NOT PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

____________

Nos. 12-3866, 12-3867, 12-3868

____________

NATALIE LUTZ CARDIELLO,

Plaintiff-Appellant-Cross-Appellee

v.

THOMAS D. ARBOGAST and MARY CLAIRE ARBOGAST,

Defendants-Appellees-Cross-Appellants

____________

On Appeal from the United States District Court

for the Western District of Pennsylvania

(D.C. Civil Nos. 2:12-cv-353, 2:12-cv-401, 2:12-cv-402)

District Judge: Honorable Terrence F. McVerry

____________

Argued June 17, 2013

Before: DAVIS, WALKER, JR. and SACK, Circuit Judges.

*

(Opinion Filed: August 7, 2013)

Neal H. Levin, Esq. (ARGUED)

Freeborn & Peters

311 South Wacker Drive

Suite 3000

Chicago, IL 60606

 * Honorable Andre M. Davis, of the United States Court of Appeals for the Fourth 

Circuit, Honorable John M. Walker, Jr. and Honorable Robert D. Sack, of the United 

States Court of Appeals for the Second Circuit, all sitting by designation following the 

recusal of the members of the Court of Appeals for the Third Circuit.
2

Natalie Lutz Cardiello, Esq.

107 Huron Drive

Carnegie, PA 15106

Counsel for Plaintiff-Appellant-Cross-Appellee Natalie Lutz Cardiello, Trustee for 

the Bankruptcy Estate of Thomas D. Arbogast

Nicolas D. Krawec, Esq. (ARGUED)

Bernstein-Burkley, P.C.

700 Grant Street

Suite 2200 Gulf Tower

Pittsburgh, PA 15219

Counsel for Defendant-Appellee-Cross-Appellant Thomas D. Arbogast

Joseph F. McDonough, Esq.

Buchanan Ingersoll & Rooney, P.C.

301 Grant Street, 20th Floor

One Oxford Centre

Pittsburgh, PA 15219

Counsel for Defendant-Appellee-Cross-Appellant Mary Claire Arbogast

____________

OPINION OF THE COURT

____________

SACK, Circuit Judge:

These appeals arise from an adversary proceeding related to the Chapter 7 

bankruptcy proceedings of debtor Thomas D. Arbogast ("Thomas") in the United States 

Bankruptcy Court for the Western District of Pennsylvania. At issue in the adversary 

proceedings were alleged fraudulent transfers made by Thomas to an account that he and 

his wife, Mary Claire Arbogast ("Mary Claire"), held as tenants by the entireties (the 
3

"Entireties Account" or the "Account"). The Bankruptcy Court (Markovitz, J.) found that 

there had been fraudulent transfers in the amount of $143,389.10. The bankruptcy court 

entered judgment in that amount in favor of plaintiff Natalie Lutz Cardiello, who is the 

Chapter 7 Trustee in Thomas’s bankruptcy action, and against Thomas and Mary Claire 

as owners by the entireties. The Trustee appealed that judgment to the United States 

District Court for the Western District of Pennsylvania, and the Arbogasts crossappealed; the district court (McVerry, J.) affirmed. The Trustee appeals from that 

judgment, and the Arbogasts again cross-appeal. We affirm.

BACKGROUND

A. Proceedings in State Court

The bankruptcy proceedings that underlie this appeal are part of the fallout from a 

landlord-tenant dispute between TrizecHahn Gateway LLC ("Trizec") -- a commercial 

landlord -- and Titus & McConomy LLP ("T&M") -- a no-longer-extant Pittsburgh law 

firm. In 2000, Trizec brought suit in a Pennsylvania Court of Common Pleas against

T&M and its general partners, including Thomas, in their individual capacities. The 

court found in favor of Trizec, and, in 2006, entered final judgment in the amount of 

$3.27 million. Thomas was among the partners upon whom the judgment imposed joint 

and several liability.

In 2007, as part of its effort to recover on that judgment, Trizec brought a 

fraudulent transfer action against Thomas and Mary Claire in the Court of Common 

Pleas. Trizec alleged that Thomas had been depositing his salary from his new employer, 
4

Schnader Harrison Segal & Lewis LLP, into a bank account that he and Mary Claire held 

as tenants by the entireties. Trizec contended that these deposits constituted fraudulent 

transfers under the Pennsylvania Uniform Fraudulent Transfer Statute ("PUFTA"), 12 Pa. 

Cons. Stat. §§ 5101-10.

