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Adversary complaint attacking a complex transaction in federal bankruptcy court.
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{00361715/1}
IN THE UNITED STATES BANKRUPTCY COURT FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
IN RE: TRANSCONTINENTAL REFRIGERATED LINES, INC.,
Debtor in Possession.
TRANSCONTINENTAL REFRIGERATED LINES, INC., by LAWRENCE V. YOUNG, ESQUIRE, LIQUIDATING AGENT,
Plaintiff,
versus NEW PRIME, INC.; STEPHEN P. HROBUCHAK; JANIS HROBUCHAK; NICOLE HROBUCHAK; STEPHEN HROBUCHAK; DAVID HROBUCHAK; LILY LAKE FAMILY TRUST; S&M LEASING, INC.; CHERRY MARINE, LLC; KEVIN DAVIS; JOHN DOE, ERIC KALNIS; JAMES DUGGAN; HANDLER, THAYER & DUGGAN; and HANDLER THAYER, LLP;
Defendants.
Chapter 11 Case No. 5-‐08-‐bk-‐50578
Adversary No. 1-‐10-‐ap-‐__________
ADVERSARY COMPLAINT
Comes now plaintiff, debtor Transcontinental Refrigerated Lines, Inc., by
Lawrence V. Young, Esquire, acting in his capacity as appointed Liquidating Agent
pursuant to the First Amended Plan of Reorganization of Official Unsecured Creditors’
Committee of Transcontinental Refrigerated Lines, Inc., No. 5-‐08-‐bk-‐50578 (July 22,
2009), which was confirmed by Order entered November 16, 2009, and, for its complaint
against defendants, states as follows:
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Jurisdiction & Venue
1. The Court has jurisdiction over this adversary proceeding pursuant to 28
U.S.C. §§ 157(a) and 1334(b).
2. This matter is a core proceeding pursuant to 28 U.S.C. § 157(b)(2).
3. Venue of this adversary proceeding is proper in this Bankruptcy Court
pursuant to 28 U.S.C. § 1409(a).
The Players & Their Parts
4. Plaintiff Transcontinental Refrigerated Lines, Inc. (“Transcon”) is a
corporation organized under the laws of Pennsylvania and debtor in possession in these
Chapter 11 bankruptcy proceedings. Historically, Transcon participated in the freight
transportation market from its base of operations in Pittstown, Pennsylvania.
5. By Order entered November 16, 2009, this Court confirmed the First
Amended Plan of Reorganization of Official Unsecured Creditors’ Committee of
Transcontinental Refrigerated Lines, Inc., filed July 22, 2009 (“First Amended Plan”).
Pursuant to Article V.B of the First Amended Plan, Lawrence V. Young, Esquire was
appointed as Liquidating Agent upon the December 28, 2009 effective date of the First
Amended Plan. See Exhibit A at Art. V.B.
6. Pursuant to Article IV of the First Amended Plan, all property of the
bankruptcy estate and all assets of Transcon vested in the liquidating entity under the
control of the Liquidating Agent. Exhibit A at Art. IV.A.
7. The First Amended Plan expressly provides that “[a]ll causes of action under
Chapter 5 of the Bankruptcy Code, all Claims against third parties, and all other causes of
action and rights belonging to or in favor of [Transcon] [are] preserved and retained for
assertion and enforcement solely and exclusively by, and in the discretion of, the
Liquidating Agent.” Exhibit A at Art. IV.A.
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8. Pursuant to the First Amended Plan, the Liquidating Agent may, in his “sole
discretion, determine whether to . . . initiate any litigation on behalf of the Debtor and . . .
the manner in which such litigation is prosecuted.” Exhibit A at Art. IV.D.
9. Also pursuant to the First Amended Plan, the Liquidating Trustee may
initiate and prosecute all such litigation “without any approval of, or any supervision by,
the Bankruptcy Court.” Id.
10. Accordingly, Lawrence V. Young, Esquire exercises the authority expressly
conferred in the First Amended Plan and, acting in his capacity as court-‐appointed
Liquidating Agent, initiates and prosecutes this action on Transcon’s behalf.
11. The claims set forth in this action each arise in connection with the
December 3, 2007 transaction through which Transcon transferred the bulk of its assets
to defendant New Prime, Inc. See Asset Purchase Agreement (“APA”) (Dec. 3, 2007)
(Exhibit B). As explained below, the structuring of the APA and its related transactions
resulted in Transcon receiving no consideration whatsoever for many of its assets,
including its customer lists, vendor lists, trade secrets, pricing, and its substantial
goodwill and other related intangibles.
12. After learning of Transcon’s asset transfer—which netted Transcon a mere
$29,000.00 in cash at closing—certain of Transcon’s numerous creditors filed an
involuntary bankruptcy petition on February 29, 2008.
13. On March 28, 2008, the Debtor consented to the entry of an order for relief
and, on March 31, 2008, an order was entered converting the case to one under Chapter 11.
14. Defendant New Prime, Inc. (“New Prime”) is a corporation organized
under the laws of Nebraska that maintains a principal place of business at 2740 North
Mayfair, P.O. Box 4208, Springfield, Missouri 65808-‐4208.
15. On December 3, 2007, New Prime acquired virtually all of the assets of
debtor Transcon, including Transcon’s valuable customer lists, vendor lists, trade secrets,
pricing, goodwill and other intangible property pursuant to the APA.
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16. At the same time it acquired Transcon’s assets, New Prime also acquired the
Pittstown, Pennsylvania property on which Transcon’s facilities were located. The real
estate transaction proceeded according to a separate Agreement to Purchase Real Estate
(“APRE”) (Exhibit C).
17. The real estate New Prime acquired under the APRE consisted of three
separate parcels, one of which was conveyed by defendant (and Transcon owner) Stephen
P. Hrobuchak (2.0 acres), another by defendant S&M Leasing, Inc. (7.78 acres), and the
third by domestic trust, Lily Lake Family Trust (“Lily Lake”)1 (11.52 acres).
18. In exchange for the three parcels aggregating 21.3 acres, New Prime paid
$5,902,000.00, representing a per-‐acre price in excess of $275,000.00.
19. In addition to the APA and APRE, New Prime also entered into a Covenant
Not to Compete (“Covenant”) with defendant Cherry Marine, LLC. See Exhibit D.
20. Like the APA and APRE, the Covenant took effect on December 3, 2007.
Pursuant to the Covenant, New Prime paid defendant Cherry Marine, LLC a combined
sum of $1,000,000.00, $940,000.00 of which was paid in exchange for the promise of
Cherry Marine and the promise of Hrobuchak, in his personal capacity, to refrain from
competing with New Prime for a period of five years and to maintain as confidential the
valuable business information, including customer lists, vendor lists, trade secrets,
pricing, employee information, and other vital business information New Prime had
acquired from Transcon.
21. In addition to serving as consideration for the promises described above,
the remaining $60,000.00 paid to Cherry Marine, LLC served as consideration for New
Prime’s employment of Cherry Marine, LLC, in the person of its managing member,
defendant Stephen P. Hrobuchak, for a period of six months from closing of the APA.
