1 By order of the Bank

ruptcy Appe llate Panel, the prec edential effec t of t his de c isi on is l im ite d to thec as e an d p ar tie s p ur su an t to 6th C i r
. B A P L B R 8 0 1 3 -1 (b). S

ee a l s o 6 th C i r
. B

A P L B R 8 0 1 0 -1 (c).
F ile Nam e: 11b0005n.06
BA NK RU P TC Y A P P ELLA TE P AN EL OF THE SI XT H C IR CU IT
I nr e : ) Triton Enterpr ises, I nc., ) ) Debtor. )

_____________________________________ ) ) Robin Broc k, )

Appellant-Tr

ustee, )

) No. 10-8049 v . ) ) Rand y Ha mmo nd s; C lif

fo rd Ha mmo nd s, ) De fe nd ants , ) ) Mark Da vid Craft; Cotton C oal Company , I nc.; ) Randy Cook; Mike Cook; KWVA Energ y , I nc.; ) M & R T r u c k i n g , In c . ; R a m T r

u c k i n g C o mp an y, ) De fe nd ants -A

pp e lle e s. )

__________________________________________

Appea l from the United States B ankruptc y Court for the Easter

n District of Kentucky

(Pikeville) Case No. 05-71583; Adv. P. No. 07-7014 Argued : May

3, 2011
Dec ided and F iled: J uly

7, 2011
B e fo re : F UL TO N, HA RRI S, a nd RH OD ES, B ank

ru ptc y Ap pe llate Pane l Judg e s.2 ____________________ CO UN SEL
ARG UED: J o hn P. Brice I I , WYATT, TARRANT & COMBS, L L P, L exington, Kentucky , for Appellant. L aura

Day Del C o t t o , DelC OTTO LAW GROUP P L L C, L exington, Kentucky , for A p p e ll ees. O N B RI E F: J ohn P. Brice I I , WYATT, TARRANT & COMBS, L L P, L exington, Kentucky , C. Randall Tacke tt, W hitesburg , Kentucky , for Appe llant. L aura Day DelCotto, Ch

r is tina E. Hay ne, De lCOTTO L AW GROUP P L L C, L exington, Kentucky , for Appe llees.

____________________ OP IN ION

____________________ STEVEN RHODES, B ankruptc y Appellate Pane l J udg e. This appe al ar i ses from a n
a d v e r s ar y p r o c e e d in g b r o u g h t b y th e tr u s te e s e e k in g to s e t a s id e a ll e g e d f r a u d u le n t tr an s fer s, and

s e e k i n g a j u d g m e n tf

o r b r e a c h o f

f i d u c i ar y d u t y an d a i d i n g an d

a b e t t i n g b r e a c h o f

f i d u c i ar y d u t y. The ba nkruptcy court e ntere d finding s of fa ct and c onclusions of law on May 13, 2010, holding that the trustee ha d not met her burde n of proof on the issue of fr aud or a ny other a lleg ed misdeed. F or the re a so ns that f

oll ow , th e Pane l A F F I RMS.

I. ISS UES ON APP EAL

The trustee’s brief identified seventeen issues on appea l, but her brief did not actually

argue
a ll o f t he se iss ue s. At or a l ar g ume nt the Pane l re qu e ste d the tr us te e ’s a tto rn e y

to i de nti fy

and a dd re ss the trustee ’s s trong est arguments. I n response , counsel primar ily addre ssed cha lleng es to the bankruptc y

court’s f actua l finding s leadingto the judgme nt for def endants. Spec ifically , the trustee

c ha lle ng e s th e ba

nk ru ptc y c ourt ’s fa c tua l fin din g s re la tin g to its co nc lus ion that the de fe nd ants did

no t c on tr ol the de bto r c or po ratio n and did no t c a

us e its pr inc ipa l to us ur

p a c or porat e oppo rt

un ity

or div e rt the pr of its to t he de fe nd ants

.3 II. JU RI SDI CT ION AN D ST AN DA RD OF RE VI EW

Th e B ank ru ptc y Ap pe llate Pane l of the Sixth Cir c uit ha s jur isd ic tio n to de c ide thi s a pp e a l. The United States District Court for the Easter

n District of Kentucky

has authorized appe als to the BA P. A final order

of a ba nkruptcy court may be appea led by rig ht unde r 28 U.S.C. §158(a )(1)

. For purposes of appea l, an order is final i f i t “‘e nds the l itigation on the merits and lea ves nothing for the court to do but execute the judg ment.’” Midland Asphalt Corp. v. United States , 489 U.S. 794, 798, 109 S. Ct . 1494, 1497 (1989) ( citations omitt ed).

