GTI still owed

for OAI.

However, Onkyo petitioned the bankruptcy court to allow it to recover the $12

million. Onkyo filed proofs of claim in the bankruptcy court, requesting that the court

lift the stay. A bankruptcy court can lift the stay for cause, after notice and a hearing,

if a party requests. 11 U.S.C.A. § 362(d)(1).

GTI then filed the instant suit in the bankruptcy court.

B

1. The Bankruptcy Court Proceeding

On September 30, 2003, GTI filed a suit in bankruptcy court. GTI sought to

avoid the $12 million obligation that it incurred and recover the $13 million payment it

made to Onkyo when it purchased OAI, on the basis that the sale was a fraudulent

transfer. Second, and relatedly, GTI asked that the bankruptcy court disallow the proofs

of claim that Onkyo filed in the bankruptcy court, as they were based on the allegedly

fraudulent transfer.

Chapter 11 allows a bankruptcy trustee to avoid any transfer (excepting certain

charitable contributions) participated in by the debtor that is “voidable under applicable

law by a creditor holding an unsecured claim that is allowable under [11 U.S.C.] § 502.”

11 U.S.C. § 544(b)(2). Therefore, a trustee can avoid a transfer if a hypothetical
No. 11-1582 Onkyo Eur. Elec., et al. v. Global Technovations Page 6

1

A corporation is “deemed to be a citizen . . . of the State or foreign state where it has its principal

place of business . . . .” 28 U.S.C. § 1332(c)(1).

2

Under Florida law, as well as the law of the Fifth and Eleventh Circuit, if the debtor has received

70% or less of the value it gave in the transfer, then it has not, as a general rule, received “reasonably

equivalent” value. See Bakst v. Levenson (In re Goldberg), 229 B.R. 877, 884–85 (Bankr. S.D. Fla. 1998)

(collecting cases).

unsecured creditor of the debtor could void it under an applicable law. GTI claimed that

an unsecured creditor could void both its payment of $13 million and its obligation of

$12 million under the Florida Uniform Fraudulent Transfer Act, FLA. STAT. § 726.101

et seq. The Florida Uniform Fraudulent Transfer Act was “applicable law” under the

bankruptcy code because GTI had its principal place of business in Florida.1

The Florida Uniform Fraudulent Transfer Act provides, in relevant part:

A transfer made or obligation incurred by a debtor is fraudulent as to a

creditor whose claim arose before the transfer was made or the obligation

was incurred if the debtor made the transfer or incurred the obligation

without receiving a reasonably equivalent value in exchange for the

transfer or obligation and the debtor was insolvent at that time or the

debtor became insolvent as a result of the transfer or obligation.

FLA. STAT. § 726.106(1). To prove that the obligation incurred by GTI to Onkyo was

the result of a fraudulent transfer, then, the bankruptcy court required GTI to prove three

elements:

1) That an actual creditor existed whose claim arose before the transfer was made

and the obligation was incurred,

2) that GTI received less than reasonably equivalent value in exchange for the

transfer and obligations,2 and 

3) that GTI was insolvent at the time, or became insolvent as a result of, the

transfer and obligations.

The bankruptcy court conducted an 17-day bench trial to determine whether

Onkyo’s sale of OAI for $25 million was a fraudulent transfer. GTI presented extensive

testimony from its officers and from its expert, Van Conway. Onkyo countered with

extensive cross-examination and proffered its own expert, Jeffrey Risius. 
No. 11-1582 Onkyo Eur. Elec., et al. v. Global Technovations Page 7

3

This value was the highest of three possible values (resulting from three different methods of

valuation) offered by Conway, GTI’s expert.

On June 30, 2010, the court filed its trial opinion. The trial court made the

following key findings:

• OAI was worth $6.9 million at the time of the transfer.3

• GTI paid $21.6 million in value for OAI. This value was the sum

of the $13 million in cash GTI paid and the $8.6 million value

that the court determined to be the present discounted value of

the $12 million in promissory notes. Risius, Onkyo’s expert, put

a present discounted value on the notes of $8.6 million; Conway,

GTI’s expert, stated that the present discounted value should be

the same as the face value—$12 million. The court credited the

value of Onkyo’s expert, Risius.

• The value of the indirect benefits Onkyo argued GTI received in

the transaction was zero.

Based on these findings, the bankruptcy court determined that GTI had not

received reasonably equivalent value when it purchased OAI because the $6.9 million

in value GTI received was well under 70% of the $21.6 million given up ($13 million

in cash augmented by the $8.6 million the court determined the promissory notes were

worth). The court ordered that GTI’s obligation to pay the $12 million in promissory

notes be avoided, and ordered that Onkyo repay GTI $6.1 million—the difference

between the $13 million in cash Onkyo had received and the $6.9 million the court

determined OAI had been worth.