1 Lily Lake Family Trust, which is referred to throughout as Lily Lake, no longer exists and, for that reason, is not a defendant in this matter. Each of Lily Lake’s five beneficiaries are, however, named as individual defendants based on the nature of the assets Lily Lake distributed upon its termination. Also named as a defendant is the currently-‐constituted Lily Lake Family Trust, which, being organized under the laws of Cook Island, is referenced throughout as the “Cook Island Trust.”
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22. Defendant Stephen P. Hrobuchak (“Hrobuchak”) is a natural person
who claims as his principal residence an ocean-‐going vessel moored at various and sundry
ports of call throughout the year. When not on the high seas, Hrobuchak can be found
either in Florida, North Carolina, or Pennsylvania. When in Pennsylvania, Hrobuchak
stays with his family at Box 180A, Lily Lake Road, Dalton, Pennsylvania, which is a private
residence owned by nonparty Stephen P. Hrobuchak Family Trust.
23. At all times material to this complaint, Hrobuchak has been the owner of
100% of Transcon’s outstanding stock.
24. Hrobuchak is also the former owner of the 2.0 acre parcel of real property
New Prime acquired under the APRE.
25. Hrobuchak initiated, negotiated, and structured the transaction through
which New Prime acquired Transcon’s assets under the APA and the real property
transferred under the APRE.
26. Hrobuchak executed the APA on behalf of Transcon.
27. Hrobuchak executed the APRE in three separate capacities, once on his own
individual behalf, again in his capacity as President of S&M Leasing, Inc., and a third time
as trustee of the then-‐United-‐States-‐based Lily Lake Family Trust (“Lily Lake”).
28. In addition to his ownership of Transcon and the 2.0 acre parcel transferred
under the APRE, defendant Hrobuchak, as described more fully below, maintains
interests in each of the three other entities that received consideration in connection with
the New Prime transaction, including fifty percent ownership interests in Cherry Marine,
LLC and S&M Leasing, Inc., and an interest as a beneficiary of Lily Lake.
29. Defendant Janis Hrobuchak (“Mrs. Hrobuchak”) is a natural person
having, on information and belief, an address of Box 180A, Lily Lake Road, Dalton,
Pennsylvania.
30. Mrs. Hrobuchak is the wife of Hrobuchak and, as explained below,
maintains interests in each of the three entities that received funds in connection with
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the New Prime transaction, i.e., fifty percent ownership interests in Cherry Marine, LLC
and S&M Leasing, Inc., and an interest as a beneficiary of Lily Lake.
31. Defendants Nichole Hrobuchak, Stephen Hrobuchak, and David
Hrobuchak (collectively, with Hrobuchak and Mrs. Hrobuchak, the “Lily Lake
Beneficiaries”) are natural persons and named here in their capacities as beneficiaries of
Lily Lake, which received value in connection with the APRE transaction that was
subsequently disbursed to the Lily Lake Beneficiaries.
32. On information and belief, Nichole Hrobuchak has an address of Box 180A,
Lily Lake Road, Dalton, Pennsylvania.
33. On information and belief, Stephen Hrobuchak has an address of Box 180A,
Lily Lake Road, Dalton, Pennsylvania.
34. On information and belief, David Hrobuchak has an address of Box 180A,
Lily Lake Road, Dalton, Pennsylvania.
35. Defendant Lily Lake Family Trust (“Cook Island Trust”) is a trust
organized under the laws of Cook Island. Mrs. Hrobuchak is the sole beneficiary of the
Cook Island Trust, which is administered by a foreign entity known as PacSouth.
36. The Cook Island Trust was created upon the termination of Lily Lake,
which, as noted, owned the third piece of real estate transferred to New Prime pursuant
to the APRE.
37. On information and belief, the Cook Island Trust came into being on the
APA’s and APRE’s December 3, 2007 closing date. On information and belief, following
distribution to the Lily Lakes Beneficiaries, Lily Lake dissolved and the sums attributable
to the beneficial interests Hrobuchak and Mr. Hrobuchak held in Lily Lake were, along
with other unknown assets, ultimately deposited in the Cook Island Trust.
38. Defendant S&M Leasing, Inc. (“S&M”) is a corporation organized
pursuant to the laws of Pennsylvania having a principal place of business at 130
Armstrong Road, Pittstown, Pennsylvania 18640.
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39. Hrobuchak and Mrs. Hrobuchak each own 50% of S&M’s stock.
40. S&M was the owner of one of the three parcels transferred to New Prime by
means of the December 3, 2007 APRE.
41. Hrobuchak, acting in his capacity as President of the corporation, executed
the APRE on S&M’s behalf.
42. Defendant Cherry Marine, LLC (“Cherry Marine”) is a limited liability
company organized under the laws of Nevis (a 36-‐square-‐mile island in the West Indies).
43. Hrobuchak and Mrs. Hrobuchak, each own an equal 50% interest in Cherry
Marine.
44. Hrobuchak is Cherry Marine’s managing member.
45. As described above, in connection with the New Prime Transaction, New
Prime employed Cherry Marine, in the person of Hrobuchak, for a period of six months in
exchange for $60,000.00 in compensation.
46. In exchange for that employment, and an additional $940,000.00 payment,
Cherry Marine and Hrobuchak, in his personal capacity, both promised New Prime to
refrain from competing with New Prime for a period of five years and to maintain as
confidential the valuable business information New Prime had acquired from Transcon.
47. At the December 3, 2007 closing, New Prime disbursed $940,000.00 for the
benefit of Cherry Marine pursuant to the Covenant. The distribution consisted of (1) a
$240,000.00 direct deposit into Cherry Marine’s Swiss bank account, and (2) a
$700,000.00 deposit into escrow for subsequent payment to Cherry Marine. All or
substantially all of the escrowed $700,000.00 payment was subsequently released to
Cherry Marine.
48. Defendant Kevin A. Davis (“Davis”) is a natural person having a last-‐
known business address of 130 Armstrong Road, Pittstown, Pennsylvania 18640.
49. Davis is Transcon’s former Chief Financial Officer (“CFO”).
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50. As Transcon’s CFO, Davis participated in negotiation of the APA and was
responsible for assuring that Transcon received consideration for the transfer of its
valuable property, which included Transcon’s customer lists, vendor lists, trade secrets,
pricing, goodwill and other valuable intangible assets to which the APA allocated no
value whatsoever.
51. Defendant John Doe (“Doe”) is a natural person having a place of
residence and/or business in Boston, Massachusetts.
52. Doe is an accountant who advertises and provides services intended to
protect the personal assets of high-‐net-‐worth individuals.
53. After locating Doe by means of an internet search, Hrobuchak contacted
Doe at some point during the first half of 2007.
54. On information and belief, Hrobuchak contacted Doe for the purpose of
obtaining advice regarding how best to maximize and protect his personal assets in
connection with his efforts to market Transcon and/or its assets to interested buyers.
55. On information and belief, Doe was aware that Hrobuchak was seeking to
accumulate and protect personal assets at the expense of Transcon’s creditors.