The ba nkruptcy court’s f indings of f

act a re r eviewe d under the clea rly err oneous standar d, and it s conclusions of law are re viewed de novo. Behlke v. Eisen ( In re Be hlke ), 358 F .3d 429, 433 (6th Cir. 2004). Under t h e clea rly err oneous standar d, the Panel must g ive def ere nce to the b an k ru p t cy

court a s the finder

of fa ct. Sicherman v . Diamoncut, Inc . ( I n r e S o l B e r g m a n E s t a te Jewe lers, Inc .), 225 B.R. 896, 904 (B AP 6th Cir. 1998). The bankruptcy court is in the best position to assess the testimony

and cr edibility

of witnesses. Kay e v
. Ag

rip oo l, S RL ( In re Murray, Inc .), 392 B.R. 288, 297 (B AP 6th Cir. 2008)

. Se e als o Ramsey v. United M

ine W orkers of Am. , 481 F.2d 742, 747 (6th Cir. 1973) (“ Thus, howeve r we might indi vidually view the evidenc e if we were the triers of fa ct, it is clear that we ar e re quired to g ive g reat weig ht to the finding s of t he trial court whic h had the opportunity

to see the w itnesses, to weig h their evide nce as it was prese nted, to view the demea nor of the pe rsons who testified in cour t, and to deter

mine all issues of credibility .”) ( citing F e d. R. C iv. P. 52 (a ))

. Th e Sup re me Court ha s e xpla ine d the c le arl y e rr on e ou s sta nd ard a s f oll ow s:

I f th e d i s trict court’ s acc ount of the evide nce is plausible in lig ht of the re c or d v ie we d in its e nti re ty , the c ourt of a pp e a ls may no t r e ve rs e it e ve n thou g h co nv inc e d tha t ha d it be e n s itt inga s th e tr ie r o f f a c t, i t would have w eig hed the e vidence differ ently . Where ther e ar e two permissible views of the evidenc e, the f actf inder’s c hoice between the m c ann ot b e c le arl y

e rr on e ou s. Thurman v

. Y

ellow Fre ight Sy

s., Inc ., 90 F.3d 1160, 1165- 66 (6th Cir. 1996) (quoting Anderson v. City of B esse me r Ci ty , 470 U.S. 564, 573-75, 105 S. Ct. 1504, 1511-12 (1985)).4 III . F AC TS

I n this appeal, the trustee challeng es many of the bankruptc y court’s f actua l findings. The following is a summary

of the fa cts that are either not in dispute or that the bankr uptcy court found

and wh ic h th e Pane l do e s n ot f ind to b e c le arl y

e rr on e ou s.
Randy Hammonds, who pre viously had some experience in ha uling coal and clea

ring sites for “ house seats,” dec ided to try his hand at mining a

g ob pile. On J anuar

y 8, 2003, Hammonds

cause d his corporation, Triton Enterprises, to ente r into a written c oal lease with H erma n Bates for the purp os e of

min ingthe “ Th or

ton Go b Pile .” Th e Tr ito n le a se wa s f or a on e y e ar t e rm , r e ne wa

ble up on a g re e me nt o f b oth

pa rt ie s.

I n ear ly 2003, Hammonds approa ched Chuc k Cornett about ass i s ting him in the mining endea vor. Cornett wa s a license d fore man and had experienc e as a surfa ce mine boss. Corne tt then approa ched B illy

L og an, also a

n experience d mine boss, about the dea l. Hammonds, Cornett and L og an ente red into a pr ofit sharing ag ree ment on Fe bruar y 17, 2003. The profit sharingag ree ment did no t e xpla in h owc on tr ibutio ns , wh eth er cap ita l or sw e a t e qu ity , w ou ld b e ma de , b ut s imp ly pr ov ide d th a t pr of

its wo uld be sp lit e qu a lly a mon g the pa

rt ie s. At so me po int , th e pa

rt ie s c a me to
an understanding that the permits would need to be held by a cor porate entity . Hammonds indicated that his company , “Triton,” c ould be used a s the corpor ate e ntity . Cornett and L og an ag ree d, as long

a s th e y ha d th e same de a l. Th e pa rt ie s did no t e xec ute any

fu rt he r a g re e me nt o r f

or ma lly su bs tit ute Tr ito n f or Rand y Ha mmo nd s.