Onkyo appealed the judgment to the United States District Court for the Eastern

District of Michigan. The district court had jurisdiction under 28 U.S.C. § 158(a).

2. The District Court Proceeding

The appellants pursued two lines of attack : Onkyo argued first, that GTI did in

fact receive equivalent value when it purchased OAI for $25 million, and second, that

GTI failed to prove that it was rendered insolvent due to the transaction.
No. 11-1582 Onkyo Eur. Elec., et al. v. Global Technovations Page 8

To show that GTI received reasonably equivalent value when it purchased OAI,

Onkyo argued that the bankruptcy court overestimated how much value GTI paid.

Specifically, it argued that the bankruptcy court incorrectly used Onkyo’s expert’s

estimate for the face value of GTI’s $12 million in promissory notes. It argued that

using their expert’s number was impermissible because the bankruptcy court did not also

credit his testimony that the transaction did not make GTI insolvent. The appellants

argued that the “conclusion about what GTI paid out depends entirely on Risius’ [sic]

other conclusion—which the court flatly rejected—that GTI remained solvent after the

transaction.” Further, Onkyo argued that GTI failed to put forth its own evidence

regarding the value of the notes.

To show that GTI received reasonably equivalent value in the transaction, Onkyo

also argued that the bankruptcy court underestimated the amount of value GTI received.

It claimed the “indirect benefits” that GTI received, which the bankruptcy court had

decided were worth “less than zero,” were actually worth more. Onkyo also argued that

the bankruptcy court used hindsight in valuing the indirect benefits and that this made

its valuation wrong as a matter of law. Finally, Onkyo argued that the bankruptcy court

should have rejected GTI’s expert testimony about the indirect benefits’ value.

For their second line of attack, Onkyo argued that GTI failed to prove that it was

rendered insolvent as a result of purchasing OAI. Specifically, it argued that the

bankruptcy court erred when it admitted GTI’s expert’s testimony on the matter.

Though Onkyo’s brief suggests that the bankruptcy court erred when it did not credit its

expert’s opinion that GTI was not insolvent at the time it bought OAI, Onkyo only raises

this argument in regard to proving the valuation of GTI’s promissory notes. Onkyo

appears to have abandoned any independent argument that GTI failed to prove that it

was insolvent, and we deem the argument to be waived. Brown v. Konteh, 567 F.3d 191,

212 (6th Cir. 2009) (“[I]ssues not adequately developed or argued in the appellate briefs

are deemed abandoned and are thus not addressed by this court.”), cert. denied, 130 S.

Ct. 1081 (2010).
No. 11-1582 Onkyo Eur. Elec., et al. v. Global Technovations Page 9

On March 31, 2011, the district court filed an opinion affirming the bankruptcy

court’s decision. The court held that GTI had satisfied its burden of establishing both

the value of the assets received and the value of the assets transferred. Menchise v.

Clark (In re Dealers Agency Servs. Inc.), 380 B.R. at 608, 620, 622 (Bankr. M.D. Fla.

2007) (explaining the burden in a fraudulent-transfer case).

The district court held that the bankruptcy court did not err when it used the

valuation of the note provided by Onkyo’s expert, Risius. Using Risius’s value for the

notes without adopting his separate opinion that GTI was not rendered insolvent by the

transaction was not error, the district court reasoned, noting, “[t]here is no requirement

that the trier of fact must adopt an expert’s opinion in its entirety.”

The district court next held that the bankruptcy court did not err in valuing the

indirect benefits GTI received from OAI at zero. The court disagreed that the

bankruptcy court used hindsight in determining the value, determining that it assessed

the value of the indirect benefits based on the information known to OAI at the time of

acquisition. The court determined that OAI’s management knew that OAI would be

such a financial drain on GTI as of the time of closing and that any value from indirect

benefits “was undermined by the cash drain on GTI.”

Finally, the district court also disagreed with Onkyo that GTI’s expert did not

provide a “substantive analysis” of the indirect benefits. The court stated that Conway

“saw no evidence of [the indirect benefits’] value because the representations made by

OAI’s management, who had undisclosed ties to Onkyo Japan and undisclosed financial

incentives for selling OAI to GTI, lacked a factual basis.” The court determined that the

“bankruptcy court ‘had sufficient evidence to conclude, based on the totality of the

circumstances, that the benefits to the debtor were minimal . . . .’” Onkyo U.S.A. Corp.

v. Global Technovations, Inc. (In re Global Technovations, Inc.), Civil Case No. 10-

12781, 2011 WL 1297356, at *7 (E.D. Mich. Mar. 31, 2011) (quoting Pension Transfer

Corp. v. Beneficiaries to Fruehauf Trailer Corp. Ret. Plan No. 003 (In re Fruehauf

Trailer Corp.), 444 F.3d 203, 214 (3d Cir. 2006)).
No. 11-1582 Onkyo Eur. Elec., et al. v. Global Technovations Page 10

Onkyo filed this timely appeal. This court has jurisdiction to hear bankruptcy

appeals once the judgments of the bankruptcy court and the district court are final. 28

U.S.C. § 158(d)(1); Cottrell v. Schilling (In re Cottrell), 876 F.2d 540, 541 (6th Cir.

