Kahle v. Cargill, Inc.

Background

Philip von Kahle, acting as assignee for the benefit of the creditors of Coex Coffee International, Inc. (referred to as “Coex Miami”), sued Cargill, Inc. He sought to avoid three limited guarantees and avoid and recover more than $91.5 million in transfers from Coex Miami to Cargill. The claims arose under New York or Florida state-law theories of actual and constructive fraud.

Coex Miami had assigned its assets under Florida’s assignment statute, Chapter 727, and the plaintiff began a Florida assignment-of-benefits proceeding. The plaintiff filed this action based on that state insolvency proceeding rather than a federal bankruptcy case.

Earlier dismissal ruling

Cargill moved to dismiss, arguing primarily that the claims were preempted by 11 U.S.C. § 546(g). That provision generally restricts a federal bankruptcy trustee from avoiding certain transfers involving swap agreements. Cargill acknowledged that the plaintiff was an assignee in a Florida state insolvency proceeding, but argued that he was the functional equivalent of a bankruptcy trustee.

In an earlier order, the court granted in part and denied in part Cargill’s motion to dismiss. The court held that federal bankruptcy law did not preempt the plaintiff’s state-law claims because the plain text of § 546(g) applied only to a federal bankruptcy trustee and the proceeding here was a state insolvency proceeding. The court also rejected Cargill’s argument that the claims were impliedly preempted because they conflicted with Congress’s purposes. The earlier order separately rejected field-preemption arguments and dismissed as untimely constructive-fraud claims based on transfers predating July 1, 2017; those rulings were not at issue in this motion.

Motion for interlocutory appeal

Cargill moved under 28 U.S.C. § 1292(b) to certify the preemption ruling for an interlocutory appeal, meaning an appeal before the district court case is finished. Certification required Cargill to show that the order involved a controlling legal question, that there was substantial ground for a difference of opinion, and that an immediate appeal could materially advance the end of the litigation.

The court agreed that the first and third requirements were satisfied. The preemption question was a pure legal issue, and reversing the ruling could result in dismissal of the action. An immediate appeal could therefore materially advance the litigation’s termination.

The court nevertheless found that Cargill failed to satisfy the second requirement. Cargill identified no conflicting authority and relied instead on assertions that the issue was difficult and novel. The court concluded that the statutory text, the absence of a federal bankruptcy proceeding, and the lack of cases applying § 546(g) to bar a state-law avoidance claim did not create a substantial ground for disagreement. The court also found Cargill’s evidence about Congress’s purposes insufficient and speculative.

Disposition

The court denied Cargill’s motion for certification of an interlocutory appeal and directed the Clerk of Court to terminate the motions at ECF Nos. 139 and 140.