Th e pa rt ie s b e g an th e min ingop e ra tio n, wi th a ll the pa

rt ies con tr ib utingso me c a pit a l, equip me n t an d ti me . T h e le a s e w it h B a te s e xp ir e d an d w a s n o t r e n e w e d , a lt h o u g h th e parties

c on tin ue d to wo rk

on the g ob pil e fo r q

uit e so me tim e the re a ft e r. At so me po in t, Hammo nd s, Cornett and L og an had some sort of a disag ree ment. Hammonds testified that he believe d that the oth e r t wo we re tr

y ing to squ e e ze him ou t, wh ile Cor ne tt a nd L og an te sti fi e d th a t it

wa s H a mmo nd s,
a lon g wi th M ike & Rand

y Coo k, that sq

ue e zed the m out.At trial, the cour t utili zed a proc edure under w hich the propone nt of ea ch witness submitted 1 an af fidavit of the witness in lieu of direc t testimony , and then the oppos ing party cross e x amined 5 Eventually , Hammonds consulted an attorney . Hammonds testified that he be lieved that B a te s w ou ld n ot r e ne w the le a se wi th H a mmo nd s or Tr ito n due to a dis pu te ov e r ro y a lty a mou nts

. Ha mmo nd s fu

rt he r te sti fi e d that the a tto rn e y e nc oura g e d him to fi nd so me wa y to wo rk ou t th e le a se si t u at i o n . On Octobe r 12, 2004, instead of rene wing the lease with Triton, Bates executed a new le a se wi th C lif

fo rd Ha mmo nd s, the fathe r o f R and y Ha mmo nd s.

On Oc tob e r 1 3, 20 04 , T ri ton e nte re d int o a purc ha se a g re e me nt fo r t he sa le of a ll the pe rm its and mining opera t i o n s to a newly formed e ntity

called Cotton Coal. The purc hase pr ice wa s $40,000. Cotton C oal oper ated the mine fo r m o re than three months and used Triton’s bank

acc ounts while the transfe r of the pe rmits was in proce ss. Cott on Coal mad e a p ro fi t during that time. The final bill of sale w as date d Fe bruar y 11, 2005.

Cornett and L og an sued H ammonds and Triton in state cour t. Trito n fi led bankr

uptcy on October 15, 2005. Cornett and L og an fi l ed proofs of c laim asserting an unsec ured de bt of $933,333.33 ea ch . The trustee filed this adver sary proce eding seekingto set aside the tra nsfer of Triton’s assets to Cotton Coal. The a dversa ry proce eding also soug ht monetary rec overy from Mike and Randy

Cook, the two individuals that the trustee asser ted controlled Cotton Coal an d p a r ti c ip a te d in a c on sp ir a c y

to d e fr a ud Tr ito n’ s c re dit or s.

The a d v e r s ar

y c o mp la in t c o n ta in e d th e f o ll o w in g c o u n ts : Co u n t I

- f r a u d u le n t tr an sfer

of mining permit pursuant to § 548; Count I I - rec overy from the Cook def

endants pursua

nt to § 550; Count I I I- aiding and abe tting bre ach of fiduciar y duty pursuant to Kentuc ky

state law; a

nd Count I V - fr audulent tra

nsfer of pay ments to the Cooks pursuant to § 548.

After trial, the bankr

uptcy court c oncluded that the trustee ha d not proven he r ca se and r uled for the defe ndants, adopting and entering the defendants’ proposed findings of fact and conclusions of law. 1the wit ness. The P anel recog nizes that the conduct of a trial is left t o the t rial court’s discretion and

further rec og nizes that this proce dure can save va luable trial time. Ne verthe less, the Panel ca utions a g a ins t us ingthi s pro c e dure wh e n the re are sig nif ic ant fa c tua l issu e s. I n s uc h c a se s, the c re dib ili ty of the witnes s es i s cruc ial to the court’s f indings a nd to the resolution of the c ase. The proce dure used by the bankruptcy court deprived it of the va luable opportunity to evaluate the demea

nor and cre dibilit y

of the witnesse s as they testify in their o wn words in re sponse to open-e nded dire ct examination q u es t i o n s . I nstead, the pr ocedur e leaves the c ourt with the substantially reduc ed opportunity to e valuate the demea nor and cre dibilit y of the witnesses based simply on their y es and no answe rs to leadingquestions on cross examination. 6 IV . D ISC USS ION