56. On information and belief, Doe materially assisted Hrobuchak in the
execution of that scheme by referring Hrobuchak to defendant Handler, Thayer &
Duggan.
57. On information and belief, Doe collected a monetary fee from Hrobuchak
as remuneration for his professional services.
58. On information and belief, defendant Handler, Thayer & Duggan and/or its
individual partners compensated Doe for referring Hrobuchak to the firm, either by
making a monetary payment or through other means.
59. Defendant Handler Thayer & Duggan, LLC (“HTD”) is a limited liability
company organized under the laws of Illinois, having a principal place of business at 191
North Wacker Drive 23rd Floor Chicago, Illinois 60606.
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60. HTD is a professional service firm principally engaged in the practice of law.
61. Defendant Eric Kalnis is a natural person and member of HTD having an
office address of 191 North Wacker Drive 23rd Floor Chicago, Illinois 60606.
62. In bankruptcy proceedings, Hrobuchak has testified that Kalnis personally
represented Transcon in connection with the New Prime transactions.
63. Defendant James Duggan is a natural person and partner of HTD having
an office address of 191 North Wacker Drive 23rd Floor Chicago, Illinois 60606.
64. In bankruptcy proceedings, Hrobuchak has testified that Duggan personally
represented Hrobuchak on asset protection matters arising in connection with Transcon’s
entry into the APA, Hrobuchak’s entry into the APRE on his own behalf, in his capacity as
trustee of Lily Lake and as President of S&M, Cherry Marine’s entry into the Covenant,
the creation of off-‐shore asset protection entities and other related matters.
65. Defendant Handler Thayer, LLP is a professional services firm located at
191 N. Wacker Drive 23rd Floor Chicago, Illinois 60606.
66. Handler Thayer is, on information and belief, a successor entity to HTD and
references to HTD should be understood to include Handler Thayer as successor entity.
Statement of Facts
67. In early 2007, Transcon experienced losses running into the millions of
dollars and, based on those losses, Hrobuchak decided that it had come time to sell.
68. Once he decided to sell the business, Hrobuchak made several phone calls
to contacts he had within the freight transportation business, including New Prime and at
least two other companies, Navajo Express and Priority.
69. New Prime, in the person of its owner, Robert Low, expressed interest in
acquiring Transcon and, within a week, Mr. Low visited the Transcon facilities to discuss
the potential acquisition.
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A. The New Prime Transaction
70. At first, the proposed transaction called for the sale in which New Prime
would acquire all of Transcon’s assets and debts.
71. After the initial negotiations, however, the deal “went a little cool,” and a
period of a few months passed without any activity toward a transaction.
72. At some point, the transaction that Transcon and New Prime contemplated
moved from a complete sale to a transfer that included only certain assets.
73. Throughout the negotiations leading up to the December 2007 transaction,
New Prime also intended to acquire the property on which Transcon’s facilities were
located, which, as described above, consisted of three separate parcels, which were owned
by Hrobuchak and entities that he controlled.
74. At some point in the month to month-‐and-‐a-‐half prior to the December 3,
2007 closing date, the transaction was reduced to a written Asset Purchase Agreement.
See Exhibit B.
75. Despite the fact that, through the APA, New Prime acquired most of
Transcon’s assets, the APA obligated New Prime to pay Transcon only an unadjusted
$886,273.00, which sum was allocated only among the specific assets identified on
Schedules A and B of the APA. Schedule A included assets in the nature of licenses,
permits, insurance, tires, parts and fuel, for which New Prime was to pay an unadjusted
$786,273.00. Schedule B included assets in the nature of office equipment for which New
Prime was to pay Transcon $100,000.00.
76. In addition to the payments attributable to the Schedule A and B assets,
New Prime also purchased the four equipment leases identified on Schedule C, for which
New Prime paid $29,080.69.
77. The total unadjusted price Transcon was to receive for all assets it was
transferring to New Prime was $915,353.00.
78. At closing, the sales price was subjected to adjustments for (1) increased
debt in the amount of $4,094.69; (2) a $50,000.00 earnest money deposit; (3) a “tire
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adjustment” of $37,468.43; (4) a “parts adjustment” of $111,507.30; (5) a $147,520.35
adjustment for existing owner/operator liabilities; (6) existing driver payables in the
amount of $38,325.00; and (7) existing employee payables in the amount of $196,718.48.
79. In addition to the adjustments that deducted money from the closing price,
$300,000.00 of the purchase price was to be escrowed.
80. After being subjected to the various adjustments, the total amount due
Transcon at closing was reduced to $29,018.75.
81. Most significantly, the transaction between Transcon and New Prime
allocated no value whatsoever to many of the assets being transferred, including the most
valuable property in Transcon possession—it’s customer lists, vendor lists, trade secrets,
pricing, goodwill and other intangible property.
82. Despite allocating no value to Transcon’s intangible property, New Prime’s
owner, Bob Low, made it clear in an interview that New Prime was not merely acquiring
Transcon’s assets, but acquiring Transcon’s customers and existing business, i.e.,
acquiring Transcon’s goodwill:
This is a promising opportunity for us in a region of the country that compliments our freight network and driver base. . . . We appreciate Mr. Hrobuchak’s confidence in us to maintain the strong customer service for the customers that TRL have been serving. TRL was a good company focused on service, and I am confident that all customers and the drivers will see positive benefits from this transaction.
Interview printed at HiringTruckDrivers.com, January 3, 2008 (Exhibit D).
83. Although the APA allocated no value to the goodwill and other intangible
assets New Prime was acquiring from Transcon, New Prime nevertheless recognized that
those assets possessed considerable value.
84. Indeed, New Prime considered those assets to be so valuable that it paid
Cherry Marine $1,000,000.00 to protect those assets from disclosure and competition for a
five year period.
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85. Of the $1,000,000.00 payment New Prime made to Cherry Marine, fully
$940,000.00 was dedicated solely to the protection and preservation of assets for which,
by reference to the APA, New Prime paid not a single penny.
86. Because Transcon’s goodwill and other valuable intangible property was
transferred without consideration in an intentional effort to hinder, delay, or defraud
Transcon’s creditors, the transaction is avoidable as fraudulent to Transcon’s creditors.
87. Alternatively, because Transcon’s goodwill and other valuable intangible
property was transferred without consideration and left Transcon insolvent, the
transaction is avoidable as fraudulent to Transcon’s creditors.
88. Alternatively, because Transcon’s goodwill and other valuable intangible
property was transferred without consideration and left Transcon with unreasonably
small capital, the transaction is avoidable as fraudulent to Transcon’s creditors.
B. The Value Attributable to Transcon’s Intangibles
89. As a practical matter, however, New Prime did pay for the goodwill and
other valuable intangible property it acquired from Transcon, it just didn’t pay Transcon.
90. Instead of paying Transcon for its valuable intangible property, Hrobuchak,
with New Prime’s agreement and acquiescence, funneled that substantial payment to
himself and his family members through two different means.