1989).

II

On appeal, Onkyo reiterates its arguments that GTI failed to establish the value

it paid and the value it received in the OAI transaction. Specifically, Onkyo makes three

primary arguments: (1) GTI failed to prove the value of its promissory notes;

(2) the bankruptcy court’s valuation of OAI’s stock was derived using hindsight; and

(3) GTI failed to prove the value of all the economic benefits it received.

A

In a bankruptcy proceeding, the bankruptcy judge is the finder of fact. Nicholson

v. Isaacman (In re Isaacman), 26 F.3d 629, 631 (6th Cir. 1994). A district court on

appeal reviews the bankruptcy court’s factual findings for clear error. It reviews the

bankruptcy court’s legal conclusions de novo. Ibid. In an appeal from the district court,

this court “consider[s] the judgment of the bankruptcy court directly, using the same

standards of review as the district court.” Ibid. (internal quotation marks omitted).

Therefore, we review the bankruptcy court’s factual findings for clear error. The

court’s determination that these facts do or do not add up to a fraudulent transfer,

however, is a question of law that we review de novo.

B

In order to resolve the parties’ conflict efficiently, we find it useful to reorder

Onkyo’s arguments from back to front, addressing the value of indirect benefits first,

then the bankruptcy court’s alleged use of hindsight, and then the value of GTI’s

promissory notes.
No. 11-1582 Onkyo Eur. Elec., et al. v. Global Technovations Page 11

We begin with Onkyo’s argument that the bankruptcy court failed to require GTI

to prove the value of the indirect benefits it received from OAI. Onkyo terms this a

“methodological failure” that should be reviewed de novo. 

Onkyo is incorrect that this issue should be reviewed de novo. Contrary to its

assertions, the bankruptcy court did analyze the value of the indirect benefits GTI

received from OAI. Their value was discussed at trial in detail. Therefore, the

bankruptcy court did not fail to consider the value of the indirect benefits, which would

have been a legal error. The bankruptcy court merely determined, after weighing the

facts, that the correct value for the benefits was zero. This is a matter of fact. The

court’s determination of the amount of value is thus reviewed for clear error. See, e.g.,

Lisle v. John Wiley & Sons, Inc. (In re Wilkinson), 196 F. App’x 337, 341

(6th Cir. 2006). 

The indirect benefits at issue, according to Onkyo, were the following:

1) Avoiding de-listing by the American Stock Exchange;

2) Access to substantial credit, leaving GTI with approximately $3

million in cash immediately after the transactions;

3) Exclusive distribution rights for Onkyo’s automotive speakers in the

Americas;

4) Access to Onkyo patents, trademarks, trade names, technologies, and

technological assistance;

5) The ability to move production of GTI oil analyzers to a state-of-theart production facility in Columbus, Indiana; and

6) Enhanced credibility in the eyes of automotive

manufacturers—potential customers for GTI’s other product lines.

The bankruptcy court stated that the only indirect benefit that was not “highly

speculative and . . . unachievable” was GTI “temporarily avoiding being de-listed from

the American Stock Exchange.” The court also determined that “the net value to GTI

of any such alleged other benefits from the acquisition of OAI was zero or less, because

any value from these other benefits was outweighed by the economic damage GTI

suffered from acquiring OAI . . . because, as the Court has found, OAI was a serious
No. 11-1582 Onkyo Eur. Elec., et al. v. Global Technovations Page 12

cash drain on GTI from the time of the acquisition forward.” This result, the court

emphasized, was not based on hindsight but was “predictable from information known

and available to OAI’s management, but not disclosed to GTI’s management, prior to

the acquisition.”

Onkyo protests on appeal that GTI failed to provide evidence of the value (or

lack of value) for the indirect benefits and that the bankruptcy court refused to consider

any value of these benefits. This is, it argues, citing a single Third Circuit case,

reversible error. It argues that the value of the indirect benefits is critical because the

direct benefits received by GTI (the stock, which was valued at $6.9 million by the

bankruptcy court) already equals 53% of the cash paid by GTI. Onkyo therefore

believes that the value of the indirect benefits could result in the total value of benefits

to GTI reaching the crucial 70% level deemed presumptively reasonable.

