The opinion of the court was delivered by: Morrison C. England, Jr. United States District Judge
New Cingular Wireless Services, Inc. ("New Cingular" or "Appellant") is a creditor of Wire Comm Wireless, Inc. ("Wire Comm" or "Debtor"). After Wire Comm filed for Chapter 7 bankruptcy protection, New Cingular filed a proof of claim in the amount of $2,949,703.17. The claim arises out of advances and commissions New Cingular contends Wire Comm retained when it was a dealer of New Cingular products and services. Before Wire Comm filed for bankruptcy, New Cingular brought an action against Wire Comm and its principal shareholders, Timothy, Renee, Richard, and Shirley McCormick ("the McCormicks"), alleging alter ego fraudulent transfer, and alter ego aiding and abetting fraudulent transfer.
The Chapter 7 Bankruptcy Trustee, Michael F. Burkart ("Trustee") moved to approve a compromise with the McCormicks, requiring them to pay $257,343.00. The Trustee agreed, as part of the compromise, to allow Timothy and Richard McCormick's proofs of claim, and further agreed to settle the state court action brought by New Cingular against the McCormicks.*fn1 The bankruptcy court approved the compromise on October 5, 2007. Presently before the Court is New Cingular's Appeal of that Order which, for the reasons set forth below, will be affirmed.*fn2
The McCormicks are the owners and principal shareholders of Wire Comm. Wire Comm operated New Cingular retail stores in which it sold cellular phone equipment and services. New Cingular alleges it voluntarily advanced Wire Comm $934,797.47 in late 2004 and early 2005 to cover delays in resolving commission disputes.
After taking into account commissions due Wire Comm, New Cingular claims Wire Comm still owed a net $864,192.47 in un-recouped advances. New Cingular alleges that after a brief meeting with Wire Comm president Timothy McCormick to discuss repayment of this balance in June 2005, Wire Comm terminated the dealer agreement. After adding the outstanding balance for equipment Wire Comm had purchased, New Cingular calculated Wire Comm's total debt at $1,066,295.70.
Following its termination of the dealer agreement with New Cingular, the McCormicks set up a new corporation, Premiere Wireless Solutions ("Premiere"). Premiere operated as a dealer of Verizon Wireless products. New Cingular alleges that Richard and Shirley McCormick were Premiere's shareholders. There is conflicting testimony as to the extent of Timothy McCormick's affiliation with the new company. When deposed, he stated he only "help[ed] out occasionally" (Appellant's App. 197:12-14), while the testimony of his mother (Appellant's App. 312:9-313:12) and Wire Comm's bookkeeper Kathy Witry (Appellant's App. 266:8-25) suggest a greater involvement. Ms. Witry testified Mr. McCormick was among three people who "ran the company." (Appellant's App. 267:19-22.)
New Cingular claims Wire Comm transferred over $500,000.00 in cash and assets to Premiere. Wire Comm's bank account statement shows a net portfolio value of $573,226.31 in June 2005, the month of Wire Comm's termination notice. (Appellant's App. 135.) By December 2005, the account's net portfolio value was $59.36. Id.
Timothy McCormick admitted Wire Comm received no compensation for Premiere's assumption of the leases, the physical assets, the money transferred, and accessories in the former Wire Comm stores. (Appellant's App. 209:8-14.)
New Cingular further alleges the McCormicks personally assumed other Wire Comm assets. Both New Cingular and the Trustee, for example, believes that while Richard and Shirley McCormick held legal title to a Fresno residence, Wire Comm held equitable title. (Appellant's App. 11:7-9.) The McCormicks kept the $261,000.00 in proceeds from the sale of this property. (Appellant's App. 33-36.) The Trustee also noted that Wire Comm made the down payment and mortgage payments for a Las Vegas condominium, listing it as an asset on Wire Comm's tax returns. (Appellant's App. 11:26-12:2.) Renee McCormick sold the condominium in April 2007, and kept the $257,343.00 in profits. (Appellant's App. 11:25-26.)
In September 2005, soon after termination of its dealer agreement with New Cingular, Wire Comm commenced an arbitration proceeding against New Cingular to seek recovery of unpaid commissions which it claimed totaled approximately $1,225,000.00. New Cingular counterclaimed for reimbursement of debts totaling $1,120,825.70 and for damages totaling $1,828,887.47. In addition, before the arbitration hearing was scheduled to take place, New Cingular filed a Complaint in state court against the McCormicks, alleging alter ego fraudulent transfer and alter ego aiding and abetting fraudulent transfer.
On December 8, 2006, Wire Comm filed for bankruptcy under Chapter 7 of the United States Bankruptcy Code. The arbitration hearing, set to begin on December 12, was suspended because of that bankruptcy filing. On February 6, 2007, New Cingular filed a proof of claim with the bankruptcy estate in the amount of $2,949,703.17.
In July 2007, the Trustee entered into a settlement agreement with the McCormicks, who agreed to pay the bankruptcy estate $257,343.00 in exchange for allowing Timothy and Richard McCormick's proofs of claim, and for settling New Cingular's state law causes of action against the McCormicks.
On August 7, 2007, Trustee moved to approve the compromise. After a hearing on October 2, 2007, the bankruptcy court issued an Order granting Trustee's motion. New Cingular filed a Notice of ...