Before the parties could litigate the fraudulent transfer action, however, the 

Pennsylvania Superior Court reversed the Court of Common Pleas' judgment against 

Thomas in the lease litigation, holding that he could not be held liable in his individual 

capacity. TrizecHahn Gateway LLC v. Titus, 930 A.2d 524, 539, 2007 Pa. Super. 196 

(Pa. Super. Ct. 2007). Trizec appealed this decision to the Pennsylvania Supreme Court, 

but it also discontinued the fraudulent transfer action against Thomas and Mary Claire. 

In July of 2009, the Pennsylvania Supreme Court reversed the Superior Court in the lease 

litigation, reinstating Thomas's individual liability. TrizecHahn Gateway LLC v. Titus, 

601 Pa. 637, 646-50, 976 A.2d 474, 479-81 (2009). The Court of Common Pleas in the 

fraudulent transfer action thereafter granted Trizec's motion to strike its discontinuance of 

that action.

B. Proceedings in Bankruptcy Court 

Thomas filed a Chapter 7 bankruptcy petition on January 15, 2010, in the United 

States Bankruptcy Court for the Western District of Pennsylvania. He then removed the 

fraudulent transfer action to federal court, where it was docketed as an adversary 

proceeding in the bankruptcy court, see 28 U.S.C. § 1452; 28 U.S.C. § 157; Fed. R. 
5

Bankr. P. 7001, and assigned to Bankruptcy Judge M. Bruce McCullough. The 

bankruptcy court entered an order substituting Cardiello, the Chapter 7 Trustee, for 

Trizec, thus enabling the Trustee to pursue its right under 11 U.S.C. § 544(b) to "avoid 

any transfer of an interest of the debtor in property . . . that is voidable under applicable 

law by a creditor."

One of the fraudulent transfer theories the Trustee sought to prosecute in the 

bankruptcy court, and the only one at issue here, was constructive fraud. In general, a 

transfer is constructively fraudulent as to a creditor if it is "made . . . without receiving a 

reasonably equivalent value in exchange for the transfer . . . and the debtor was insolvent 

at that time or the debtor became insolvent as a result of the transfer." 12 Pa. Cons. Stat. 

§ 5105; see also id. § 5104.

The Trustee's position as to how the law of constructive fraudulent transfer applied 

to Thomas's deposits was, and continues to be, based on the premise that "under 

Pennsylvania law, . . . property held as tenants by the entireties is exempt from process 

by a creditor of only one spouse," In re Houck, 184 B.R. 21, 23 (Bankr. E.D. Pa. 1995). 

So if a debtor spouse deposits his own funds into an entireties bank account and thus out 

of reach of his creditors, and receives nothing in return for that deposit from the nondebtor spouse, he has "transfer[red]" funds without receiving "reasonably equivalent 

value" within the meaning of the PUFTA, and that transfer is therefore constructively 

fraudulent. Plaintiff's Pretrial Statement, Sept. 15, 2010, at 3-4, Joint App'x at 158-59.

This rule, as the Trustee seems to have understood it, was subject to the single 

qualification that such deposits into an entireties account "are not fraudulent as 
6

to . . . creditors to the extent th[e] funds are then used to satisfy reasonable and necessary 

expenses for the maintenance of said debtor's family." See Plaintiff''s Post-Trial 

Memorandum, Nov. 29, 2010, Cardiello v. Arbogast, No. 10-2092-MBM, ECF #64, at 5 

(quoting In re Meinen, 232 B.R. 827, 842 (Bankr. W.D. Pa. 1999)). To make out its case, 

the Trustee planned to adduce evidence of all of Thomas's deposits of his salary into the 

Account as the universe of constructively fraudulent transfers, the amount of which could 

be reduced only through proof of later expenditures from the Account for "reasonable and 

necessary expenses."

This view of the applicable law was largely drawn from an opinion Judge 

McCullough himself had previously handed down, In re Meinen, supra. But Judge 

McCullough apparently did not think In re Meinen governed the Trustee’s claims in this 

case. Instead, he seems to have been persuaded, or perhaps thought himself bound, by 

the Pennsylvania state court’s approach in a fraudulent transfer action concerning one of 

Thomas's former partners. The rule established there was that the debtor spouse's 

deposits into an entireties account were constructively fraudulent against creditors only if 

spent on luxury items for the exclusive benefit of the non-debtor spouse. Apparently 

poised to apply this rule after trial, Judge McCullough entered a case management order 

directing the Trustee to specify which expenditures of funds from the Entireties Account 

it thought were spent on luxuries, undermining the Trustee’s desire to enter evidence of 

Thomas’s initial deposits into the Account.
7

After discovery, Judge McCullough held a trial at which the parties litigated, as 

relevant here, four categories of alleged disbursements from the Entireties Account, 

totaling about $900,000.00: (1) checks drawn and deposited into an account owned solely 

by Mary Claire; (2) payments related to the Arbogasts' purchase and maintenance of a 

house in Florida; (3) membership fees for three different country clubs; and (4) premium 

payments towards various life insurance policies.