A. The Cook Defendan ts’ Contr ol Over Triton, Ham m onds and Cotton Coal

The resolution of sever al counts in the complaint turned on whe ther the truste e prove d that the Coo k de fe nd a

nts , Mike and Rand

y Coo k an d th e ir

c or po ra tio ns , c on tr oll e d T ri ton

En te rp ri se s, Rand y Ha mmo nd s, Cotton

Coa l and its pr inc ipa l, M ark

Cr a ft , a nd that th e y us e d th os e e nti tie s to usurp the mining oppor

tunity from Triton to the detriment of its c reditors. The trustee asser ts that fo l l o wi n g t h e m o n ey

t h ro u gh t o t h e C o o k

d ef en d an t s p ro v es t h ei r w ro n gd o i n g.

The ba nkruptcy court he ld:

The Tr ustee ha s not proven any fac ts that establish that Cotton Coal or Craf

t was a “c o n duit” or a “ strawman” for the Cook Def endants or that the Cook Defe ndants r ece ived any benef it from the Transf er. The Court finds the Tr

ustee’s a rg uments weak that the Cooks “ma n i p ulated” or

“contr olled” the many

persons that the Tr

ustee alleg es . . . . The T ru s t ee ’s “theor y ” and innue ndo that the Cooks we re Cotton

Coa l, o r t

hat th ey se t up and

c on tr oll e d Co tto n Co a l, complet e ly

la c k s a n y

e v id e n ti a r y o r le g a l s u p p o rt. N o e v id e n c e of [si c] leg al authority

for “ pierc ing” Cotton C oal’s cor porate veil was prese nted. (Dkt. 169 at 21.)7

Th e ba nk ru ptc y c ourt su mma ri zed its fa c tua l f

ind ings regar din g the Coo k d e fe nd a nts ’ involvement at par ag raphs 44- 53 of its findings of fac t and conclusions of law. (Dkt. 169 at 14-17.) The trustee challeng es many of these finding s. One of the trustee’ s main challeng es is to para g raph 51 , w hic h s ta te s:

There is no proof in the re cord to indi ca t e that the challeng ed pay ment s fr o m Triton’s acc ount were for a ny thing other

than compensation for the haulingservice s or re ntal equipment provided on the T h o rt on Gob Pile job. Pay ments from Cotton Coal are ir re le va nt t o th e Pla int if

f c la ims

. (Dkt. 169 at. 16.)

Th e tr us te e c ha lle ng e s b oth

pa rt s o f t his fa c tua l f

ind ing

. Th e fi rst pa

rt is i n r e g ard s to pa y me nts fr om T ri ton ’s a c c ount. Th e tr us te e argue s th a t th e ba

nk ru ptc y c ourt ’s fa c tua l fi nd ingis clea rly err oneous bec ause she did present e vidence that the Cook defe ndants rec eived $38,772.57 that was una ccounte d for by the bookkee per’ s rec ords. The trustee argues that these pay ments were a dire ct siphoning of

profits b y t he Cook defe ndants. The trustee argues that this is “conclusive pr oo f t hat th e Coo k d e fe nd ants so c on tr oll e d b oth Tr it on and Co tto n th a t” the y c ou ld d ir e c t th os e
e nti tie s to pa

y the m w hat w ou ld h a ve oth e rw ise be e n p ro fi t.

