Opinion ID: 4208266
Heading Depth: 4
Heading Rank: 1

Heading: The Dominion Test Explained

Text: Under the dominion test, “a transferee is one who . . . has dominion over the money or other asset,”—in other words, one with “the right to put the money to one’s own purposes.” In re Mortg. Store, 773 F.3d at 995 (quoting In re Incomnet, 463 F.3d at 1070). The “key[s]” to this test are “‘whether the recipient of funds has legal title to them’ and whether the recipient has ‘the ability to use [the funds] as he sees fit.’” Id. (quoting In re Incomnet, 463 F.3d at 1071). We further explained that, “an individual will have dominion over a transfer if, for example, he is ‘free to invest the whole [amount] in lottery tickets or uranium stocks.’” Id. (quoting Bonded Fin. Servs., 838 F.2d at 894). “The first party to establish dominion over the funds after they leave the transferor is the initial transferee; other transferees are subsequent transferees.” Id. (citations omitted). In adopting the “more restrictive ‘dominion test’” from Bonded Financial Services, our court stressed that the test “focuses on whether the recipient of funds has legal title to them”; that “dominion . . . strongly correlates with legal title”; and that “dominion . . . [is] akin to legal control.” In re Incomnet, 463 F.3d at 1071, 1073 (emphasis added) (quotation omitted); In re Mortg. Store, 773 F.3d at 996 (“[T]he touchstones . . . for initial transferee status are legal title and the ability of the transferee to freely appropriate the transferred funds.” (emphasis added)). Indeed, in adopting the dominion test, we took care both to distinguish it from the often-conflated “control test,” and to reject that more lenient standard for determining initialtransferee status. In re Incomnet, 463 F.3d at 1069–71 (explaining that “the ‘dominion test’ and the ‘control test,’ as originally stated, are not merely different names for the same inquiry”). While the dominion test focuses on who had 14 IN THE MATTER OF WALLDESIGN “legal authority over the money,” the control test involves a more gestalt analysis and requires courts to “view the entire transaction as a whole to determine who truly had control of the money.” Id. at 1070 (emphasis added) (citations omitted). After noting that some courts “combined these tests” or their names, we held that the tests are distinguishable. Id. at 1071. We then adopted the “more restrictive ‘dominion test’” and rejected the “more lenient ‘control test.’” Id. (quotations omitted); see also In re Mortg. Store, 773 F.3d at 995–96 (adhering to “the pure dominion test”).