Judge Brendan Linehan Shannon issued an opinion in the Samson Resources settlement trust’s longstanding fraudulent transfer adversary proceeding
today, after taking the decision under advisement
in December 2022 following a three week trial. The judge sided entirely with the defendants in the suit, which originally sought recovery of alleged fraudulent transfers totaling $7.2 billion arising out of the 2011 sale of Samson Investment Company by the defendants, the Schustermans to the alleged detriment of creditors.
Judge Shannon finds that "the Plaintiff has failed to prove that the consideration paid in connection with the 2011 acquisition of SIC did not reflect its fair market value at the time
," and therefore enters judgment in favor of the defendants on all counts (emphasis added).
The court opines that "It is black letter law in this Circuit that the gold standard for determining the value of an asset is to sell it in an open and fair market. A thing is worth what a willing buyer will pay to a willing seller following a proper marketing process."
"At bottom, Plaintiff’s case is premised on the proposition that the Schustermans were obliged to temper their demands and to second guess the judgment of the purchasers as to how much to pay, and how to operate the business following the closing. That is not our law. The Schustermans were entitled – and expected – to clamor and negotiate for as much consideration as the buyers would agree to deliver."
Judge Shannon explains that the fact that the company ultimately filed for bankruptcy "does not mean the sale process was flawed or the price unfair."
"Risk is an inescapable feature of commercial transactions. Here, the Schustermans placed a healthy, thriving business up for sale; the buyers presumably concluded that they got a good deal and could grow the business to new heights of profitability. Their failure to accomplish their goals does not mean that the Schustermans must now pay back the sale proceeds they received. Put bluntly, the Schustermans are neither the guarantor nor the insurer of the future success of the business they sold."