91. First, Hrobuchak, with New Prime’s agreement and acquiescence, funneled
a portion of the funds that New Prime was willing to pay to acquire Transcon’s intangible
property through the APRE by radically over-‐valuing the real estate assets to be conveyed
in that agreement.
92. With New Prime’s agreement and acquiescence, Hrobuchak inflated the
portion of the purchase price attributable to real estate value and depressed that portion
attributable to the assets New Prime acquired through the APA.
93. Second, in addition to the intentional misallocation of purchase price
between the APA and APRE, Hrobuchak also funneled value attributable to Transcon’s
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goodwill and other intangible assets into the Covenant such that Cherry Marine received
a considerable portion of the value attributable to those assets at Transcon’s expense.
1. The Scheme to Shift Value from the APA to the APRE
94. Hrobuchak was personally responsible for the decisions regarding the
manner in which the total purchase price was allocated among the assets transferred in
the APA and the real estate transferred under the APRE.
95. Prior to allocating the value of $5,902,000.00 to the three parcels conveyed
in the APRE, Hrobuchak did not have the property appraised for the purpose of
determining fair market value.
96. Although Hrobuchak purports to have discussed appraised values with New
Prime, Hrobuchak did not know the appraised value of any of the three properties.
97. Hrobuchak did not conduct any investigation to determine the fair market
value of the physical assets that were being transferred under the APA. Instead,
Hrobuchak took a paper and pencil, figured out what he wanted for the property, and put
a number on it.
98. In allocating the total price New Prime was willing to pay for the Transcon
assets and the real property, Hrobuchak radically over-‐valued the real estate in which he
and his family maintained personal interests.
99. In allocating the total price New Prime was willing to pay for the Transcon
assets and the real property, Hrobuchak radically under-‐valued the assets in which
Transcon and its creditors maintained interests and, indeed, did not place any value at all
on considerable goodwill and other intangible property being conveyed to New Prime.
100. By over-‐allocating value to the real property in which Hrobuchak and his
family maintained personal interests, Hrobuchak defrauded Transcon and its creditors by
conveying property of the estate, in the form of funds New Prime paid for purposes of
acquiring Transcon’s goodwill and other intangibles, to himself and his family members.
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101. At closing, Hrobuchak received property of the estate, in the form of value
properly attributable to Transcon assets, e.g., its goodwill and other intangible property,
in exchange for the sale of his parcel of real property to New Prime.
102. Hrobuchak did not provide Transcon with any consideration, let alone
reasonably equivalent consideration, in exchange for that property of the estate.
103. At closing, S&M received property of the estate, in the form of value
properly attributable to Transcon assets, e.g., its goodwill and other intangible property,
in exchange for the sale of his parcel of real property to New Prime.
104. S&M did not provide Transcon with any consideration, let alone reasonably
equivalent consideration, in exchange for that property of the estate.
105. At closing, Lily Lake received property of the estate, in the form of value
properly attributable to Transcon assets, e.g., its goodwill and other intangible property,
in exchange for the sale of his parcel of real property to New Prime.
106. Lily Lake did not provide Transcon with any consideration, let alone
reasonably equivalent consideration, in exchange for that property of the estate.
107. The property of the estate that was conveyed without consideration to
Hrobuchak, S&M, and Lily Lake by means of the over-‐allocation of value to real property
was conveyed with the specific intent to hinder, delay, or defraud Transcon’s creditors
and thereby enrich Hrobuchak and his family at the expense of those creditors.
108. Alternatively, the property of the estate that was conveyed without
consideration to Hrobuchak, S&M, and Lily Lake by means of the over-‐allocation of value
to real property left Transcon insolvent.
109. Alternatively, the property of the estate that was conveyed without
consideration to Hrobuchak, S&M, and Lily Lake by means of the over-‐allocation of value
to real property left Transcon with unreasonably small capital such that Transcon would
be obviously unable to satisfy the claims of its creditors.
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110. Following Lily Lake’s receipt of its portion of the closing price under the
APRE, Lily Lake made a final distribution of trust assets among the Lily Lake Beneficiaries
and terminated.
111. Thus, property of the estate that was conveyed without consideration to
Lily Lake by means of the fraudulent over-‐allocation of value to real property was
subsequently transferred to the Lily Lake Beneficiaries, i.e., Hrobuchak, Mrs. Hrobuchak,
Nichole Hrobuchak, Stephen Hrobuchak, and David Hrobuchak.
112. Following that distribution, certain Lily Lake Beneficiaries settled the Cook
Island Trust with property of the estate Lily Lake had received by means of the fraudulent
over-‐allocation of value to real property.
113. Accordingly, whether as initial transferees or as subsequent transferees,
Hrobuchak, S&M, the Lily Lake Beneficiaries, and the Cook Island Trust are each in
possession of property of the estate subject to recovery as a fraudulent conveyance.
2. The Scheme to Funnel Value to Cherry Marine
114. As explained above, at the same time it closed on the APA and APRE, New
Prime paid $940,000.00 in connection with the Cherry Marine Covenant, through which
New Prime received the promise of Cherry Marine and the promise of Hrobuchak, in his
personal capacity, to refrain from competing with New Prime for a period of five years
and to maintain as confidential the valuable business information, including customer
lists, vendor lists, trade secrets, pricing, employee information, and other vital business
information New Prime had acquired from Transcon.
115. New Prime paid Cherry Marine an additional $60,000.00 as consideration
both for the promises Cherry Marine and Hrobuchak provided in the Covenant and as
compensation for its employment of Cherry Marine, in the person of Hrobuchak, for a
six-‐month period.
116. The $1,000,000.00 sum that New Prime paid Cherry Marine was paid in
connection with property that, as far as the APA was concerned, had no value, i.e.,
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Transcon’s customer lists, vendor lists, trade secrets, pricing, goodwill and other
intangible property.
117. As also explained above, however, shortly after the transaction, New Prime
specifically noted its acquisition of Transcon’s goodwill and other intangible property.
118. It is therefore believed and alleged that the value New Prime transferred to
Cherry Marine was transferred in consideration of Transcon’s goodwill and other
intangible property.
119. It is further believed, and therefore alleged, that Hrobuchak extended the
promises in the Covenant through Cherry Marine for fraudulent purposes.
120. It is further believed, and therefore alleged, that, with the knowing
assistance of asset protection professionals as described below, Hrobuchak schemed to
funnel the proceeds of Transcon’s sale of assets including goodwill and other intangible
property to Cherry Marine, such that Hrobuchak and the entities he controlled would
profit at the expense of Transcon and its creditors.
121. It is further believed, and therefore alleged, that New Prime was a knowing
participant in Hrobuchak’s fraudulent scheme to funnel value attributable to Transcon
assets to Cherry Marine such that Hrobuchak and the entities he controlled would profit
at the expense of Transcon and its creditors.
122. It is further believed, and therefore alleged, that, in exchange for its
knowing participation in Hrobuchak’s scheme, New Prime acquired certain of Transcon’s
assets, including its goodwill and other intangible property, at a substantial discount to
their actual value.
