Involuntary + ABC + Voluntary [All For Same Debtor] = Stay and transfer orders (In re Aliera)

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An “Order Staying Subsequent Bankruptcy Cases” comes from In re The Aliera Companies Inc.Case No. 21-11548, Delaware Bankruptcy Court (issued January 18, 2022, Doc. 56), followed by “Order Transferring Venue of Voluntary Bankruptcy Cases Subsequently Filed” (issued January 25, 2022, Doc. 67) in the same case.

The first order stays lawsuits in five Chapter 11 cases filed in North Georgia bankruptcy court. The stay is until the Delaware Bankruptcy Court “enters into its order determining the district or districts in which this matter and [the five Georgia cases] should continue.

The second order determines that the five Georgia cases must continue in Delaware and orders their transfer there.

Creditor allegations

Here’s what happened, according to the creditors.[Fn. 1]

Aliera exists as a vehicle to sell health insurance to consumers.

–Regulatory actions

Several states have taken regulatory action against Aliera, finding that:

  • Aliera sold unauthorized and illegal health insurance; and
  • Aliera has created a fake health care sharing ministry, with which he has contracted to sell fake illegal health insurance.

–Class Action Judgments

Two class action judgments, totaling more than $25 million, find that Aliera sold fraudulent and unauthorized health plans to thousands of health care consumers and misappropriated money that should have been used to reimburse the group members.

–Involuntary bankruptcy in Delaware

Shortly after obtaining their judgments, judgment creditors file an involuntary bankruptcy against Aliera in Delaware, alleging that Aliera insiders made the company insolvent by forcing it to “loan” itself millions of dollars.

–ABC in Georgia

Instead of filing for bankruptcy, which would be under judicial supervision and require the recovery of fraudulent transfers, Aliera insiders are commencing an assignment for the benefit of creditors (“ABC”) in Fulton County, Georgia. Especially :

  • Under Georgia ABC law, an assignee is not required to pursue fraudulent transfers or any other avoidance or salvage action against insiders, although an assignee may choose to do so; and
  • Aliera insiders select a transferee to liquidate the business and leave virtually no assets to Aliera or its subsidiaries except claims against third parties.

The plaintiffs are concerned that the insider’s chosen assignee has no incentive to pursue claims against insiders and could settle those claims for a small fraction of the actual value.

–Voluntary Bankruptcies in Georgia

Then, despite the pending ABC and the pending involuntary bankruptcy, Aliera files a concurrent petition for Chapter 11 bankruptcy in the Northern District of Georgia, signed by ABC’s assignee. Four related entities are also filing Chapter 11 petitions with the same Georgia court.

Movement in Delaware

The petitioners in the Delaware case propose:

  1. Change the location of the five cases from Georgia to Delaware, so that a single bankruptcy court can handle all related cases; and
  2. For an order, under BR 1014(b) [fn. 2]suspending Georgian cases subsequently filed until a determination of venue is made.

Aliera’s objection

Aliera objects (Doc. 40 in the Delaware case), saying the Motion venue “is replete with irrelevant and inappropriate innuendo, hyperbole, half-truths, and misleading or incomplete statements that are wholly immaterial.”

Aliera’s objection adds, “The petitioning creditors would lead the Court to believe that this was some nefarious type of conspiracy to protect insiders and others from fraudulent transfers and other claims. This is simply not true, and is based on a complete misunderstanding of the Georgia ABC process” and is “a deliberate misinterpretation”.

First decision–Suspension

In response to the petitioners’ motion and Aliera’s objection, the Delaware Bankruptcy Court initially orders the following [fn. 3]:

“Pursuant to Federal Bankruptcy Procedural Rule 1014(b), the following matters are SUSPENDED, and no party to the matters may proceed until this Court issues its order determining the district or districts in which this matter and the following business should take place: ”

  • In re The Aliera Companies, Inc., Case No. 21-59493-jrs (Bankr. ND Ga.)”;
  • In re Advevo LLCCase No. 21-59495-jrs (Bankr. ND Ga.)”;
  • In re Ensurian Agency LLCCase No. 21-59496-jrs (Bankr. ND Ga.)’;
  • In re Tactic Edge Solutions LLC, Case No. 21-59497-jrs (Bankr. ND Ga.)’; and
  • In re USA Benefits & Administrators LLCCase No. 21-59498-jrs (Bankr. ND Ga.).

Second Decision – Transfer

Then the Delaware Bankruptcy Court orders, again, the following [fn. 4]:

  • “in the interests of justice and for the convenience of the parties,” the five pending cases in Georgia “should proceed in” Delaware; and
  • the five Georgian cases “are transferred. . . in the United States Bankruptcy Court for the District of Delaware. »

Conclusion

It is fascinating (i) that the Federal Bankruptcy Rules of Procedure actually have a rule (1014(b)) to deal with the specific circumstances of these cases, and (ii) how that rule is actually applied.

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