The Supreme Court has denied plaintiff Equitable Transitions, Inc.’s attempt to keep alive a lawsuit against Alston & Bird’s client, Dell Marketing, L.P. The Supreme Court’s denial of Equitable’s certiorari petition marks the end to a lawsuit involving the intersection of state law and bankruptcy law for which Alston & Bird had successfully obtained dismissal at every previous stage of the case. Dell was represented by Leib Lerner, a partner in Alston & Bird’s Los Angeles office, and Grant T. Stein, a partner in Alston & Bird’s Atlanta office. Associates Adriene Lynch and Lorraine Sarles also assisted in defending the case.
Equitable, as the assignee for the benefit of creditors designated to liquidate the assets of Brash Entertainment, an insolvent video game company, originally filed suit against Dell in November 2009 in California state court alleging that under California’s preference avoidance statute, more than $2.8 million in allegedly fraudulent transfers and $81k in allegedly preferential transfers could be “clawed back.”
Alston & Bird removed the case from state court to the federal District Court for the Central District of California. The firm filed a motion to dismiss Equitable’s complaint, arguing that pursuant to the decision of the Ninth Circuit Court of Appeals, Sherwood Partners, Inc. v. Lycos, Inc., the bankruptcy code preempted the California statute on which Equitable based its preference claim. The District Court agreed with Dell and granted the motion to dismiss, with the result that the preference claim was dismissed based upon the Sherwood argument, and the fraudulent transfer claim was withdrawn.
Equitable filed an opening brief in the Ninth Circuit Court of Appeals in February 2011 and a petition for en banc review in March 2011 asking the court to review and overrule its decision in Sherwood. Equitable acknowledged that its appeal of the District Court’s decision could not succeed if the Court of Appeals did not overrule Sherwood. In May 2011, the Ninth Circuit denied Equitable’s petition for en banc review, and in June 2011, Dell’s unopposed motion to dismiss was granted.
In December 2011, Equitable petitioned the Supreme Court to review and overrule the Ninth Circuit’s decision in Sherwood, and thus reverse the three previous decisions in favor of Dell. After Dell filed a brief in opposition to Equitable’s petition in January 2012, the Supreme Court denied Equitable’s request, bringing Equitable’s attempts to have the Sherwood decision overruled to an end and preserving the rights of Alston & Bird’s client, Dell, to the disputed payments.