Before he could render a final decision, Judge McCullough died. The case was 

reassigned to Western District Bankruptcy Judge Bernard Markovitz. Judge Markovitz 

decided, pursuant to Fed. R. Civ. P. 63, to retry the case, and the retrial again focused on 

the four categories of expenditures listed above. On February 7, 2012, Judge Markovitz 

issued a Memorandum Opinion and Judgment resolving the Trustee's claims. Cardiello 

v. Arbogast, 466 B.R. 287 (Bankr. W.D. Pa. 2012). Adopting, by and large, In re 

Meinen's and the Trustee's understanding of the law governing the case, but applying it to 

the evidence as limited by Judge McCullough's case management order, Judge Markovitz 

determined that there were $143,389.10 in constructively fraudulent transfers, based on 

disbursements related to the Florida residence and the country club memberships. Id. at 

296, 302-04, 320. Both parties appealed to the district court, that court affirmed, and the 

parties now renew their appeals here.
8

DISCUSSION

In bankruptcy cases, we "exercise the same standard of review as the District 

Court when it reviewed the original appeal from the Bankruptcy Court." In re Handel, 

570 F.3d 140, 141 (3d Cir. 2009). "Thus, we review the Bankruptcy Court's findings of 

fact for clear error and exercise plenary review over the Bankruptcy Court's legal 

determinations." Id.

I. The Trustee's Appeal

A. Exclusion of Evidence of Deposits into the Entireties Account

We address at the threshold the principal theme of the Trustee's counsel's 

presentation at oral argument before us: that the bankruptcy court's judgment is 

fundamentally flawed because the Trustee was precluded from introducing evidence of 

Thomas's deposits into the Entireties Account, and instead limited to proof of 

disbursements from the Account. This limitation of the Trustee's proofs, counsel 

maintained, is so at odds with the law Judge Markovitz ultimately applied to resolve the 

fraudulent transfer claims that we must vacate the judgment and remand for retrial.

We have no reason to doubt the accuracy of the Trustee's understanding of the 

law. But we decline to reach the merits of this argument because we conclude that it was 

waived. "An issue is waived unless a party raises it in its opening brief, and for those 

purposes 'a passing reference to an issue . . . will not suffice to bring that issue before this 

court.'" Laborers' Int'l Union of North Am., AFL-CIO v. Foster Wheeler Energy Corp.,

26 F.3d 375, 398 (3d Cir. 1994) (quoting Simmons v. City of Philadelphia, 947 F.2d 

1042, 1066 (3d Cir. 1991) (opinion of Becker, J., announcing the judgment)); Fed. R. 
9

App. P. 28; 3d Cir. R. 28. Despite its centrality at oral argument, and although it is 

referenced elliptically in the Trustee's briefs, the issue of the evidentiary limitations the 

bankruptcy court allegedly imposed upon the Trustee does not appear as a ground for 

appeal in the "Statement of Issues" or "Argument" sections of the Trustee's brief; nor 

does the Trustee's brief mention the argument in its conclusion, which seeks only a 

"remand for a recalculation [of fraudulent transfer amounts]," not a new trial. Appellant's 

Br. at 28. We therefore conclude that this argument is not properly before us.

B. Recovery Period

The first argument properly raised in the Trustee's briefing is that the bankruptcy 

court erred by limiting its recovery to transfers made between April 23, 2003, and April 

23, 2007. The basis upon which the bankruptcy court did so is the PUFTA's four-year 

statute of repose, 12 Pa. Cons. Stat. § 5109. The bankruptcy court interpreted this 

provision to limit the Trustee’s potential recovery to transfers during a four-year "lookback period" stretching backwards from April 23, 2007, the date Trizec first filed the 

fraudulent transfer action in Pennsylvania state court. See Arbogast, 466 B.R. 287, 300-

02. The Trustee argues that the court erred insofar as it interpreted the PUFTA's statute 

of repose to preclude it from seeking relief for allegedly fraudulent transfers that took 

place after Trizec's April 23, 2007, filing.