123. It is further believed, and therefore alleged, that Cherry Marine was a
knowing participant in Hrobuchak’s scheme to funnel value attributable to Transcon
assets to Cherry Marine such that Hrobuchak and the entities he controlled would profit
at the expense of Transcon and its creditors.
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124. It is further believed, and therefore alleged, that, in his capacity as
Transcon’s CEO, defendant Davis was a knowing participant in Hrobuchak’s scheme to
funnel value attributable to Transcon assets to Cherry Marine such that Hrobuchak and
the entities he controlled would profit at the expense of Transcon and its creditors.
125. It is further believed, and therefore alleged, that defendant Davis received
some form of remuneration for his cooperation in Hrobuchak’s scheme to funnel value
attributable to Transcon assets to Cherry Marine such that Hrobuchak and the entities he
controlled would profit at the expense of Transcon and its creditors.
C. The Role of the Professionals
126. As Hrobuchak testified during his deposition, HTD provided legal services
in connection with the New Prime Transaction.
127. Hrobuchak testified that defendant Kalnis ostensibly represented the
interests of Transcon in connection with the New Prime transaction.
128. Hrobuchak testified that defendant Duggan represented the interests of
Hrobuchak in connection with the New Prime transaction.
129. Accordingly, HTD simultaneously provided legal counsel to Transcon and
Hrobuchak with regard to the New Prime transaction.
130. Transcon’s interest in the New Prime transaction was to maximize the value
it received in exchange for the assets being sold under the APA.
131. Hrobuchak’s interest in the New Prime transaction was to (a) maximize the
value received in exchange for the real estate being sold under the APRE; (b) maximize
the value he could divert from Transcon to himself and entities he controlled; and (c)
protect personal assets from the risk they would be sought by creditors of Transcon in the
wake of a transaction that left Transcon insolvent.
132. In short, the interests of Transcon and Hrobuchak were, as far as the New
Prime transaction was concerned, directly adverse.
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133. Despite the obvious adversity between Hrobuchak and Transcon as regards
the New Prime transactions, Hrobuchak testified that neither Kalnis nor Duggan ever
advised him (or, necessarily, Transcon) of the risks attending HTD’s dual representation
of Hrobuchak and Transcon.
134. Based on Hrobuchak’s testimony and the manner in which the New Prime
transaction was structured, it is believed, and therefore, alleged that Kalnis, Duggan, and
HDR failed to protect the interests of their client, Transcon, in connection with the New
Prime transaction.
135. It is further believed and alleged that the failure of Kalnis, Duggan, and
HDR to protect Transcon’s interest in the New Prime transaction was intentional and
undertaken for purposes of maximizing Hrobuchak’s gain and their own fee.
136. Based on Hrobuchak’s testimony and the manner in which the New Prime
transaction was structured, it is believed, and therefore, alleged that Kalnis, Duggan, and
HTD knowingly assisted in the development of a fraudulent scheme to funnel value
attributable to Transcon assets away from Transcon and its creditors and to Hrobuchak,
his family, and other entities in which Hrobuchak maintained a financial interest.
137. It is further believed, and therefore alleged, that Kalnis, Duggan, and HDR
affirmatively worked with Hrobuchak, New Prime and New Prime’s counsel to funnel
assets away from Transcon and its creditors despite the facts that HDR represented
Transcon in a transaction adverse to Hrobuchak and New Prime.
138. Based on Hrobuchak’s testimony and the manner in which the New Prime
transaction was structured, it is believed, and therefore, alleged that Kalnis, Duggan, and
HTD knowingly assisted in the execution of a fraudulent scheme to funnel value
attributable to Transcon assets away from Transcon and its creditors and to Hrobuchak,
his family, and other entities in which Hrobuchak maintained a financial interest.
139. It is further believed, and therefore alleged, that, in exchange for their
knowing assistance in the development and execution of Hrobuchak’s fraudulent scheme,
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Kalnis, Duggan, and HTD received remuneration in the form of a fee for services, the
amount and form of which is currently unknown.
140. Hrobuchak has also testified that he was referred to HTD by a Boston
accountant he located during the course of an internet search. The identity of that
accountant being the subject of uncertainty despite Hrobuchak’s promise to provide the
information, the accountant is joined here as John Doe.
141. It is believed, and therefore alleged, that Hrobuchak sought John Doe’s
advice for purposes of developing and executing a fraudulent scheme to funnel value
attributable to Transcon assets away from Transcon and its creditors and to Hrobuchak,
his family, and other entities in which Hrobuchak maintained a financial interest.
142. It is further believed, and therefore alleged, that John Doe knowingly
participated in Hrobuchak’s fraudulent scheme by referring Hrobuchak to HTD for
purposes of developing and executing a plan to funnel value attributable to Transcon
assets away from Transcon and its creditors and to Hrobuchak, his family, and other
entities in which Hrobuchak maintained a financial interest.
143. It is further believed, and therefore alleged, that, in exchange for his
knowing assistance in the development and execution of Hrobuchak’s fraudulent scheme,
John Doe received, from Hrobuchak and/or HTD, remuneration in the form of a fee for
services, the amount and form of which is currently unknown.
COUNT I – COMMON LAW FRAUD (versus New Prime, Hrobuchak, S&M & Cherry Marine)
144. Plaintiff incorporates all the foregoing paragraphs of its complaint as
though fully set forth herein.
145. New Prime, Hrobuchak, and S&M intentionally misrepresented the value of
the real estate New Prime was acquiring through the APRE by allocating an amount of
the total purchase price to the real estate that significantly exceeded its market value.
146. New Prime and Hrobuchak intentionally misrepresented the value of the
Transcon assets New Prime was acquiring pursuant to the APA by (1) intentionally
{00361715/1} 20
excluding Transcon’s valuable goodwill and other intangible assets from the APA’s
schedules even though New Prime was, in fact, acquiring those assets and (2) allocating a
significantly lower portion of the purchase price to the assets transferred under the APA
than warranted by reference to the value of the assets actually transferred.
147. New Prime, Hrobuchak, and Cherry Marine intentionally misrepresented
the purpose of the Covenant’s $1,000,000.00 payment as being to protect New Prime from
competition and to protect the confidential information, goodwill and other intangible
property New Prime had acquired from Transcon.
148. In reality, the $1,000,000.00 payment New Prime made to Cherry Marine
pursuant to the Covenant was a payment made on account of New Prime’s acquisition of
Transcon’s goodwill and other intangible property.
149. Each of the misrepresentations made by New Prime, Hrobuchak, S&M
and/or Cherry Marine was memorialized and uttered in written documents prepared in
connection with the New Prime transaction.
150. In addition to the forgoing affirmative misrepresentations, New Prime,
Hrobuchak, S&M and Cherry Marine all concealed material facts, including the actual
value of the real estate being transferred under the APRE and the reality that the value
New Prime was paying for Transcon’s goodwill and other intangible property was being
diverted to Cherry Marine for the personal benefit of Hrobuchak and Mrs. Hrobuchak.
151. New Prime, Hrobuchak, S&M, and Cherry Marine intended that Transcon
rely on the foregoing misrepresentations as accurately reflecting the nature of the
Transcon assets transferred to New Prime, the value properly attributable to those assets,
the value properly attributable to the real estate New Prime was acquiring, and the
purpose of the Cherry Marine Covenant.