Ho we ve r, the tr

us te e ’s e vid e nce r egardingpa y me nts is n ot c on c lus ive pr oo f. I t is me re ly circ umstantial evidence from which the trustee a rg ued that the Cook def

endants c ontro l l ed other parties. The bankrup t cy co u rt d eclined to make that infere nce. Arevie w of the tria l testimony

re ve a ls that a ll of the wi tne sse s de sc ri be d a bu sin e ss e nv ir on me nt wh e re un wr itt e n c on tr a c ts, loa ns , and “he lping out” family and friends wer e commonplace practice s. The ba nkruptcy court’s f actua l finding at parag raph 50 rec og nized the t y pe of environment in which thi s business transac tion took place . Moreove r, the ba

nkruptcy court found “cr edible the testimony from the Cooks a nd Craft that the Cooks had no owner ship or control of Cotton Coal.” (Dkt. 169, ¶ 52 at 16).8

The trustee also asser

ts that the bankruptcy

court’s finding that “Pay

ments from Cotton Coal

are irrele vant to the Plaintiff claims” is clea rly err oneou s and mus t be re verse d. I n her br ief, the trustee a dmits t hat “[a] Tr ial Court ma y weig h the proof of these pay ments ag ainst all of the other evi d en ce an d d ecide it is l acking , but it mus t at least consider the evidenc e, not dismiss i t as ir re le va nt. ” Th e tr

us te e a lso c ite s F RE 4 01 , g ov e rn ing the re le va nc y of e vid e nc e . I t is imp or tant t o note, howeve r, that the ba nkruptcy court did not exclude the trustee ’s evidenc e on the ba s is of irrelevance . I n fac t, the evidenc e wa s admitted, and at the be g inning of the finding s of fa ct and conclusions o f law, the ba nkruptcy court stated that it considered a ll of the evidenc e pre sented. There fore , it appear s that the bankruptc y court did not use the term “irre levant” to indicate that it was not considering the evidenc e, but rather, to indicate that it found the e vidence unpersua sive. I ndeed, the bankr uptcy court’s f ac t u al fi ndings in pa

rag raph 49- 51 show that it considere d the evidenc e reg ardingthe service s that the Cooks provided and the pa y ments that the Cooks rece ived, and f ound t h a tb o t h w e r e t yp i c a l f

o r b u s i n e s s i nt h a tc o u n t y.

The standa

rd of r eview f

or fa ctual finding s is c lear ly err oneous, and the deter mination of the

cre dibilit y

of witnesses is left to the sound discr et i o n of the trial c ourt. The ba nkruptcy court’s fac tua l f in d in g s an d

c o n c lu s io n s o f

la w in c lu d e c it a ti o n s to th e r e c o r d th a t s u p p o rt t h e c o u rt’ s finding s and conc lusions. T h e b an k ruptcy court did not abuse its discre tion in determining

cre dibilit y . Clearl y , none of the witnesses we re sophisticate d. The c ourt’s desc riptions of the

manner in which they

conducte d business is supported b y t h e ev i dence of the pa rties’ leve ls of education. I n holding that there was “no proof” that the cha lleng ed pay ments were for a

ny thing other than hauling s er v i ce s or equipment re ntal, the bankr uptcy court wa s simply

reje cting the trustee’ s theory that the unac counted pa y ments we re fo r som ething else. Instead, the ba nkruptcy court
acc epted the witnesses’ testi mony that they wer e paid f

or hauling service s and equipment re ntals and that they simply did not keep very g ood rec ords of the pay ments that they

wer e entitled to re ceive

. Ac c or din g ly , th e Pane l a ff ir ms the ba nk ru ptc y c ourt ’s fa c tua l f

ind ing s o n th e se iss ue s.9 B. Alleged Errors R egarding Valuation

An o th e r k e y c o mp o n e n t o f th e tr u s te e ’ s ar g u me n ts is th e p r o f it a b il it y o f th e mi n e . The trustee a rg ues that the $40,000 sale price was sig nificantly lower tha

n the “a nt i ci p at ed value of $2,800,000 in profit.” (A

ppellant’s B r. at 31). The trustee argues t hat t he ac tual perf ormanc e of the mining oper ation afte r Cotton Coal purc hased it r esulted in a profit of appr ox imately $400,000. The trustee f urther a rg ues that the pa

y ment of $14,100 (th e am o u n t the trustee a lleg es wa s the final reduc ed ca sh price) is per se not re asonable

.
The ba nkruptcy cou rt reje cted these arguments, finding that the trustee ha d not met her burd e no f p r o o f

. T h e b an kr

u p tc y c o u rt r e li e d

u p o nth e o n ly

e xp e rt w it

n e s s p r e s e n te d , Wi lliam Bishop. B ishop’s aff

idavit opined that the value of the per mit was $30,000-$40,000.