Once again, the Trustee's argument may have theoretical merit. But also once 

again, we ultimately do not reach it. In a pre-trial conference held before Judge 

McCullough in this case, the court asked counsel for all parties, "While we're talking 
10

about time frames, does anybody disagree that we've got four years we're dealing with 

here?" Tr. of Hr'g, Oct. 14, 2010, at 42, Joint App'x at 194. Counsel for the Trustee 

responded, "No, sir. We don't." Id.

"The chief purposes of the pre-trial conferences are to define and simplify the 

issues, to lessen surprise at trial and the risk of judicial error, to conclude stipulations on 

matters of evidence, and to promote settlements." Price v. Inland Oil Co., 646 F.2d 90, 

96 (3d Cir. 1981) (internal quotation marks omitted). To these ends, "this court 

has . . . been willing to hold the parties bound by pre-trial representations." Id. at 95. We 

conclude here, as did the district court on appeal from the bankruptcy court's order, that 

the Trustee is bound by counsel’s unambiguous statement before Judge McCullough. We 

therefore reject this ground for appeal. 

C. Burden of Proof

Finally, the Trustee contends that the bankruptcy court erred in its allocation of the 

burden of proof with respect to whether the Arbogasts' expenditures from the Entireties 

Account were for "reasonable and necessary expenses for the maintenance of [the] 

debtor's family," Meinen, 232 B.R. at 842. The bankruptcy court concluded that the 

burden of persuasion on this issue remained at all times with the Trustee, but did assign 

to the Arbogasts "the burden of producing at least some useful evidence regarding what 

the funds deposited into an entireties account are ultimately spent on." Arbogast, 466 

B.R. at 308. The Trustee argues that the law's exemption for constructive fraud purposes 

of funds later used for "reasonable and necessary expenses" constitutes an affirmative 

defense, and that the burden of persuasion should therefore have rested with the 
11

Arbogasts. 

Pennsylvania law appears to us to be silent as to whether the demonstration that 

funds were used for "reasonable and necessary expenses" is an affirmative defense or 

instead, a negation of the plaintiff's prima facie case. See, e.g., Watters v. DeMilio, 16 

Pa. D. & C.2d 747, 752-53 (Ct. Com. Pl. 1957) (recognizing the rule, but offering no hint 

as to its nature). Cases from other jurisdictions arising in similar legal contexts, however, 

have treated the subsequent use of transferred funds as going to the question of 

"reasonably equivalent value," that is, as negating that element of a plaintiff's prima facie 

case. See United States v. Goforth, 465 F.3d 730, 736 (6th Cir. 2006) (collecting cases). 

And, as the bankruptcy court recognized, Arbogast, 466 B.R. at 307-08, Committee Note 

6 of section 5102 of the PUFTA specifically rejects the notion that the burden of proof 

with respect to whether "the transferor received reasonably equivalent value" should ever 

shift to the defendant. 12 Pa. Cons. Stat. § 5102 cmt.6.*

In any event, because the Arbogasts did indeed produce evidence at trial as to the 

uses to which funds from the Entireties Account were put, it seems to us highly unlikely 

that the bankruptcy court's allocation of the burden of persuasion made any difference in 

this case. Cf. Ridley School Dist. v. M.R., 680 F.3d 260, 271 (3d Cir. 2012) ("In a non-

 *

 The Pennsylvania Supreme Court has instructed that "[o]fficial comments are to 

be given weight in the construction of statutes," Lessner v. Rubinson, 527 Pa. 393, 398 

n.4, 592 A.2d 678, 680 n.4 (1991), a principle that is derived from Pennsylvania statutory 

law, 1 Pa. Cons. Stat. § 1939. See also McGowan v. University of Scranton, 759 F.2d 

287, 298 & n.14 (3d Cir. 1985) (recognizing and applying the principle contained in 1 Pa. 

Cons. Stat. § 1939).
12

criminal case, an error regarding the placement of the burden of persuasion will 

frequently be harmless."). We therefore reject this ground for the appeal.

II. The Arbogasts' Cross-Appeal

A. Scope of "Reasonable and Necessary Expenses"

We read the Arbogasts' first ground for their cross-appeal to be that the bankruptcy 

court adopted an unduly narrow conception of what sorts of expenses are "reasonable and 

necessary . . . for the maintenance of [the] debtor's family." Meinen, 232 B.R. at 842. 

They argue that this category of expenses should be understood to embrace expenses for 

anything other than luxuries. So understood, the Arbogasts posit, the category of 

"reasonable and necessary expenses" should embrace the expenditures on the Florida 

residence and the country club memberships, and hence exempt them from the 

constructive fraudulent transfer calculation.