It is true, as Onkyo reports, that the Third Circuit has held that a plaintiff has the

burden to prove that a benefit is worth zero, and that it may fail to meet its burden if “no

calculations are offered into evidence, and there is some evidence that the benefit

conferred value.” In re Fruehauf, 444 F.3d at 214. However, Onkyo is incorrect that

the district and bankruptcy court’s decisions must be reversed if GTI did not put forth

a calculation of indirect benefits.

The first reason that Onkyo is incorrect is found within Fruehauf itself. Fruehauf

specifically established an exception to its general requirement that the plaintiff proffer

a calculation of the value of indirect befits:

This general rule yields to common sense: in those cases where a court

has sufficient evidence to conclude, based on a totality of the

circumstances, that the benefits to the debtor are minimal and certainly

not equivalent to the value of a substantial outlay of assets, the plaintiff

need not prove the precise value of the benefit because such a calculation

is unnecessary to the court’s analysis. Moreover, . . . the trier of fact’s

ultimate determination of whether the values are reasonably equivalent

is reviewed only for clear error, even if the court did not convert those

values into precise cash quantities.

Ibid. (emphasis added). 
No. 11-1582 Onkyo Eur. Elec., et al. v. Global Technovations Page 13

4

In fact, even if the promissory notes were valued at zero, as Onkyo argued for at trial, and the

purchase price for OAI was deemed to have been GTI’s $13 million cash payment, the indirect benefits

would still have to amount to $2.2 million to add to the $6.9 million in direct benefits GTI was deemed

to have received, thus totaling $9.1 million, which would be 70% of the $13 million GTI spent, to make

the transfer presumptively reasonably equivalent in value. In re Goldberg, 229 B.R. at 884–85.

Moreover, Onkyo is also incorrect because Fruehauf does not represent a

uniformly applicable rule for establishing the value of indirect benefits in fraudulenttransfer cases. Some courts, in fact, require that the party who made the

transfer—Onkyo, in this case—bear the burden of establishing the value of any supposed

indirect benefits. See, e.g., Kapila v. Clark (In re Trafford Distrib. Ctr.), 431 B.R. 263,

299 (Bankr. S.D. Fla. 2010) (holding that the party against whom the fraudulent transfer

was claimed bore the burden, once the debtor showed that it had not received direct

benefits in the transfer, of showing that the debtor received indirect benefits that would

amount to reasonably equivalent value); see also In re Wilkinson, 196 F. App’x at 342

(acknowledging without adopting that defendants may be required to prove the value of

indirect benefits). Because the bankruptcy court’s decision withstands scrutiny under

Fruehauf or the Kapila standard, we need not decide at this time this Circuit’s position

on the applicable burden of proof.

The district court decided that the exception articulated in Fruehauf applied to

the bankruptcy court’s decision. See In re Global Technovations, 2011 WL 1297356 at

*6–*7. We agree that the court’s decision falls under the exception, assuming without

deciding that the Fruehauf standard is relevant. The court determined, after hearing

extensive testimony from both parties’ witnesses, that the value of the indirect benefits

was “minimal”—in fact, the value was close to or equal to zero. Moreover, then, the

value of the indirect benefits were “certainly not equivalent” to a “substantial outlay”

of $6.02 million, the amount that would be needed to add to the $6.9 million in direct

benefits GTI was deemed to have received in the transfer in order to equal $12.92

million, or 70% of the $21.6 that GTI agreed to pay.4

 Therefore, the bankruptcy court’s

determination that the indirect benefits were insubstantial was valid without the

necessity of providing calculations. Onkyo’s argument must fail. The court’s method

was correct as a matter of law and its finding was not clear error.
No. 11-1582 Onkyo Eur. Elec., et al. v. Global Technovations Page 14

C

Onkyo’s second argument is that the bankruptcy court impermissibly relied on

hindsight in determining the value of OAI’s stock, which the court valued at

$6.9 million. Because the court relied on hindsight to determine the value of the stock,

Onkyo argues, the court’s determination that GTI did not receive equivalent value from

Onkyo must be reversed.

Onkyo points to two key areas where it claims the bankruptcy court relied on

hindsight: a multiple of earnings derived from transactions that Conway said were

similar to the OAI transaction and Conway’s calculation of OAI’s trailing-12-month

EBITDA.

Onkyo argues that the bankruptcy court’s application of hindsight is part of the

inquiry into the methodology the bankruptcy court used to determine value. Questions

of methodology are questions of law to be reviewed de novo. In re Wilkinson, 196 F.

App’x at 342; Slone v. Dirks (In re Dirks), No. 08-8031, 2009 WL 103606, at *7 (B.A.P.

6th Cir. 2009) (relying on In re Wilkinson)).

