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Official Comm. of Unsecured Creditors of HH Liquidation, LLC v. Comvest Grp. Holdings, LLC (In re HH Liquidation, LLC)

United States Bankruptcy Court for the District of Delaware

January 22, 2018, Decided

Chapter 11, Case No.: 15-11874 (KG) (Jointly Administered), Adv. No. 16-51204 (KG)

Opinion

 [*219]  Re: D.I. 142

CORRECTED1 FINDINGS OF FACT AND CONCLUSIONS OF LAW2

INTRODUCTION

On September 8, 2015, Haggen filed for bankruptcy under Chapter 11 of the Bankruptcy Code, 11 U.S.C. § 101, et seq. The filing took place a few months after Haggen, an 18 grocery store operation, purchased 146 stores from Albertsons and Safeway (the "Project"). The bankruptcy resulted in the loss of thousands of jobs and creditors losing tens of millions of dollars. The Committee filed an adversary proceeding with a 78 count Complaint alleging fraudulent transfers, breach of fiduciary duties, unjust enrichment and more.

The Court conducted a five day trial and received hundreds of exhibits, numerous deposition transcripts and over 300 pages of the parties' proposed findings of fact and conclusions of law. The parties involved in the adversary proceeding are: the Plaintiffs, which is the Committee acting on behalf of the Debtors; and the Defendants, Comvest Group Holdings, LLC; Comvest Investment Partners III, L.P; Comvest Haggen Holdings III, LLC; Comvest Haggen Holdings IV, LLC; Comvest Advisors, LLC; Haggen Property Holdings, LLC; Haggen Property South, LLC; Haggen Property North, LLC; Haggen Property Holdings, LLC; Haggen Property Holdings II, LLC; Haggen [**5]  SLB, LLC; and individual defendants John Caple, Michael Niegsch, Cecilio Rodriquez, John Clougher, William Shaner, Blake Barnett and Derrick Anderson.

The Committee and the Defendants litigated the adversary proceeding earnestly and thoroughly, but civilly and courteously. Both sides were very well represented by their lawyers, whose advocacy was outstanding. The Court nonetheless must name the winner and the loser based upon the evidence presented and applicable law.

The Defendants argue that the Individual Defendants made every effort to make the Project a success and that the risk they took is what a capitalist society encourages and its legal system protects. The Defendants also argue that the Committee's legal theories shifted and that the Committee did not bring a single creditor to the trial to support its case.

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590 B.R. 211 *; 2018 Bankr. LEXIS 140 **

In re: HH LIQUIDATION, LLC, et al., Debtors.OFFICIAL COMMITTEE OF UNSECURED CREDITORS OF HH LIQUIDATION, LLC, et al., Plaintiffs, v. COMVEST GROUP HOLDINGS, LLC, COMVEST INVESTMENT PARTNERS III, L.P., COMVEST INVESTMENT PARTNERS IV, L.P., COMVEST HAGGEN HOLDINGS III, LLC, COMVEST HAGGEN HOLDINGS IV, LLC, COMVEST ADVISORS, LLC, HAGGEN PROPERTY HOLDINGS, LLC, HAGGEN PROPERTY SOUTH, LLC, HAGGEN PROPERTY NORTH, LLC, HAGGEN PROPERTY HOLDINGS II, LLC, HAGGEN SLB, LLC, JOHN CAPLE, CECILIO RODRIGUEZ, MICHAEL NIEGSCH, JOHN CLOUGHER, BLAKE BARNETT, WILLIAM SHANER and DERRICK ANDERSON, Defendants.

Subsequent History: As Corrected January 26, 2018.

Prior History: Official Comm. of Unsecured Creditors of HH Liquidation, LLC v. Comvest Grp. Holdings, LLC (In re HH Liquidation, LLC), 571 B.R. 97, 2017 Bankr. LEXIS 1258 (Bankr. D. Del., May 8, 2017)

CORE TERMS

Entities, Holdings, Leases, Acquisition, lender, fraudulent transfer, subordination, real estate, Borrowers, consolidation, transfers, real property, unjust enrichment, pricing, liquidity, subsidiaries, projections, sales, parties, fiduciary duty, transactions, equitable, courts, Team, no evidence, recharacterization, rent, risks, transferor, breach of fiduciary duty

Business & Corporate Law, Directors & Officers, Management Duties & Liabilities, Fiduciary Duties, Corporate Existence, Powers & Purpose, Existence, Distinct & Separate Legal Entity, Bankruptcy Law, Commencement of Case, Joint Cases, Consolidation, Evidence, Burdens of Proof, Allocation, Governments, Courts, Judicial Precedent, Avoidance, Fraudulent Transfers, Elements, Prepetition Transfers, Voidable Transfers, Preferential Transfers, Elements, Benefit of Creditor, Voidable Transfers, Unsecured Creditors, Estate Property, Fraudulent Transfers, Constructively Fraudulent Transfers, Intent, Creditor Advantage, Shareholders, Shareholder Duties & Liabilities, Piercing the Corporate Veil, Fiduciary Duties, Business Judgment Rule, Causes of Action, Self-Dealing, Limited Liability Companies, Management Duties & Liabilities, Preponderance of Evidence, Misfeasance & Nonfeasance, Duty to Third Parties, Corporate Formation, Powers, Defenses, Administrative Powers, Executory Contracts & Unexpired Leases, Powers to Assume & Reject, Duty of Care, Civil Procedure, Jurisdiction, Subject Matter Jurisdiction, Jurisdiction Over Actions, Preliminary Considerations, Justiciability, Standing, Actions Against Corporations, Derivative Actions, Enforcement of Corporate Rights, Legislation, Interpretation, Member Duties & Liabilities, Examiners, Officers & Trustees, Duties & Functions, Liquidations, Committees, Contracts Law, Remedies, Equitable Relief, Quantum Meruit, Federal & State Interrelationships, Choice of Law, Governmental Interests, Contract Interpretation, Claims, Types of Claims, Claim Classification, Corporations, Corporate Finance, Initial Capitalization & Stock Subscriptions, Initial Capitalization & Stock Subscriptions, Undercapitalization, Business & Corporate Compliance, Business & Corporate Law, Corporate Finance, Unsecured Priority Claims, Subordination, Contracts Law, Standards of Performance, Creditors & Debtors