Opinion ID: 3051676
Heading Depth: 3
Heading Rank: 4

Heading: United Energy Controls.

Text: The district court correctly concluded that the good faith exception is not barred as a matter of law. In reversing the bankruptcy court, the district court held that Mackenzie “exchanged his partnership interest for a proportionately reduced restitution claim.” Although we agree with the district court in its ultimate conclusion, we wish to clarify further because we recognize the potential effect this case will have on a number of other AFI fraudulent transfer cases. The Trustee argues that the parties did not expressly exchange the restitution claim for the $89,824.18, and instead, AFI transferred the money on account of Mackenzie’s partnership interest. Although circumstances of the exchange were cloaked in terms of a partnership interest, we delve beyond the “form” to the “substance” of the transaction. See United Energy, 944 F.2d at 596. [7] As noted above, the record demonstrates that Eisenberg’s operation was a Ponzi scheme before Mackenzie provided his principal “investment,” and thus well before the transfers were made from AFI to Mackenzie. Because of this, Mackenzie acquired a restitution claim at the time he bought into Eisenberg’s Ponzi scheme, just as the investors in United 7 Evidence of the Trustee’s oversimplification of the role the limited partnership interest plays in this case is evident in his citation to In re Riverside-Linden Investment Co., 925 F.2d 320, 323 (9th Cir. 1991) (noting only that a legitimate partnership interest is not a claim contemplated by the bankruptcy code). 4096 IN RE AFI HOLDING, INC. Energy acquired a restitution claim at the time they bought their solar modules. Id. at 596. It is this restitution claim, in toto, that Mackenzie exchanged when AFI returned Mackenzie’s principal “investment” amount. If AFI had only provided Mackenzie a portion of his initial investment, as a fictitious gain or otherwise, Mackenzie would be entitled also to keep that amount as an exchange for a proportionate reduction in his restitution claim. See id. Even if Mackenzie did not acquire a restitution claim at the time he bought into AFI, the unique facts of this case still provide us grounds to hold that he exchanged reasonably equivalent value for return of his principal “investment.” Mackenzie was not being paid on account of an equity position as were the investors in Agretech. Instead, he was ending his interest in the so-called partnership, creating something more than a simple equity payment in proportion to a capital contribution. Either way we skin this cat, Agretech is distinguishable, and United Energy is the more appropriate precedent. As a result, the district court was correct to determine that the good faith exception is not barred as a matter of law. If, on remand, the bankruptcy court concludes that Mackenzie took the transfer in good faith, Mackenzie is entitled only to the amount he initially provided to AFI. United Energy, 944 F.2d at 595 n.6. The fictitious gain, however, amounting to $16,424.18, is in excess of his restitution claim, and was not returned on account of his withdrawal from the partnership. Therefore the district court was correct to find that the Trustee was entitled to have that amount avoided. E. Prejudgment Interest. We agree with the district court, and conclude that any discussion of the bankruptcy court’s discretion to award prejudgment interest is premature. We therefore decline to address that part of the Trustee’s appeal. That issue is left for the IN RE AFI HOLDING, INC. 4097 bankruptcy court once the application of the good faith exception has been adjudicated. III