Methodology, of course, refers to how the court assessed value. The Fifth Circuit

describes as follows the methodology behind fraudulent-transfer analysis:

[T]he clearly erroneous standard [that governs the bankruptcy court’s

findings of reasonably equivalent value] is subject to modification if the

bankruptcy court invokes improper methodology in reaching its

conclusion on the issue of reasonable equivalency. Consequently, we

review de novo the methodology employed by the bankruptcy court in

assigning values to the property transferred and the consideration

received.

In the instant case, the methodology employed by the bankruptcy court

was appropriate. The bankruptcy court heard testimony, on direct and

cross-examination, from each party’s expert appraiser as to his

credentials, opinion of the proper valuation, considerations,

assumptions, and sources of information.

Texas Truck Ins. Agency, Inc. v. Cure (Matter of Dunham), 110 F.3d 286, 289 n.11

(5th Cir. 1997) (emphasis added). 
No. 11-1582 Onkyo Eur. Elec., et al. v. Global Technovations Page 15

We agree with the Fifth Circuit’s description of methodology. As a result, we

note that the bankruptcy court in this case followed an acceptable methodology. The

court conducted a lengthy trial and heard days of testimony from each expert witness.

The experts provided several methods for valuing OAI’s stock and provided their

reasons for each method. They were cross-examined regarding these methods and

calculations. The court then credited the portions of expert testimony it believed to be

correct.

Furthermore, GTI’s expert, Conway, was explicitly cross-examined on the

potential for hindsight in his calculations of the multiple and his calculations of OAI’s

trailing-12-month EBITDA. Conway explicitly stated that he was not relying on

hindsight in his projections:

Q: [Y]ou agree that actual results for [OAI] after 2000 have no support

for your projections, is that true?

A: After August 31st [the day of the transfer of OAI’s stock to GTI].

Q: Right.

. . . 

A: . . . Actual results are not to be used unless again you would have

predicted those [results] based on information you would have known.

So you have to put yourself back on August 31st of 2000 what you’ve

[sic] known or should have known.

Similarly, there was another discussion of hindsight later in the crossexamination, with regard to Conway’s methodology for selecting a multiple:

Q: Let’s turn to your—the comparable transactions method now. Is it

appropriate in using the comparable transaction method to use

transactions that were announced after the valuation date here, August

31, 2000?

A: It would be—it would be okay if they’re within—you know, when

you’re looking for comparable transactions you’re not going to find

transactions on August 31st, so you can use them within a reasonable

range of time. Otherwise you’d never be able to use this method.

. . . You’re not going to be able to go into the data bases and find

transactions on August 31st. So you—you have to accept that within a

couple of months, maybe even longer, recognizing that the farther out
No. 11-1582 Onkyo Eur. Elec., et al. v. Global Technovations Page 16

you go, there may be a risk of—of the value being different, but

hopefully not materially different. . . . 

Q: There’s no way that the parties would know at the time of the

transaction on August 31st, 2000 of a private transaction that had not

been announced yet as of that date, right?

A: That’s true.

Q: And so in that sense you’re applying hindsight by using transactions

that were announced after August 31, 2000, right?

A: I don’t think so. Because in this situation yes, you wouldn’t have

known about a November transaction. But whenever anybody looks at

the issue of value[, like] the Internal Revenue [Service], they come in to

take a look and they can look at transactions within a reasonable time

frame.

Yes, you wouldn’t have known at that time. But as part of the

basis if one was to dispute value, I don’t think it’s unreasonable to pick

transactions within the approximate time . . . Because the valuation

disputes like this one are done after the fact. . . . We do have the benefit

of hindsight here, but we’re using transactions within the relevant time

frame.

. . . 

Q: [D]o you generally agree that it’s generally better to use private

transactions closer to the valuation date?

. . . 

A: You’d love them on the same date, so the answer is yes.

The record demonstrates that the bankruptcy court was fully aware of Conway’s

qualifications, the methods he used to determine value, and of the potential problems

with using hindsight to determine OAI’s value. There is no indication that the
No. 11-1582 Onkyo Eur. Elec., et al. v. Global Technovations Page 17

5

Moreover, there is no indication that using comparable transactions from times preceding and

postdating an allegedly fraudulent transaction equates to an impermissible use of hindsight. The

“comparable transactions” method Conway used to determine OAI’s value is a standard method employed

in bankruptcy cases, whether in evaluating solvency or valuing assets. The “comparable transactions”

method “examines recent transactions where [similar assets] have been bought and sold on the market .

. . [and] is designed to yield the price the [asset] would carry in the marketplace based on similar

transactions.” Lids Corp. v. Marathon Inv. Partners, L.P. (In re Lids Corp.), 281 B.R. 535, 545 (Bankr.