The Arbogasts cite no authority, nor have we found any ourselves, that suggests 

that "reasonable and necessary expenses" in this context means "expenses for anything 

other than luxuries." Whatever the category's outermost perimeters, moreover, we can 

find no case extending it so far as to cover such non-essential expenses as vacation 

residences or country club memberships -- even if either is used from time to time for 

business purposes. Cf. Watters, 16 Pa. D. & C.2d at 752 (referencing "food, clothing, 

medical expenses, taxes on . . . real estate . . . and interest paid on [a] mortgage" as 

reasonable and necessary); Goforth, 465 F.3d at 736 (approving use of funds on "food, 

clothing, utilities, gasoline, property taxes, and travel expenses" as reasonable and 

necessary). And we see no reason that the law of fraudulent transfer should permit an 
13

insolvent debtor to transfer his own funds out of the reach of his creditors -- frustrating or 

delaying attempts to recover a debt -- while still directing the use of those funds towards 

amenities of his choice. We therefore affirm the bankruptcy court's decision that the 

payments towards the Florida residence and the country club memberships were not 

"reasonable and necessary expenses" within the meaning of Pennsylvania law.

B. Reasonably Equivalent Value Through Satisfaction of Thomas's Debts

The Arbogasts next argue that those funds deposited into the Entireties Account that were 

later used for membership fees at Thomas’s country clubs should not be treated as 

fraudulent transfers inasmuch as such payments were put towards satisfaction of 

Thomas’s debts to the clubs. Payment in satisfaction of "antecedent debts," they point 

out, is included in section 5103 of the PUFTA’s definition of "value." 12 Pa. Cons. Stat. 

§ 5103. And the question of "reasonably equivalent value," they continue, is generally 

one to be considered under the "totality of the circumstances." In re R.M.L., Inc., 92 F.3d 

139, 153 (3d Cir. 1996). The Arbogasts maintain that in circumstances in which 

transferred funds are initially deposited into an entireties account, but eventually used 

towards satisfaction of a debt owed by the debtor that is of similar value to the funds 

transferred, the debtor receives "reasonably equivalent value" from the initial transfer, 

and such transfer would therefore not constitute constructive fraud.

The problem with this argument as applied to the facts of this case -- an initial 

transfer to an entireties account, followed by a transfer from that account towards 

satisfaction of a debt -- is that it treats the initial transfer to the entireties account as 

legally irrelevant. It is not, inasmuch as that initial transfer places the funds out of all 
14

creditors’ reach, and therefore, at the least, hinders or delays creditors seeking 

satisfaction of debts owed them. Cf. Nostalgia Network, Inc. v. Lockwood, 315 F.3d 717, 

720 (7th Cir. 2002) (addressing a similar argument in a related context, and explaining 

panel’s view that "the inquiry should stop at the first stage of the analysis, that is, should 

stop after it is determined that the [initial] transfer was not supported by consideration"). 

It is true, of course, that the uses to which the funds are later put may also be relevant --

for example, through the exemption for funds spent on "reasonable and necessary 

expenses" addressed supra. Similarly, insofar as a later received benefit, either direct or 

indirect, can be seen as being "as a result of" the initial transfer, it may confer 

"reasonably equivalent value." Mellon Bank, N.A. v. Metro Commc'ns, Inc., 945 F.2d 

635, 647 (3d Cir. 1991). But we are aware of no authority suggesting that any later 

expenditure from a transferee that happens to confer some value upon the transferor 

sanitizes, for constructive fraud purposes, a transfer that was fraudulent when made. We 

therefore reject this argument.

C. Additional Post-Trial Hearing

Finally, the Arbogasts argue that the bankruptcy court erred by not holding an 

additional hearing after the trial at which they would have had an opportunity to 

demonstrate that funds from the Entireties Account that were used for expenses the court 

found not to be "reasonable and necessary" came from Mary Claire, and not Thomas, and 

therefore could not be counted as constructively fraudulent transfers. They argue that the 

parties stipulated to such a hearing before Judge McCullough, and that Judge Markovitz 

was bound by this stipulation.
15

Even if the parties did agree on such a hearing before Judge McCullough, we find 

nothing in the record to establish that the Arbogasts brought this to Judge Markovitz’s 

attention. We conclude, considering the circumstances, that it was incumbent upon them 

to do so before they can assert that such a hearing was wrongly withheld. We therefore 

reject this ground for appeal also.

CONCLUSION

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