                                                                                                                           Opinions of the United
2005 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


3-3-2005

In Re:PHP Healthcare
Precedential or Non-Precedential: Non-Precedential

Docket No. 03-3972




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                                             NOT PRECEDENTIAL

                UNITED STATES COURT OF APPEALS
                     FOR THE THIRD CIRCUIT
                          ____________

                           No. 03-3972
                          ____________

                              IN RE:

                  PHP HEALTHCARE CORPORATION,

                                  Debtor

                     PHP LIQUIDATING, LLC,

                                 Appellant

                                 v.

       *CHARLES H. ROBBINS; RJB PARTNERS PROFUTURES FUND
             MANAGEMENT, INC.; STROME HEDGE CAP LTD;
            STROME PARTNERS LP; STROME OFFSHORE LTD;
  STROME SUSKIND HEDGE CAP LP; LAKESHORE INTERNATIONAL LTD;
        KENNETH L. STAUB; LISA I. GROVE-SAMUELSON TRUST B;
         RACHAEL K. COLLINS TRUST B; J.F. GROVE III TRUST A;
    EARLE E. GALES, JR.; DEERE PARK CAPITAL MANAGEMENT, LLC;
   ELARA LTD; CANADIAN IMPERIAL HOLDINGS; SIL NOMINEES LTD;
      BEAR STEARNS SECURITIES CORP.; WATT FAMILY PROPERTY;
   FORTUNE FUND LTD; ROBERT CHARLES KETNER; KIRK WHILLOCK;
  JUDY WILLOCK; OH SHARMA; BHAGYAWATI SHARMA; CALDWELL &
    ORKIN MARKET OPPORTUNITY FUND #1; JILL BROOKS MILBERG;
    DENNIS DECRET; TOM TETERS; MARY K. CARPENTER; ROBERT F.
      CARPENTER; JOHN P. COLE; LINDA D. COLE; WARD T. BELL &
  ASSOCIATES, INC. PROFIT SHARING PLAN; WILLIAM L. TODD; ALLEN
             MENDLER; PAUL COLE; PAUL MANDRAGONA;
 CARMELLA G. MANDRAGONA; TERRY W. HUNT; RANDALL A. KONSKER;
         CAROL R. BOUNDS; MARY JERKINS; BERWIN C. JERKINS;
   R2 INVESTMENTS; Q FUNDING LP; HARRY METHERIAN, JR.; JOLANA
   METHERIAN; METHERIAN FAMILY LIVING TRUST; MARIA CALVERT;
OHIO STATE SYSTEMS SMALL 384; BIG CAPITAL PARTNERS LP; EXECUTIVE
NURSE HOME CARE, INC.; WALKER SMITH CAPITAL LP; JEANNE MARCARI;
  JOHN DOES 1-500; ABC CORPS 1-500; ROBERT KONSKER; PROFUTURES
                     SPECIAL EQUITIES FUND LP

           *(Amended pursuant to Court’s 07/28/04 Order)

                          ____________________

       ON APPEAL FROM THE UNITED STATES DISTRICT COURT
                FOR THE DISTRICT OF DELAWARE

                      Dist. Court Civil Action No. 01-236
             District Judge: The Honorable Joseph J. Farnan, Jr.
                            ___________________

                          Argued January 20, 2005

            Before: ALITO, McKEE, and SMITH, Circuit Judges

                           (Filed: March 3, 2005)

                                   GERALD H. GLINE (ARGUED)
                                   Cole, Schotz, Meisel, Forman & Leonard, P.A.
                                   25 Main Street, P.O. Box 800
                                   Hackensack, New Jersey 07601-7015

                                   NEAL J. LEVITSKY
                                   Fox Rothschild
                                   824 North Market Street
                                   Suite 810
                                   Wilmington, Delaware 19899-2323

                                                       Counsel for Appellants


                                   THOMAS J. ALLINGHAM II (ARGUED)
                                   DARRYL A. PARSON
                                   Skadden, Arps, Slate, Meagher & Flom LLP
                                   One Rodney Square, P.O. Box 636
                                   Wilmington, Delaware 19899-0636

                                     -2-
MICHAEL WOOLEY (ARGUED)
Potter Anderson & Corroon LLP
Hercules Plaza, 6th Floor
1313 N. Market Street, P.O. Box 951
Wilmington, Delaware 19899-0951

THOMAS G. MACAULEY (ARGUED)
Zuckerman Spaeder LLP
919 Market Street
Suite 1705, P.O. Box 1028
Wilmington, Delaware 19899

LAURIE S. SILVERSTEIN
WILLIAM A. HAZELTINE
Potter, Anderson & Corroon
1313 North Market Street
6th Floor, P.O. Box 951
Wilmington, Delaware 19801

MICHAEL WOOLLEY
MARK D. KOTWICK
Seward & Kissel
One Battery Park Plaza
New York, New York 10004

