In Re: Orly Genger

Background

Dalia Genger appealed orders entered in her daughter Orly Genger’s chapter 7 bankruptcy proceeding. The bankruptcy court had dismissed Dalia’s adversary complaint and later denied her motion for reconsideration. The district court reviewed the bankruptcy court’s decision.

The dispute concerned three agreements executed in 2004 when Dalia and Arie Genger divorced. Dalia agreed to transfer rights in 794.40 shares of Trans-Resources, Inc. to trusts benefiting Orly and Sagi Genger in exchange for continuing financial support. Sagi promised to pay Dalia, on demand, amounts tied to the shares. Orly separately promised to indemnify Sagi for one-half of his payments to Dalia.

After later litigation, Orly entered into a 2013 settlement under which the shares connected to the Orly Trust were converted into cash and two promissory notes, which were distributed to others. Dalia alleged that Orly had fraudulently transferred approximately $17.3 million and the notes to frustrate Dalia’s claimed right to up to $12.25 million. Dalia’s amended complaint sought a constructive trust, an equitable lien, delivery of the notes, and an injunction.

Bankruptcy court ruling and appeal

The bankruptcy court dismissed the amended complaint on several grounds: Dalia lacked constitutional and prudential standing, her claims were time-barred, and she failed to state claims for relief. It also denied leave to amend. The bankruptcy court later denied reconsideration.

The district court reviewed legal conclusions and dismissals under Rules 12(b)(1) and 12(b)(6) without deference. Rule 12(b)(1) concerns subject-matter jurisdiction, while Rule 12(b)(6) concerns whether a complaint states a legally sufficient claim. The district court affirmed the bankruptcy court’s orders.

Standing

The district court rejected the bankruptcy court’s conclusion that Dalia lacked Article III standing. It held that Dalia had plausibly alleged a concrete monetary injury based on her claim that the alleged transfers denied her the economic benefit of the shares. The court explained that standing is separate from whether Dalia had a valid legal claim or was entitled to relief.

Statute of limitations

The district court held that Dalia’s claims were untimely. Applying the parties’ assumption that New York law governed, it concluded that a six-year limitations period applied to claims seeking a constructive trust or equitable lien. The period began when the alleged wrongful transfer occurred, not when Orly later refused to indemnify Sagi.

The court determined that the alleged wrongful transfer occurred in June 2013 and that the six-year period ended on June 13, 2019. Dalia commenced her bankruptcy adversary proceeding on January 22, 2020. The court rejected her equitable-tolling arguments, reasoning that the 2013 settlement agreement showed that the cash and notes had been transferred to others and that her arguments about when she received or understood the agreement either were not raised below or failed as a matter of law.

Failure to state a claim

The district court also held that the amended complaint failed to state a claim. For a constructive trust, New York law requires a confidential or fiduciary relationship, a promise, a transfer made in reliance on that promise, and unjust enrichment. The court found that Dalia had not plausibly alleged either a fiduciary relationship or a promise by Orly to Dalia. Family ties alone did not establish a fiduciary relationship, and the complaint’s legal conclusions were insufficient.

The court further held that the 2004 agreements showed that Orly promised to indemnify Sagi, not to pay Dalia directly. The court rejected Dalia’s reliance on other pleadings and litigation materials, including materials not incorporated into the amended complaint. Because Dalia had not plausibly alleged a promise by Orly to Dalia, her constructive-trust claim failed.

The equitable-lien claim failed for essentially the same reason. Dalia had not alleged an express or implied agreement that the proceeds of the 2013 settlement would be held as security for an obligation owed by Orly to Dalia.

Leave to amend and reconsideration

The district court affirmed the denial of leave to amend. It agreed that amendment would be futile because the alleged agreements did not contain a promise by Orly to Dalia, and Dalia did not identify a proposed amendment that could cure that defect.

Dalia also appealed the bankruptcy court’s denial of reconsideration, but the district court held that she had forfeited that challenge because she did not explain why the bankruptcy court abused its discretion.

Disposition

The district court affirmed the Bankruptcy Court’s August 12, 2021 and September 1, 2024 orders dismissing Dalia’s claims.