The trustee challeng es the ba nkruptcy co u rt’s finding that, “The re w as no evide nce on the qu al i t y o r r ec o v ery

p er ce n tfo r t h e 2 5 0 t o n s o f co al m i n ed

. ” (D kt

. 1 6 9 , ¶ 1 1 at 1 9

. ) In s o fi n d i n g, the bankr uptcy court re lied on Bishop’ s af fi d avit and testimony

on cross e x amination, which indicated that he did not rec eive any documentation about the quantit y or qualit y of the c oal at the g ob pil e . T he tr

us te e po int s to the te sti mony of Ha mmo nd s, Cor

ne tt a nd L ogan th at th e wa sh perc entag e wa s 41%. When asked w here he g ot the 41% fig ure, L og an testi fied, “I seen it on a pie ce of pa pe r. ” (D kt. 15 5 at 15 3. ) S imi larl y , Co rn e tt t e sti fi e d, “ Ita lke d to - - me and B ill ta lke d a bo ut i t. I t h i n k i t wa s l i k e 4 1 p er ce n t o r s o m et h i n g, m ay b e, o r b et t er . ” ( Dk t

. 1 5 5 at 1 3 4

. ) F i n al l y , al t h o u gh Hammonds also testifi ed t o 4 1 %, the c ourt could prope rly discredit that testimony

beca use it was based on H ammonds’ “r efr eshed r ecollec tion” afte r re viewing a n u n i d entified a nd unadmitted document with a ha

ndwritten notation indicating 41%.

The trustee asser

ts that the testimony

reg ardingthe wash r ate unde rmines the Cook defe ndants’ testimony

as to valuation bec ause the ir expert had no wa sh data to support his valuation. Whil e ther e wa s some testimony about t he wash rate , it was only uncorr oborate d testimony with no

su pp or tin g do c ume ntatio n. Pe rh a ps the ba nk ru ptcy c ourt sh ou ld h a ve sa id t

he re is n o “ c re dib le10

evidenc e” on the quality or re cover y perc entag e rather than “ no evidenc e.” H oweve r, none of the witnesses we re e x perts, and their testimony was based on some handwr itten notes that contradic ted

a r e p o rt th a t n o n e o f t h e m c o u l d s u b s t an t i a t e an d

t h a tw a s n o ta d m i t t e d

i n t o e v i d e n c e . A c c o r d i n g l y, the Panel finds that the ba nkruptcy court did not e rr in its fac tual finding on this point. Moreove r, the e xpe rt a dd re sse d th e fa c t that he did no t have do c ume ntatio n of the wa sh data , a nd sto od by his conclusion as to valuation. The ba nkruptcy court did not err

in acc epting the testimony of the e x pert wi tne ss.

Th e tr us te e did no t pr e se nt a

n e xpe rt wi tne ss o n va luatio n. I ns te a d, the tr us te e re lie d s ole ly on the spec ulation of Randy Hammonds , C h u ck C o rn ett and B illy L og an as to the pr ofits of the mining ope ra t i o nan d

s o m e i n co n cl u s i v e e v i d en ce o nt h e a ct u al p ro fi t s t h at C o t t o nC o al d er i v edfrom the mining ope ration.

I n the pre sent ca se, Triton re ceive d $ 2 8 , 7 0 0 i n cash f or the pe rmit. I n addition, Triton

re c e iv e d an o th e r $ 2 5 , 9 0 0 w h e n th e b o n d s p o s te d b y Co tt o n Co a l r e v e rte d b a c k to Triton. Acc ording ly , Triton rec eived ove r $50,000 for a per mit that the only

expert to testify

valued at $30,000-$40,000. Ac cording ly , the bankruptcy court’s c onclusion that the trustee did not prove that Tr ito n r e c e ive d le ss t

ha n r e a so na bly e qu iva le nt v a lue is n ot c le arl y e rr on e ou s.
C. Aiding an d Abetting Breach of Fiduciary Duty

Un de r K e ntu c ky

law, “ wh e re a

pe rs on in a fi du c iary re la tio ns hip to an oth e r vio la te s his d uty as a f iduciary , a third per son who participates in the violation of duty m ay b e l i ab l e to t he benef iciary .” Ste e lv est, In c . v . S c an ste e l Se rv . Ct

r . , 8 0 7 S

. W

. 2 d 4 7 6 , 4 8 6 (Ky . 1 9 9 1 ) ( ci t i n g W hitney v. Citibank, N

.A. , 7 8 2 F. 2 d

1 1 0 6 (2 d C i r. 1 9 8 6 ))