D. Del. 2002). The methodology centers on transactions that are similar in nature, and there is no case law

to suggest that a similar transaction that occurred after the transaction cannot be examined because to do

so would draw on hindsight. See, e.g., Chartwell Litig. Trust v. Addus Healthcare, Inc. (In re Med

Diversified, Inc.), 346 B.R. 621, 642 (Bankr. E.D.N.Y. 2006) (describing the comparable-transactions

methodology).

bankruptcy court’s methodology was flawed.5 As a result, we cannot agree with Onkyo

that the bankruptcy court used hindsight as part of its methodology.

Thus, we are left with the question of whether the bankruptcy court settled on the

best value for the OAI stock, and we are reluctant to second-guess the court’s factual

determination. Circuits generally apply either a clear-error or, if not, very deferential

standard of review to a bankruptcy court’s determination of reasonably equivalent value,

considering the question to be one of fact. The First, Second, Fourth, Fifth, and Eighth

Circuits apply a clear-error standard. See Consove v. Cohen (In re Roco Corp.), 701

F.2d 978, 982 (1st Cir. 1983); Klein v. Tabatchnick, 610 F.2d 1043, 1047 (2d Cir. 1979)

(“Fairness of consideration is generally a question of fact.”); Morrison v. Champion

Credit Corp. (In re Barefoot), 952 F.2d 795, 800 (4th Cir. 1991); Matter of Dunham,

110 F.3d at 289; Jacoway v. McIlroy (In re Ozark Rest. Equip. Co.), 850 F.2d 342, 344

(8th Cir. 1988). The Seventh Circuit, in contrast, gives “great deference” to a

bankruptcy court’s “findings on the fact-intensive issue of whether the debtor received

reasonably equivalent value,” but does not apply a clear-error standard. Barber v.

Golden Seed Co., Inc., 129 F.3d 382, 389 (7th Cir. 1997). The Eleventh and Tenth

Circuits, also similarly, have held that “whether fair consideration has been given is

‘largely a question of fact, as to which considerable latitude must be allowed to the trier

of the facts.’” Nordberg v. Arab Banking Corp. (In re Chase & Sanborn Corp.),

904 F.2d 588, 593 (11th Cir. 1990); see also Clark v. Sec. Pac. Bus. Credit, Inc. (In re

Wes Dor, Inc.), 996 F.2d 237, 242 (10th Cir. 1993) (same).

Only the Ninth Circuit has held that the determination of reasonably equivalent

value is subject to de novo review. See Maddox v. Robertson (In re Prejean), 994 F.2d
No. 11-1582 Onkyo Eur. Elec., et al. v. Global Technovations Page 18

706, 708 (9th Cir. 1993). However, the Ninth Circuit Bankruptcy Panel recently ignored

this precedent, assuming that the Circuit would now decide the issue differently.

Ehrenberg v. Tenzer (In re Heartbeat of the City, N.W., Inc.), Bankruptcy No. LA 99-

45650-EC, 2006 WL 6810939, at *5 (B.A.P. 9th Cir. 2006) (noting that “[e]ight other

circuits, and the leading treatise, consider the issue a question of fact” and presuming

that “under the overwhelming weight of authority,” the Circuit would consider

“reasonably equivalent value of a transfer to be a question of fact subject to review under

the clearly erroneous standard”).

The Sixth Circuit has not squarely held that it applies the clear-error standard to

a bankruptcy court’s determination of reasonably equivalent value, but it has held in

unpublished cases that “whether [a debtor] received reasonably equivalent value [in a

fraudulent-transfer case] is a question of fact.” In re Wilkinson, 196 F. App’x at 341

(citing In re Humble, 19 F. App’x 198, 200 (6th Cir. 2001) (unpublished) (stating that

reasonably equivalent value should be “analy[zed] based upon the facts and

circumstances of each particular case”)). We take this opportunity to express our

agreement with the majority of Circuits and adopt the clear-error standard of review.

The bankruptcy court’s adoption of Conway’s value based on the comparabletransactions method was not clearly erroneous. Onkyo’s argument must fail.

D

Onkyo’s final argument is that GTI failed to prove the value of its promissory

notes. Onkyo states that “[i]t is undisputed that GTI failed to offer evidence of [the]

actual value” of the notes. Onkyo argues that the bankruptcy court “plugged the hole”

with its expert’s value of $8.6 million. The “fundamental problem” with the court using

Risius’s value, though, according to Onkyo, is that the court rejected Risius’s opinion

that GTI was not insolvent at the time of or as a result of the transaction. Onkyo argues

that the court’s finding that the notes were worth $8.6 million cannot be squared with the

court’s finding that GTI was rendered insolvent “as an immediate result of the OAI

acquisition.” Onkyo argues that the bankruptcy court made a legal error, reviewable

under a de novo standard, and that its judgment must be reversed.
No. 11-1582 Onkyo Eur. Elec., et al. v. Global Technovations Page 19

Onkyo’s argument is flawed. First, contrary to Onkyo’s claim, GTI’s expert did

in fact place a value on the notes. GTI’s expert stated at trial that the notes were worth

$12 million in present value, an amount equal to their face value. At trial, Conway and

Onkyo’s counsel had the following exchange:

Q: [The] final [purchase] price was $13,000,000 in cash and $12,000,000

in notes, is that right?