ANDREW R. LEE
Jones, Walker, Waechter, Poitevent, Carrere &
Denegre
210 St. Charles Avenue, 50th Floor
New Orleans, Louisiana 70170

WILLIAM M. KELLEHER
Ballard, Spahr, Andrews & Ingersoll
919 North Market Street
Wilmington, Delaware 19801

THOMAS C. MARCONI
1813 N. Franklin Street
P.O. Box 1677
Wilmington, Delaware 19899

             Counsel for Appellees

  -3-
                                  ____________________

                                       OPINION
                                  ____________________

PER CURIAM:

       The various Defendants in this action all moved to dismiss the Amended

Complaint dated April 4, 2002 (“the Amended Complaint”) for failure to state a claim

upon which relief can be granted. The District Court granted those Motions in several

Orders and dismissed the Amended Complaint with prejudice. For the reasons set forth

below, we affirm those Orders.

                                              I.

       PHP Healthcare Corporation (“PHP” or “the Debtor”), a Delaware corporation,

filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code on

November 19, 1998. Plaintiff-Appellant PHP Liquidating LLC (“the Liquidating

Company”) was established on October 12, 1999, pursuant to the Second Amended Plan

of Liquidation (“the Plan”), to liquidate the assets of PHP for the benefit of the

Liquidating Company’s members, the creditors of PHP. With exceptions not relevant

here, the Liquidating Company is the assignee of all rights, titles, interests and causes of

action that PHP possesses as the debtor-in-possession. As such, the Liquidating

Company has the express power to investigate, pursue, compromise or dismiss any and all

such causes of action. Pursuant to the Plan, creditors were also given the option to assign

and transfer to the Liquidating Company their claims and causes of action. Many of


                                             -4-
PHP’s creditors assigned their claims to the Liquidating Company.

       The Liquidating Company filed suit in federal district court in Delaware against

certain stockholders and former stockholders of PHP, seeking to recover the

consideration paid in a series of stock redemption transactions authorized by PHP’s Board

of Directors. Soon after the Liquidating Company filed its Amended Complaint, the

Defendants moved to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6). The

District Court granted their various motions in three separate Orders and explained those

Orders in two separate Opinions. The District Court did not say in so many words that it

dismissed the Amended Complaint “with prejudice,” but the import of the Opinions and

Orders seem clear. Moreover, in the absence of a clear statement to the contrary, a

dismissal pursuant to Rule 12(b)(6) should be presumed to be made with prejudice. See

United States ex rel. Karvelas v. Melrose Wakefield Hospital, 360 F.2d 220, 241 (1st Cir.

2004) (stating First Circuit rule that “in the absence of a clear statement to the contrary, a

dismissal pursuant to Fed R. Civ. P. 12(b)(6) is presumed to be with prejudice.”) This

appeal followed.

                                              II.

       Defendant Robbins argues that Virginia law, not Delaware law, governs claims

arising from his stock redemption transactions because the Stock Purchase Agreement

between Robbins and PHP contains a Virginia choice of law provision. The Liquidating

Company argues that Delaware law controls because the Stock Purchase Agreement is

trumped by the “internal affairs” doctrine, which requires that the laws of the state of

incorporation govern “matters peculiar to the relationships among or between the

                                              -5-
corporation and its current officers, directors, and shareholders.” See Edgar v. MITE

Corp., 457 U.S. 624, 645 (1982).

       When two states have a connection to a case and an issue arises on which the

states’ respective laws differ, a choice of law must be made. Because there is no

“significant conflict between some federal policy or interest and the use of state law,” we

will not recognize a federal rule of decision. O’Melveny & Myers v. FDIC, 512 U.S. 79,

87-88 (1994) (internal quotation marks and citation omitted); see also Resolution Trust

Corp. v. Forest Grove, Inc., 33 F.3d 284 (3d Cir. 1994) (discussing O’Melveny). Instead,

we will adopt the choice of law rule of Delaware — the state in which the Bankruptcy

Court resides. See In re Merritt Dredging Co., 839 F.2d 203, 206 (4th Cir.) (applying

choice of law rules of state in which federal bankruptcy court resided), cert. denied, 487

U.S. 1236 (1988). Delaware recognizes the internal affairs doctrine. McDermott Inc. v.

Lewis, 531 A.2d 206, 215 (Del. 1987). Thus the question presented is whether the

current dispute is an “internal affair.”

