The opinion of the court was delivered by: Samuel Der-yeghiayan, District Judge
This matter is before the court on Defendant-Appellant Dominic Forte's (Forte) bankruptcy appeal. For the reasons stated below, we affirm the bankruptcy court.
This matter is an appeal from Chapter 11 Bankruptcy Proceedings. The following facts are stipulated by the parties and are undisputed. Longview Aluminum, L.L.C. (Longview) is a limited liability company (LLC), organized under the laws of Delaware. Longview was governed by an Amended and Restated Limited Liability Company Agreement (LLC Agreement), which listed five members who made up a Board of Managers (Board): Michael Lynch (Lynch), Michael J. Ochalski (Ochalski), John L. Kolleng (Kolleng), McCall Enterprises, L.L.C. (McCall), and Forte. Under the LLC Agreement, Forte had a 12% interest in Longview. In addition, the LLC Agreement provided that Longview would be managed by the Board and that Longview was required to promptly furnish members of the Board financial data relating to the financial condition of the company. The LLC Agreement also provided members with the right to inspect, audit, check and make copies of the company's books and records.
In 2001 and up to June 2002, Forte made requests to Longview, asking Longview to furnish business records or to permit Forte to inspect Longview's records. All of Forte's requests were denied. In July 2002, Forte sued Lynch, contending that Lynch used his controlling interest in Longview to exclude Forte from management decisions and any review of Longview's business documents. Longview, Great Lakes Processing, LLC, and Michigan Avenue Partners, LLC (collectively referred to, along with Lynch, as "Longview Defendants") moved to intervene in the case and were named as additional defendants in the action brought by Forte. In August 2002, the members of the Board other than Forte, including Ochalski, Lynch, Kolleng and McCall, executed a majority written consent, which formally took away Forte's right to access Longview's information and records. On November 7, 2002, Forte and the Longview Defendants entered into a settlement agreement (Settlement Agreement) under which $400,000, plus attorneys' fees and costs, would be paid to Forte in exchange for Forte's agreement to leave the Board. As part of the settlement, on November 7, 2002, Longview delivered Forte a $200,000 cashiers check as an initial payment. On January 16, 2003, Longview delivered another check to Forte in the amount of $15,000, which represented payment for Forte's attorneys' fees and costs.
On March 4, 2003, Longview filed a Chapter 11 petition for bankruptcy relief (Bankruptcy Petition). Plaintiff-Appellee William A. Brandt (Trustee) was appointed as Trustee in the bankruptcy proceedings for Longview (Bankruptcy Proceedings). The Trustee filed the instant adversary action (Adversary Action) against Forte in the Bankruptcy Proceedings, seeking to avoid the $200,000 and $15,000 settlement payments as preferential transfers. Since the $15,000 transfer was made within three months of the Bankruptcy Petition, Forte conceded that the $15,000 payment was a preferential transfer and returned the funds. Forte, however, contested the Trustee's assertion that the $200,000 payment to Forte constituted a preferential transfer made to an insider within one year of the Bankruptcy Petition. In the Bankruptcy Proceedings, the bankruptcy court allowed the parties to proceed with a trial on the papers based on stipulated facts. The bankruptcy court ruled in favor of the Trustee, finding that Forte was an insider as defined by 11 U.S.C. § 101(31) of the Bankruptcy Code, and that therefore the Trustee could avoid and recover the $200,000 transfer. Forte has appealed the bankruptcy court's ruling in the Adversary Action.
A federal district court has jurisdiction, pursuant to 28 U.S.C. § 158, to hear appeals from the rulings of a bankruptcy court. Id. On appeal, the district court reviews the factual findings of the bankruptcy court under the clearly erroneous standard and reviews the bankruptcy court's legal findings under the de novo standard.Wiese v. Community Bank of Cent. Wis., 552 F.3d 584, 588 (7th Cir. 2009)(stating that the court "review[s] the bankruptcy court's determinations of law de novo and findings of fact for clear error," but "where the bankruptcy code commits a decision to the discretion of the bankruptcy court, we review that decision only for an abuse of discretion");see also in re A-1 Paving and Contracting, Inc., 116 F.3d 242, 243 (7th Cir. 1997)(stating that a "bankruptcy court's findings of fact are upheld unless clearly erroneous and the legal conclusions are reviewed de novo"). Where there are mixed questions of law and fact, the district court conducts a de novo review. Freeland v. Enodis Corp., 540 F.3d 721, 729 (7th Cir. 2008).
Forte contends that the Bankruptcy Court erred in including a member or manager of a LLC within the definition of an "insider" under 11 U.S.C. § 101(31) and therefore failing to consider whether Forte was actually a person in control of Longview. The determination of whether a person is an insider, as defined by 11 U.S.C. § 101(31) of the Bankruptcy Code, is "properly characterized as a mixed question of law and fact." In re Krehl, 86 F.3d 737, 742 (7th Cir. 1996). Thus, we shall conduct a de novo review of the bankruptcy court's ruling. Freeland, 540 F.3d at 729.
Pursuant to 11 U.S.C. § 547(b)(4) (Section 547(b)(4)), with certain exceptions, "the trustee may avoid any transfer of an interest of the debtor in property... made-- on or within 90 days before the date of the filing of the petition; or... between ninety days and one year before the date of the filing of the petition, if such creditor at the time of such transfer was an insider...." Id. Pursuant to 11 U.S.C. § 101(31)(B) (Section 101(31)(B)), if "the debtor is a corporation," the term "insider" is deemed to include a: "(i) director of the debtor; (ii) officer of the debtor; (iii) person in control of the debtor; (iv) partnership in which the debtor is a general partner; (v) general partner of the debtor; or (vi) relative of a general partner, director, officer, or person in control of the debtor...." Id.
I. Whether a Member or Manager is Properly Analogized to a "Director"
Forte argues that the bankruptcy court erred in concluding that Forte, as a member of Longview, qualified as aninsider under Section 101(31)(B). Pursuant to Section 101(31)(B), a "director" of the debtor is an insider regardless of the degree of control exercised over the debtor. See, e.g., in re Public Access Technology.Com, Inc., 307 B.R. 500, 505 (E.D. Va. 2004); In re Barman, 237 B.R. 342, 349 (Bankr. E.D. Mich. 1999). The bankruptcy court concluded that a member or manager should be treated similarly under the statute. The bankruptcy court reasoned that the term "director" in Section 101(31)(B) is merely intended to illustrate the underlying relationship between the individual and the company. The bankruptcy court also found that Forte's position, as one of the five members on the Board of Longview, was a position equivalent to a director's position.
Forte argues that Section 101(31)(B) does not explicitly list a manager or member as one of the categories of insiders, and that therefore a manager or member is not an insider unless he falls under 101(31)(B)(iii) as a person in control of the debtor. However, the Seventh Circuit has indicated that "[l]egislative history suggests that, in addition to the individuals and entities actually named, the term also encompasses anyone with 'a sufficiently close relationship with the debtor that his conduct is made subject to closer scrutiny than those dealing at arm's length with the debtor.'" in re Krehl, 86 F.3d at 741-42. In addition, the Seventh Circuit has indicated that the ...