A: Yes.

. . . 

Q: To determine the value of those notes it is necessary to discount the

cash due in the future to a present value at a market insurance rate, is that

right?

A: You mean if someone was going to purchase those notes for fair

market value?

Q: Yeah . . . .

A: I think that’s fair.

Q: Have you calculated the market interest on unsecured notes issued by

GTI as of the transaction date?

A: I did not.

Q: And without calculating that rate it is not possible to determine the

value of the notes given by GTI as part of the consideration for the [OAI]

stock, is that true?

A: Well, that’s—that’s not true. Because the value of the notes is the

face value of the notes . . . . They’re of for [sic] short term duration.

There’s an expectation by the parties they can pay them, so why would

one discount them? Why would one discount those three year notes?

There may be a de minimis discount for the interest rate, but they’re three

year notes agreed to by the parties are [sic] to be paid.

(emphasis added). As evidenced by the record, Conway clearly argued that the present

value of the notes was $12 million, and provided several reasons for his conclusion.

Therefore, Onkyo is wrong that GTI put forth no evidence on the present value of the

notes. 
No. 11-1582 Onkyo Eur. Elec., et al. v. Global Technovations Page 20

The next question is whether the bankruptcy court made a legal error by crediting

Risius’s value for the notes—$8.6 million—without also crediting his opinion that GTI

was not rendered insolvent by the purchase of OAI. Onkyo has again failed to provide

any authority stating that, as a matter of law, a bankruptcy court cannot credit certain

aspects of expert testimony without crediting all of it, nor that promissory notes must be

valued at zero in any fraudulent-transfer case in which the promisor is rendered insolvent

at the time it acquires the asset at issue.

Because Onkyo has failed to show that it was legal error for the bankruptcy court

to adopt only the value portion of Risius’s testimony, the question again becomes one

of fact. We must determine then whether the bankruptcy court committed clear error in

finding that the notes were worth $8.6 million, in light of the fact that it also found that

GTI was rendered insolvent as an immediate result of the OAI acquisition. This was not

clear error. The bankruptcy court did not find that GTI was insolvent when it negotiated

and executed the notes. See Allard v. Flamingo Hilton (In re Chomakos), 69 F.3d 769,

770–71 (6th Cir. 1995) (stating that the “critical time” for determining whether

reasonable equivalent value was given is when “the transfer is made”). It found that GTI

was rendered insolvent as a result of the acquisition of OAI. The court determined that

by adding OAI to its books, GTI became immediately insolvent. But it did not add OAI

to the books until after it acquired OAI, and it did not acquire OAI until it paid for

OAI—i.e., paid the cash and notes. The district court did not clearly err in finding that

the notes were worth a significant percent of their face value when paid even though GTI

was rendered insolvent soon after. Moreover, even if the notes were valued at zero, the

$6.9 million in value GTI received for OAI was not 70% of the $13 million in cash it

paid—therefore, the transfer would still fail to be presumptively reasonable. In re

Goldberg, 229 B.R. at 884–85. Onkyo’s last argument must also fail.

III

The panel has considered whether the bankruptcy court had jurisdiction to

require Onkyo to pay GTI $6.1 million. After supplemental briefing and argument from

the parties, we determine that it did. 
No. 11-1582 Onkyo Eur. Elec., et al. v. Global Technovations Page 21

The question arose in response to the Supreme Court’s recent holdings in Stern

v. Marshall, 131 S. Ct. 2594 (2011). Stern dealt with the estate of Vickie Lynn

Marshall. Stern, 131 S. Ct. at 2595. Marshall declared bankruptcy and Pierce Marshall,

the son of Vickie’s late husband, filed a proof of claim against her bankruptcy estate.

He claimed that Vickie had defamed him, and requested damages from the bankrupt

estate. Vickie responded to the proof of claim by arguing that what she had stated about

Pierce had been true. Id. at 2601. She also filed an unrelated counterclaim against

Pierce, claiming that Pierce had tortiously interfered with the gift she should have

received from her husband’s estate when he died. Ibid.

The Supreme Court determined that the bankruptcy court violated the

Constitution when it decided the counterclaim for tortious interference. Ibid. The Court

determined that, though the bankruptcy court was within the jurisdiction conferred by

the bankruptcy statute, 28 U.S.C. § 157(b)(2)(C), hearing and determining the claim

violated the Constitution because, “in general, Congress may not ‘withdraw from

[Article III] judicial cognizance any matter which, from its nature, is the subject of a suit

at the common law, or in equity, or admiralty.’” Id. at 2609 (quoting Murray’s Lessee

v. Hoboken Land & Improvement Co., 59 U.S. 272, 284 (1856)).