152. Transcon did rely on the foregoing misrepresentations accurately reflecting
the nature of the Transcon assets transferred to New Prime, the value properly
{00361715/1} 21
attributable to those assets, the value properly attributable to the real estate New Prime
was acquiring, and the purpose of the Cherry Marine Covenant.
153. Because the New Prime transaction resulted in Transcon failing to receive
any value in connection with the transfer of perhaps its most valuable assets, i.e., its
goodwill and other intangible property, Transcon incurred damages in an amount to be
proven at trial (but in no event less than the full value, as of December 3, 2007, of the
assets transferred), as a proximate result of its reliance on the forgoing
misrepresentations of New Prime, Hrobuchak, S&M, and Cherry Marine.
154. New Prime, Hrobuchak, S&M, and Cherry Marine each profited as a direct
result of the foregoing misrepresentations, which were specifically intended to enrich
New Prime, Hrobuchak, S&M, and Cherry Marine at the expense of Transcon and its
creditors.
155. The conduct of New Prime, Hrobuchak, S&M and Cherry Marine was
intentional and outrageous such as supports an award of exemplary damages.
WHEREFORE plaintiff requests that the Court enter a judgment in Transcon’s
favor finding New Prime, Hrobuchak, S&M and Cherry Marine liable for their fraudulent
misrepresentation and awarding Transcon actual damages in an amount to be proven at
trial, punitive damages, and all such other relief as the Court deems just and proper.
COUNT II – CIVIL CONSPIRACY (versus New Prime, Hrobuchak, S&M, Cherry Marine,
Davis, Doe, Kalnis, Duggan, & HTD)
156. Plaintiff incorporates all the foregoing paragraphs of its complaint as
though fully set forth herein.
157. As set forth above, New Prime, Hrobuchak, S&M, and Cherry Marine made
fraudulent misrepresentations on which Transcon relied to its detriment when it
executed the APA.
158. New Prime, Hrobuchak, S&M, and Cherry Marine combined with a
common purpose to perform the unlawful act of defrauding Transcon and, by extension,
{00361715/1} 22
its creditors, out of value properly attributable to Transcon assets, including its goodwill
and other intangible assets.
159. The misrepresentations contained in the APA, the APRE, and the Covenant
constitute overt acts committed in pursuit of the common unlawful purpose.
160. As explained above, as a result of its reliance on the misrepresentations of
New Prime, Hrobuchak, S&M, and Cherry Marine, Transcon has suffered actual damages
in an amount to be proven at trial but in no event less than the full value, as of December
3, 2007, of the assets transferred, including the full value of its goodwill and other
valuable intangible property.
161. On information and belief, defendants Doe, Davis, Kalnis, Duggan, and
HTD combined with New Prime, Hrobuchak, and/or Cherry Marine in furtherance of the
scheme to defraud Transcon and, by extension, its creditors, out of value properly
attributable to Transcon assets, including its goodwill and other intangible assets.
162. On information and belief, defendant Doe committed an overt act in
furtherance of the conspiracy when, after learning of Hrobuchak’s fraudulent intent, Doe
referred Hrobuchak to HDR for legal assistance with his scheme.
163. On information and belief, defendant Davis committed an overt act in
furtherance of the conspiracy when Davis assisted New Prime and Hrobuchak in their
efforts to misallocate value between the APA and APRE and thereby funnel value properly
attributable to Transcon assets to Hrobuchak, his family, and entities in which he
maintained a financial interest.
164. On information and belief, defendants Kalnis, Duggan, and HTD
committed overt acts in furtherance of the conspiracy when they agreed to represent both
Transcon and Hrobuchak, as well as the entities he controlled, for purposes of benefiting
Hrobuchak (and themselves) at the expense of Transcon and its creditors.
165. On information and belief, Kalnis, Duggan, and HTD committed additional
overt acts by advising Hrobuchak with respect to the misallocation of value between the
{00361715/1} 23
APA and APRE, the creation of and entry into the Covenant between New Prime and
Cherry Marine, the post-‐closing dissolution of Lily Lake, the creation and funding of the
Cook Island Trust, and numerous other legal strategies designed to protect assets
siphoned out of Transcon in connection with the New Prime transaction.
166. Transcon suffered actual damages in an amount to be proven at trial (but in
no event less than the full value, as of December 3, 2007, of the assets transferred) as a
proximate result of defendants’ conspiracy to defraud Transcon.
167. The conspiratorial conduct of New Prime, Hrobuchak, S&M, Cherry Marine,
Davis, Doe, Kalnis, Duggan, and HTD was intentional and outrageous such as supports an
award of exemplary damages.
WHEREFORE plaintiff requests that the Court enter a judgment in Transcon’s
favor finding New Prime, Hrobuchak, S&M, Cherry Marine, Davis, Doe, Kalnis, Duggan,
and HTD liable for conspiracy to defraud and awarding Transcon actual damages in an
amount to be proven at trial, punitive damages, and all such other relief as the Court
deems just and proper.
COUNT III – FRAUDULENT TRANSFER PURSUANT TO 11 U.S.C. § 548(a)(1)(A) (versus New Prime)
168. Plaintiff incorporates all the foregoing paragraphs of its complaint as
though fully set forth herein.
169. Transcon received far less than reasonably equivalent value in connection
with the transfer of its assets.
170. Indeed, Transcon received no consideration at all in connection with the
transfer of its goodwill and other intangible property to New Prime.
171. The transaction with New Prime was made with the specific intent to
hinder, delay or defraud Transcon’s existing creditors and, in so doing, enrich Hrobuchak
and his family at the expense of those creditors.
172. Accordingly, the transfer of Transcon’s assets, including the transfer of its
goodwill and other intangible property, was constructively fraudulent as to Transcon’s
{00361715/1} 24
creditors and, as such, the Liquidating Agent is entitled to recover the value of the
transfers for the benefit of the Transcon estate.
WHEREFORE plaintiff respectfully requests that this Court enter a judgment
ordering that New Prime turn over, for the benefit of the estate, the full value of assets,
including goodwill and other intangible property, New Prime received without payment
of consideration, together with all such other relief as the Court deems just and proper.
COUNT IV – FRAUDULENT TRANSFER PURSUANT TO 11 U.S.C. § 548(a)(1)(B) (versus New Prime)
173. Plaintiff incorporates all the foregoing paragraphs of its complaint as
though fully set forth herein.
174. Transcon received far less than reasonably equivalent value in connection
with the transfer of its assets.
175. Indeed, Transcon received no consideration at all in connection with the
transfer of its goodwill and other intangible property to New Prime.
176. The transaction with New Prime resulted in Transcon’s insolvency, i.e., left
Transcon in a financial condition such that the sum of its debts exceeded all of Transcon’s
remaining property at a fair valuation.
177. Alternatively, the transaction with New Prime left Transcon with
unreasonably small capital such that Transcon would be obviously unable to satisfy the
claims of its creditors.