. T o p re v ai l o na c l ai m fo r a i d i n g an d ab et t i n g a brea ch of f

iduciary duty , the plaintiff must prove that the de fenda nts “knew of t h e b re ac h and knowing ly joined or aided and abetted t he actions constituti ng the bre ach.” Gundake r/Jordan Am. Ho ldi ng s, In c . v . Clar

k , 2009 WL 2390162, *3 (E.D. Ky 2009) (c iting Miles Farm Supply, LLC v. Helena Che m. Co. , 200 8 WL 30 10 06 4, a t *6 (W.D . Ky . Aug .1 , 2 00 8) ; Ste e lv est , 807 S.W .2d at 485).11

Th e ba nk ru ptc y c ourt de sc ri be d th e tr

us te e ’s c la im a s f

oll ow s:

The Tr ustee’s the ory

is essentially

that Randy

Hammonds brea ched his duty to refr ain from se lf-dea ling, i.e., that he stripped the va lue of the profits from the Thorton Gob Pile job out of Triton, and g ave the “prof its” of the job to Cotton C oal, which was a “strawman” for Mike Cook and Randy

Cook. The Tr

ustee ha s further

contende d that Randy Hammonds brea ched his fiduc iary duties t o T riton by transfe rringthe Permit to Cott on Coal for less than f air va lue and by putting “T riton’s” lea se into Cliffor d Ha mmonds’ name, ther eby depleting all the Debtor ’s assets a nd preve nting the D ebto r fr om mining the job itself. (Dkt. 169 at 23-24.)

As previously discussed, acc ording to the trustee’ s theory , the Cooks controlled Cotton Coal

and its pr inc ipa l, M ark Cr aft , a nd us e d th e se e nti tie s to a id H a mmo nd s in us ur pin g the c or

po rate op po rt un ity fr om T ri ton

and se lli ngit t o Co tto n Co a l.

Rand y Coo k te sti fi e d th a t he and his br oth e r w e re no t in vo lve d in a c on sp ir a c y

wi th Ha m m o n d s t o take the c orporate opportunity from Triton and use it for themselves. Mike Cook te sti fi e d th a t th e y

did no t c are wh o mi ne d th e g ob pi le and that the y jus t w ante d to g e t th e ha ul. Ad dit ion a lly , Ra

nd y Ha mmo nd s de nie d th a t th e Coo ks we re inv olv e d in his de c isi on

makin g wi th reg ard to Tr iton.
Ultimately , these issues turne d on cre dibilit y . T h e bankruptc y court found Ra

ndy Ha mmo nd s’ te sti mony

c re dib le a nd

fo un d th a t he wa s n ot try in g t o u surp Tr ito n’ s b us ine ss opportunity

to defr aud his cre ditors, specifica lly L og an and Corne tt. L ikewise, the ba nkruptcy court fo un d th a t th e te sti mony of Mi ke and Rand y Coo k w a s c re dib le and

that th e Coo k d e fe nd ants did not knowingly

assist or aid and a

bet Randy

Hammonds in brea ching a fiduc iary duty to Triton. B e c a us e the re is te sti mony in the re c or d to s up po rt the ba nk ru ptc y c ourt ’s fi nd ing s o n th e se iss ue s, the Pane l ho lds that th e se fi nd ing s are no t c le arl y e rr on e ou s. Ac c or din g ly , the ba nk ru ptc y c ourt did not err in concluding that the trustee had not c arr ied her burden of proving that the def endants “ knew12

of the bre ach a

nd knowing ly

joined or aide d and abetted t he actions constituting t he breac h.” Cla rk, 2009 WL 2390162, *3.

V. CO NC LU SION

The Pane l has throug hly examined the rec ord on ap p ea l

. Al t h oug h the Panel has not addre ssed ea ch of the issues raised on a ppeal in this opinion, it has consider ed ea ch of the issues

car efully . The Pane l concludes that the bankruptc y court’s factua l finding s are not clea rly err oneous and that the ba

nkruptcy court did not err

as a matter of law . Acc o rd i n gl y , the bankr uptcy court’s judgme nt is AFF I RMED.