The Court noted that Vickie’s counterclaim was the type of claim that the Court

had previously held could not be withdrawn from an Article III court. In Northern

Pipeline Construction Co. v. Marathon Pipe Line Co., 458 U.S. 50, 53 (1982), for

example, the Court held that a bankruptcy court could not adjudicate a “state-law

contract claim against an entity that was not otherwise part of the bankruptcy

proceedings.” Stern, 131 S. Ct. at 2609–10 (internal quotation marks removed).

Additionally, an entity that had not submitted a claim against a bankruptcy estate was

entitled to a jury trial when the estate sued it in bankruptcy to recover an allegedly

fraudulent transfer, and the bankruptcy court did not use a jury as a factfinder.

Granfinanciera, S.A. v. Nordberg, 492 U.S. 33, 36, 50 (1989). Stern’s limited holding

stated the following: When a claim is “a state law action independent of the federal

bankruptcy law and not necessarily resolvable by a ruling on the creditor’s proof of
No. 11-1582 Onkyo Eur. Elec., et al. v. Global Technovations Page 22

claim in bankruptcy,” the bankruptcy court cannot enter final judgment. Id. at 2611. In

those cases, the bankruptcy court may only enter proposed findings of fact and

conclusions of law. Ibid.

In our case, Onkyo filed a proof of claim against GTI’s bankruptcy estate. Thus,

the case is fundamentally unlike Granfinanciera, where the bankruptcy estate reached

out to file a fraudulent-transfer claim against a party who had filed no claim against the

estate. Onkyo brought itself voluntarily into the bankruptcy court. The state-law claim

in this case, the Florida cause of action for fraudulent transfer, was GTI’s defense against

Onkyo’s proof of claim. It is crystal clear that the bankruptcy court had constitutional

jurisdiction under Stern to adjudicate whether the sale of GTI was a fraudulent transfer,

because “it was not possible . . . to rule on [Onkyo’s] proof of claim without first

resolving” the fraudulent-transfer issue. Stern, 131 S. Ct. at 2616 (citing Katchen v.

Landy, 382 U.S. 323, 329–30, 332–33, and n.9, 334 (1966)).

What is not crystal clear is whether the bankruptcy court had jurisdiction under

Stern to make the additional finding that Onkyo was a “good-faith transferee” and a

“good-faith obligee” under Florida law. Florida fraudulent-transfer law allows a goodfaith transferee a credit—specifically, a “reduction in the amount of the liability on the

judgment”—in the amount of the value the transferee gave to the debtor for the transfer

or obligation. FLA.STAT.726.109(4)(c). Thus, in many fraudulent-transfer cases, it will

be necessary for the bankruptcy court to make the good-faith-transferee finding in order

to determine exactly how much of the debtor’s claim to disallow. That finding was not,

strictly speaking, necessary here, because of the comparative value of OAI and the

cash exchanged. (The bankruptcy court found that OAI was only worth

$6.9 million—considerably less than the $13 million in cash that Onkyo had already

received. Thus, the court necessarily disallowed the full $12 million in promissory notes

that Onkyo sought from GTI in its proof of claim.) However, the bankruptcy court could

not have known at the outset whether Onkyo’s proof of claim would be disallowed in its

entirety—such a determination depended on the amount the court determined OAI was

worth. We do not believe that Stern requires a court to determine, in advance, which
No. 11-1582 Onkyo Eur. Elec., et al. v. Global Technovations Page 23

facts will ultimately prove strictly necessary to resolve a creditor’s proof of claim.

Therefore, we hold that the bankruptcy court had authority to make the good-faithtransferee finding in the course of resolving GTI’s fraudulent-transfer defense.

Stern cited with approval the Court’s prior precedent holding that a bankruptcy

court may award affirmative relief to a debtor after its creditor’s proof of claim has been

resolved and where “nothing remains for adjudication.” 131 S. Ct. at 2616 (citing

Katchen, 382 U.S. at 334). In this case, once the bankruptcy court determined that the

sale of OAI had been a fraudulent transfer and Onkyo was a good-faith transferee,

awarding GTI relief was a simple matter of subtraction. The bankruptcy court credited

Onkyo the $6.9 million it determined OAI was worth at the time of the transfer, and then

ordered Onkyo to pay back the remainder—$6.1 million—of the $13 million it had

received from GTI. We hold that the court had jurisdiction under Stern to enter this

judgment.

IV

For the foregoing reasons, the judgment of the district court is AFFIRMED.