Allan B. Mendelsohn, Solely in His Capacity as Chapter 7 Trustee of the Estates of Barnett Corp. and Barnett Forest LLC v. Copap Inc.

Summary

The United States Bankruptcy Court for the Eastern District of New York partially granted and conditionally granted Copap Inc.’s motion to dismiss the Chapter 7 trustee’s claims. The court dismissed claims under the former New York Debtor and Creditor Law and claims for disallowance under 11 U.S.C. §§ 502(d) and (j), while granting the trustee 21 days to replead claims involving personal jurisdiction, constructive fraudulent transfers, current NYDCL claims, unjust enrichment, and money had and received. The order is dated February 13, 2026.

Holdings

1. A plaintiff opposing a Rule 12(b)(2) motion must make a prima facie showing that personal jurisdiction exists. Allegations that a foreign defendant merely received transfers from the debtor's United States headquarters and banks, without more specific allegations of purposeful availment, did not satisfy that requirement.
2. A constructive-fraudulent-transfer claim under 11 U.S.C. § 548(a)(1)(B) must plead facts plausibly showing a transfer of an interest in property within two years of the petition date, less than reasonably equivalent value, and the required insolvency, inadequate-capital, or inability-to-pay condition. The trustee's conclusory allegations did not satisfy Rule 8 and the Iqbal/Twombly plausibility standard.
3. A claim under current NYDCL §§ 273(a) and 274 must plausibly allege that the transfer was made without fair consideration and satisfy the applicable insolvency, inadequate-capital, or inability-to-pay requirement. Bare assertions that transfers lacked fair consideration or good faith, without supporting facts, are insufficient under Rule 8 and Iqbal/Twombly.
4. Unjust-enrichment and money-had-and-received claims must contain factual allegations supporting the elements of the claims and must address whether a valid contract or quasi-contract governs the subject matter. Formulaic recitations of enrichment, benefit, and inequity do not satisfy Rule 8 and the plausibility standard.
5. A claim seeking disallowance under section 502(d) requires both a legally sufficient avoidance claim and an actually filed proof of claim by the creditor whose claim is to be disallowed. Because Copap had not filed a proof of claim, the trustee's section 502(d) and 502(j) cause of action was dismissed.
6. Leave to amend should generally be freely given when justice requires, but may be denied for prejudice, bad faith, or futility. The trustee was given twenty-one days to replead the conditionally dismissed claims with greater particularity.

Questions Presented

1. Whether the complaint made a prima facie showing that the bankruptcy court had personal jurisdiction over Copap.
2. Whether the constructive-fraud claim under 11 U.S.C. § 548(a)(1)(B) satisfied Federal Rule of Civil Procedure 8 and the plausibility standard.
3. Whether the claims under the current New York Debtor and Creditor Law §§ 273(a) and 274 adequately pleaded lack of fair consideration and the required insolvency or financial-condition elements.
4. Whether the unjust-enrichment and money-had-and-received claims contained sufficient factual allegations and addressed the possibility of an underlying contract or quasi-contract.
5. Whether the claim for disallowance under 11 U.S.C. §§ 502(d) and 502(j) was legally sufficient when Copap had not filed a proof of claim.
6. Whether the trustee should be granted leave to amend the conditionally dismissed claims.

Disposition

other