Jalbert v. Gryaznova ( 2022 )

21-1821
Jalbert v. Gryaznova
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY
ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF
APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER
IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN
ELECTRONIC DATABASE (WITH THE NOTATION “SUMMARY ORDER”). A PARTY CITING TO A SUMMARY
ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.
1 At a stated term of the United States Court of Appeals for the Second Circuit,
2 held at the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of
3 New York, on the 5th day of May, two thousand twenty-two.
4
5 PRESENT:
6 RICHARD C. WESLEY,
7 MICHAEL H. PARK,
8 EUNICE C. LEE,
9 Circuit Judges.
10 _____________________________________
11
12 In re: Bicom NY, LLC,
13
14 Debtor,
15 _____________________________________
16
17 CRAIG R. JALBERT, in his capacity as the
18 Liquidation Trustee of the Liquidation Trust,
19
20 Plaintiff-Appellant,
21
22 v. 21-1821
23
24 IRINA GRYAZNOVA,
25
26 Defendant-Appellee.
27 _____________________________________
28
29 FOR PLAINTIFF-APPELLANT: William Dunnegan, New York, NY.
30 FOR DEFENDANT-APPELLEE: Jeffrey C. Dannenberg, New York, NY.
1 Appeal from a judgment of the United States District Court for the Southern District of
2 New York (Rakoff, J.).
3 UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED, AND
4 DECREED that the judgment of the district court is AFFIRMED.
5 Over a decade ago, Irina Gryaznova opened a joint bank account with Veniamin Nilva that
6 was intended to hold only her money and to facilitate her permanent residency in the United States.
7 But Nilva ran into financial troubles and needed to move funds between his businesses while
8 keeping his lending banks in the dark. Without Gryaznova’s knowledge, Nilva routed $1 million
9 from BICOM, NY LLC through the joint account, where it stayed for two days before Nilva
10 transferred it to his other business via a forged check in Gryaznova’s name to hide the source.
11 Later, BICOM filed for bankruptcy, and Craig R. Jalbert, the trustee, sought to recover the $1
12 million in transferred funds from Gryaznova under 11 U.S.C. § 550(a)(1), which permits a trustee
13 to recover fraudulent transfers from an “initial transferee” for the benefit of the estate. The
14 bankruptcy court entered summary judgment in favor of Gryaznova, and the district court affirmed,
15 holding that she was not an “initial transferee” and thus the trustee could not recover the
16 fraudulently transferred $1 million from her. The trustee appealed. We assume the parties’
17 familiarity with the underlying facts, procedural history, and issues on appeal.
18 This Court reviews the interpretation of a statute and a district court’s entry of summary
19 judgment de novo. See United States v. Williams, 733 F.3d 448, 452 (2d Cir. 2013); McElwee v.
20 Cty. of Orange, 700 F.3d 635, 640 (2d Cir. 2012). Under the Bankruptcy Code, to the extent that
21 a fraudulent transfer is avoided, “the trustee may recover, for the benefit of the estate, the property
22 transferred . . . from . . . the initial transferee of such transfer.” 11 U.S.C. § 550(a). “If the
23 recipient of debtor funds was the initial transferee, the bankruptcy code imposes strict liability and
2
1 the bankruptcy trustee may recover the funds.” In re Red Dot Scenic, Inc., 351 F.3d 57, 58 (2d
2 Cir. 2003). Although the Bankruptcy Code does not define “initial transferee,” we described who
3 may qualify as an “initial transferee” in In re Finley, Kumble, Wagner, Heine, Underberg, Manley,
4 Myerson & Casey, 130 F.3d 52 (2d Cir. 1997). There, we explained that “the term ‘initial
5 transferee’ references something more particular than the initial recipient.” Id. at 57. We thus
6 declined to “equate[] mere receipt with liability” and held that “mere conduits” of fraudulent
7 transfers are not “initial transferees.” Id.8 The trustee argues that Gryaznova was an “initial transferee” because although she did not
9 exercise actual control over the funds, she could have “walk[ed] into [the bank] after the funds
10 cleared . . . and . . . walk[ed] out with $1,000,000 (in cash or a certified check) from the Joint
11 Account.” Appellant’s Br. 10. In his view, “[a]n ‘initial transferee’ only needs the ability to
12 physically control the funds and need not actually control the funds.” Id. at 9. We disagree. As a
13 joint accountholder, Gryaznova was an initial recipient of the $1 million, but that is insufficient to
14 confer “initial transferee” status under Finley. See 130 F.3d at 57. Although she hypothetically
15 could have exercised control over the funds because they were in the joint account for two days, it
16 is undisputed that she never had “a realistic opportunity to” use the funds because she did not know
17 about them. Indeed, she had no reason to suspect that Nilva would use the joint account in this
18 manner based on their agreement that the joint account was to hold only her money, not his. App’x
19 142. The district court correctly concluded that Gryaznova was a “mere conduit” of the fraudulent
20 transfer and cannot be liable to the bankruptcy estate for funds she never knew about. Finley, 130
21 F.3d at 58.
22
3
1 We have considered the remainder of Jalbert’s arguments and find them to be without
2 merit. For the foregoing reasons, we affirm the judgment of the district court.
3 FOR THE COURT:
4 Catherine O’Hagan Wolfe, Clerk of Court
4