178. Accordingly, the transfer of Transcon’s assets, including the transfer of its
goodwill and other intangible property, was constructively fraudulent as to Transcon’s
creditors and, as such, the Liquidating Agent is entitled to recover the value of the
transfers for the benefit of the Transcon estate.
WHEREFORE, plaintiff respectfully requests that this Court enter a judgment
ordering that New Prime turn over, for the benefit of the estate, the full value of assets,
including goodwill and other intangible property, New Prime received without payment
of consideration, together with all such other relief as the Court deems just and proper.
{00361715/1} 25
COUNT V – FRAUDULENT TRANSFER PURSUANT TO 11 U.S.C. § 548(a)(1)(A) (versus Hrobuchak, S&M, Lily Lake Beneficiaries, Cook Island Trust)
179. Plaintiff incorporates all the foregoing paragraphs of its complaint as
though fully set forth herein.
180. Upon closing of the APRE, Hrobuchak, S&M, and Lily Lake received
property of the estate, in the form of value properly attributable to Transcon assets
including goodwill and other intangible property, in exchange for the sale of real property
to New Prime.
181. Neither Hrobuchak, S&M, nor Lily Lake provided Transcon with any
consideration, let alone reasonably equivalent consideration, in exchange for the property
of the estate they received in connection with the APRE.
182. The property of the estate that was conveyed without consideration to
Hrobuchak, S&M, and Lily Lake by means of the over-‐allocation of value to real property
was conveyed with the specific intent to hinder, delay, or defraud Transcon’s creditors
and thereby enrich Hrobuchak and his family at the expense of those creditors.
183. Accordingly, Hrobuchak, S&M, and Lily Lake’s receipt of property of the
estate was the product of a transfer that was intentionally fraudulent as to Transcon’s
creditors and, as such, the Liquidating Agent is entitled to recover the value of the
transfer for the benefit of the Transcon estate.
184. Through a distribution, Lily Lake subsequently transferred to the Lily Lake
Beneficiaries the property of the estate it received in connection with the APRE.
185. Lily Lake received no consideration for the property of the estate it
transferred to the Lily Lake Beneficiaries.
186. Nor did the Lily Lake Beneficiaries receive the transfer in good faith without
knowledge of the voidability of the transfer.
187. Accordingly, the Lily Lake Beneficiaries’ received property of the estate that
the initial transferees received as the result of product of a transfer that was intentionally
fraudulent as to Transcon’s creditors and, as such, the Liquidating Agent is entitled to
{00361715/1} 26
recover the value of the property of the estate that Lily Lake distributed to the Lily Lake
Beneficiaries for the benefit of the Transcon estate.
188. On information and belief, certain Lily Lake Beneficiaries, including, at
least, Hrobuchak and Mrs. Hrobuchak, subsequently transferred all or a portion of the
property of the estate they received from Lily Lake to the Cook Island Trust.
189. The Lily Lake Beneficiaries who transferred property of the estate to the
Cook Island Trust received no consideration for the property of the estate.
190. Nor did the Cook Island Trust receive the property of the estate in good
faith without knowledge of the voidability of the transfer.
191. Accordingly, the Cook Island Trust received property of the estate that the
initial and mediate transferees received as the result of a transfer that was intentionally
fraudulent as to Transcon’s creditors and, as such, the Liquidating Agent is entitled to
recover, for the benefit of the Transcon estate, the value of the property of the estate that
Lily Lake transferred to the Lily Lake Beneficiaries.
WHEREFORE plaintiff respectfully requests that this Court enter a judgment
requiring Hrobuchak, S&M, the Lily Lake Beneficiaries, and the Cook Island Trust to turn
over for the benefit of the estate the full value of the assets, goodwill and other intangible
property they received as a result of the intentional over-‐allocation of value to the APRE,
together with all such other relief as the Court deems just and proper.
COUNT VI – FRAUDULENT TRANSFER PURSUANT TO 11 U.S.C. § 548(a)(1)(B) (versus Hrobuchak, S&M, Lily Lake Beneficiaries, Cook Island Trust)
192. Plaintiff incorporates all the foregoing paragraphs of its complaint as
though fully set forth herein.
193. Upon closing of the APRE, Hrobuchak, S&M, and Lily Lake received
property of the estate, in the form of value properly attributable to Transcon’s assets
including goodwill and other intangible property, in exchange for the sale of real property
to New Prime.
{00361715/1} 27
194. Neither Hrobuchak, S&M, nor Lily Lake provided Transcon with any
consideration, let alone reasonably equivalent consideration, in exchange for the property
of the estate they received in connection with the APRE.
195. The transaction through which property of the estate was conveyed without
consideration to Hrobuchak, S&M, and Lily Lake by means of the over-‐allocation of value
to real property left Transcon insolvent, i.e., left Transcon in a financial condition such
that the sum of its debts exceeded all of Transcon’s remaining property at a fair valuation.
196. Alternatively, the transaction through which property of the estate was
conveyed without consideration to Hrobuchak, S&M, and Lily Lake by means of the over-‐
allocation of value to real property left Transcon with unreasonably small capital such
that Transcon would be obviously unable to satisfy the claims of its creditors.
197. Accordingly, Hrobuchak, S&M, and Lily Lake’s receipt of property of the
estate was the product of a transfer that was constructively fraudulent as to Transcon’s
creditors and, as such, the Liquidating Agent is entitled to recover the value of the
transfer for the benefit of the Transcon estate.
198. Through a distribution, Lily Lake subsequently transferred to the Lily Lake
Beneficiaries the property of the estate it received in connection with the APRE.
199. Lily Lake received no consideration for the property of the estate it
transferred to the Lily Lake Beneficiaries.
200. Nor did the Lily Lake Beneficiaries receive the transfer in good faith without
knowledge of the voidability of the transfer.
201. Accordingly, the Lily Lake Beneficiaries’ received property of the estate that
the initial transferees received as the result of product of a transfer that was intentionally
fraudulent as to Transcon’s creditors and, as such, the Liquidating Agent is entitled to
recover the value of the property of the estate that Lily Lake distributed to the Lily Lake
Beneficiaries for the benefit of the Transcon estate.
{00361715/1} 28
202. On information and belief, certain Lily Lake Beneficiaries, including, at
least, Hrobuchak and Mrs. Hrobuchak, subsequently transferred all or a portion of the
property of the estate they received from Lily Lake to the Cook Island Trust.
203. The Cook Island Trust paid no consideration for the property of the estate it
received from certain Lily Lake Beneficiaries.
204. Nor did the Cook Island Trust receive the property of the estate in good
faith without knowledge of the voidability of the transfer.
205. Accordingly, the Cook Island Trust received property of the estate that the
initial and/or mediate transferees received in connection with a transfer intentionally
fraudulent as to Transcon’s creditors and, as such, the Liquidating Agent is entitled to
recover, for the benefit of the Transcon estate, the value of the property of the estate that
certain Lily Lake Beneficiaries transferred to the Cook Island Trust.
