Lisa and Raul Galaz were divorced in 2002. As part of the divorce settlement, Lisa was granted
Question:
Lisa and Raul Galaz were divorced in 2002. As part of the divorce settlement, Lisa was granted a 25 percent interest in Artist Rights Foundation, LLC (ARF), a California limited liability company formed by Raul. One of ARF’s assets was royalties accruing from the music of a band known as the Ohio Players. The royalties generated almost $1 million between 2005 and 2010, but Lisa received no share of the profits despite her ownership interest in ARF. Raul claimed that he had exclusive rights to the royalties as such rights were purchased in 2005 by Segundo Suenos LLC, a Texas limited liability company, formed by Raul and his father Alfredo. ARF was subsequently dissolved in 2006. Lisa subsequently filed for bankruptcy and sought a court order declaring the transfer of rights from ARF to Segundo Suenos to be invalid. One of the issues before the court was whether the purported transfer of royalties from ARF to Segundo Suenos was a fraudulent transfer. The court focused its attention on the presence or absence of several “badges of fraud.” What is a “badge of fraud”? What type of conduct should be considered indicative of fraud in the context of bankruptcy proceedings?
Step by Step Answer:
Dynamic Business Law
ISBN: 9781260247893
5th Edition
Authors: Nancy Kubasek, M. Neil Browne, Daniel Herron, Lucien Dhooge, Linda Barkacs