WHEREFORE plaintiff respectfully requests that this Court enter a judgment
requiring Hrobuchak, S&M, the Lily Lake Beneficiaries, and the Cook Island Trust to turn
over for the benefit of the estate the full value of the goodwill and other intangible
property they received as a result of the intentional over-‐allocation of value to the APRE,
together with all such other relief as the Court deems just and proper.
COUNT VII – FRAUDULENT TRANSFER PURSUANT TO 11 U.S.C. § 548(a)(1)(A) (versus Cherry Marine, Hrobuchak & Mrs. Hrobuchak)
206. Plaintiff incorporates all the foregoing paragraphs of its complaint as
though fully set forth herein.
207. Upon receipt of the $1,000,000.00 payment made under the Covenant,
Cherry Marine received property of the estate, in the form of value properly attributable
to, and, on information and belief, paid on account of, Transcon’s assets including
goodwill and other intangible property, in exchange for promises made by Cherry Marine
and Hrobuchak in his individual capacity.
{00361715/1} 29
208. Cherry Marine did not provide Transcon with any consideration, let alone
reasonably equivalent consideration, in exchange for the property of the estate it received
in connection with the Covenant.
209. The property of the estate that was conveyed without consideration to
Cherry Marine, in the form of value properly attributable to, and, on information and
belief, paid on account of, Transcon’s assets including goodwill and other intangible
property, was conveyed to Cherry Marine with the specific intent to hinder, delay, or
defraud Transcon’s creditors and thereby enrich Cherry Marine and its ownership at the
expense of those creditors.
210. Accordingly, Cherry Marine’s receipt of property of the estate was the
product of a transfer that was intentionally fraudulent as to Transcon’s creditors and, as
such, the Liquidating Agent is entitled to recover the value of the transfer for the benefit
of the Transcon estate.
211. Hrobuchak and Mrs. Hrobuchak each own 50% of the interests of Cherry
Marine and are liable for the recovery and return of any of the property each may have
received from Cherry Marine.
WHEREFORE plaintiff respectfully requests that this Court enter a judgment
against Cherry Marine, Hrobuchak and Mrs. Hrobuchak awarding plaintiff the
$1,000,000.00 Cherry Marine received as payment for Transcon’s assets including goodwill
and other intangible property, without consideration, together with any and all such
other relief as the Court deems just and proper.
COUNT VIII – FRAUDULENT TRANSFER PURSUANT TO 11 U.S.C. § 548(a)(1)(B) (versus Cherry Marine, Hrobuchak & Mrs. Hrobuchak)
212. Plaintiff incorporates all the foregoing paragraphs of its complaint as
though fully set forth herein.
213. Upon receipt of the $1,000,000.00 payment made under the Covenant,
Cherry Marine received property of the estate, in the form of value properly attributable
to, and, on information and belief, paid on account of, Transcon’s assets including
{00361715/1} 30
goodwill and other intangible property, in exchange for promises made by Cherry Marine
and Hrobuchak in his individual capacity.
214. Cherry Marine did not provide Transcon with any consideration, let alone
reasonably equivalent consideration, in exchange for the property of the estate it received
in connection with the Covenant.
215. The payment Cherry Marine received in connection with the New Prime
transaction, resulted in Transcon’s insolvency, i.e., left Transcon in a financial condition
such that the sum of its debts exceeded all of Transcon’s remaining property at a fair
valuation.
216. Alternatively, the payment Cherry Marine received in connection with the
New Prime transaction, left Transcon with unreasonably small capital such that Transcon
would be obviously unable to satisfy the claims of its creditors.
217. Accordingly, the payment Cherry Marine received in connection with the
New Prime transaction, was constructively fraudulent as to Transcon’s creditors and, as
such, the Liquidating Agent is entitled to recover the value of the transfers for the benefit
of the Transcon estate.
218. Hrobuchak and Mrs. Hrobuchak each own 50% of the interests of Cherry
Marine and are liable for the recovery and return of any of the property each may have
received from Cherry Marine.
WHEREFORE plaintiff respectfully requests that this Court enter a judgment
against Cherry Marine, Hrobuchak and Mrs. Hrobuchak awarding plaintiff the
$1,000,000.00 Cherry Marine received as payment for Transcon’s assets including goodwill
and other intangible property, without consideration, together with any and all such
other relief as the Court deems just and proper.
COUNT IX – PROFESSIONAL NEGLIGENCE/MALPRACTICE (versus Kalnis, Duggan & HDR)
219. Plaintiff incorporates all the foregoing paragraphs of its complaint as
though fully set forth herein.
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220. Transcon employed Kalnis and HTD as counsel in connection with the New
Prime transaction.
221. By virtue of that employment, Kalnis and HTD owed Transcon a duty to
exercise the ordinary skill and knowledge with which an attorney is charged.
222. By undertaking the representation of Hrobuchak and the entities he
controlled in the same transaction and actively promoting Hrobuchak’s interests at the
expense of Transcon’s interests, Kalnis and HTD failed to exercise the ordinary skill and
knowledge with which an attorney is charged.
223. Indeed, by undertaking the representation of Hrobuchak and the entities he
controlled in the same transaction and actively promoting Hrobuchak’s interests at the
expense of Transcon’s interests, Kalnis and HTD intentionally harmed Transcon’s
interests.
224. As a proximate result of the negligence of Kalnis and HTD, Transcon was
damaged by not receiving any fair value for its assets, including the goodwill and other
intangible property that Kalnis, Duggan, and HTD assisted Hrobuchak in funneling to
himself and other entities in which he maintained a financial interest.
225. Not only was the conduct of Kalnis and HTD negligent, that conduct was
intentional and outrageous such that exemplary damages are warranted.
WHEREFORE plaintiff requests that the Court enter a judgment in Transcon’s
favor finding Kalnis, Duggan, and HTD liable for professional negligence/legal
malpractice and awarding Transcon actual damages in an amount to be proven at trial,
punitive damages, and all such other relief as the Court deems just and proper.
COUNT X – BREACH OF FIDUCIARY DUTY (versus Hrobuchak & Davis)
226. Plaintiff incorporates all the foregoing paragraphs of its complaint as
though fully set forth herein.
227. Hrobuchak and Davis were each officers and/or directors of Transcon.
{00361715/1} 32
228. As officers and/or directors, Hrobuchak and Davis each owed Transcon a
fiduciary duty to protect the interests of Transcon were protected by realizing the full and
fair value for the assets Transcon sold to New Prime.
229. Hrobuchak and Davis each breached their fiduciary duties to Transcon in
connection with the New Prime transaction by participating in the misallocation of value
and the diversion of assets as set forth above.
230. The conduct of Hrobuchak and Davis was intentional and outrageous such
that exemplary damages are warranted.
WHEREFORE, plaintiff requests that the Court enter a judgment in Transcon’s
favor finding Hrobuchak and Davis liable for breach of fiduciary duty and awarding
Transcon actual damages in an amount to be proven at trial, punitive damages, and all
such other relief as the Court deems just and proper.
Jury Demand
231. Plaintiff demands a trial by jury of all issues in this case so triable.
Dated: February 26, 2010