       The Restatement (Second) of Conflict of Laws explains the doctrine by offering

examples of internal affairs “which involve primarily a corporation’s relationship to its

shareholders”:

       [S]teps taken in the course of the original incorporation, the election or
       appointment of directors and officers, the adoption of by-laws, the issuance of
       corporate shares, preemptive rights, the holding of directors’ and shareholders’
       meetings, methods of voting including any requirement for cumulative voting,
       shareholders’ rights to examine corporate records, charter and by-law amendments,
       mergers, consolidations and reorganizations and the reclassification of shares.
       Matters which may also affect the interests of the corporation’s creditors include
       the issuance of bonds, the declaration and payment of dividends, loans by the
       corporation to directors, officers and shareholders, and the purchase and

                                            -6-
       redemption by the corporation of outstanding shares of its own stock.

Restatement (Second) of Conflict of Laws §302 cmt. a (1971) (emphasis added). See also

Cohn v. Mishkoff Costello Co., 175 N.E. 529 (N.Y. 1931) (court refused to hear case

against Indiana corporation where plaintiffs claimed corporation was under a duty to

redeem their stock because such an issue was an internal affair of the corporation and thus

ought be decided by the state of incorporation); Miesse v. Seiberling Rubber Co., 35

N.Y.S.2d 504 (App. Div. 1942) (court refused to require a Delaware corporation, which

was being reorganized in Delaware, to redeem preferred stock in accordance with its

certificate of incorporation since such action involved internal affairs of corporation); In

re Integra Realty Resources, Inc., 198 B.R. 352 (Bankr. D. Colo. 1996) (“[T]he question

of unlawful dividends relates directly to the administration of corporate affairs.”). Some

courts have held that a stock redemption is not an internal affair where the redemption is

subject to a definitive contract between the corporation and one of its shareholders. See

Borst v. East Coast Shipyards, Inc., 105 N.Y.S. 2d 228 (Sup. Ct.1951) (in action by

preferred stockholder against New Jersey corporation to recover redemption price of

preferred stock together with accumulated dividends, court held such action did not

involve matters pertaining to internal management of foreign corporation, and New York

court would assume jurisdiction). Here, however, the contract at issue and the result of

this action may affect indirectly the rights of non-parties to the contract; it is alleged that

PHP violated Delaware law either because PHP had no surplus when it redeemed its

stock, or, in the alternative, because the redemption impaired PHP’s capital. For this

reason the redemptions at issue qualify as internal affairs of PHP. See Lakeman Realty

                                               -7-
Corp. v. Sunny Isles Ocean Beach Co., 160 N.Y.S.2d 947 (Sup. Ct. 1957) (suit for

redemption of preferred stock and payment of accrued dividends to one stockholder might

place Florida corporation under duty to all holders, which might impair capital or

necessitate a change in the structure, which would involve the internal affairs of the

corporation and thus should be regulated by the state of incorporation); Prescott v. Plant

Industries, Inc., 88 F.R.D. 257 (S.D.N.Y. 1980) (citing Lakeman and discussing internal

affairs doctrine in general).

       Because PHP is a Delaware corporation and the Liquidating Company’s dispute

with Robbins falls within the internal affairs doctrine, Delaware law controls.

                                            III.

       In deciding a motion to dismiss under Rule 12(b)(6), we exercise plenary review.

Doug Grant, Inc. v. Greate Bay Casino Corp., 232 F.3d 173, 183 (3d Cir. 2000). Our role

is to assess the legal feasibility of the Amended Complaint, not to weigh the evidence

offered in its support. Conley v. Gibson, 355 U.S. 41, 45-46 (1957). Accordingly, we

accept as true all facts alleged in the Amended Complaint and draw all reasonable

inferences in the Liquidating Company’s favor. Sturm v. Clark, 835 F.2d 1009, 1011 (3d

Cir. 1987). We also may consider facts of which judicial notice may properly be taken

under Rule 201 of the Federal Rules of Evidence, such as stock prices on the New York

Stock Exchange. In re NAHC, Inc. Securities Litigation, 306 F.3d 1314, 1331(3d Cir.

2002) (judicial notice of stock price data compiled by Dow Jones News service); Ieradi v.

Mylan Lab., Inc., 230 F.3d 594, 600 n.3 (3d Cir. 2002) (judicial notice of stock prices

reported by Quotron Chart Services). However, if it is clear that the Liquidating

                                             -8-
Company will not be able to prove facts sufficient to support a valid legal claim, and thus

further amendment would be futile, then the Amended Complaint may be dismissed. See

Hishon v. King & Spalding, 467 U.S. 69, 73 (1984); Lake v. Arnold, 232 F.3d 360, 373-

374 (3d Cir. 2000).

                                              IV.

       Count I of the Amended Complaint alleges that PHP violated Section 160(a)(1) of

the Delaware General Corporation Law (“DGCL”) either because PHP had no surplus

when it redeemed its stock from the Defendants, or, in the alternative, because the

redemption impaired PHP’s capital. The Liquidating Company seeks to recover from the

Defendants, current and former shareholders of PHP, the proceeds of these allegedly

illegal stock redemption transactions. Because we are reviewing a motion to dismiss, we

assume that the Liquidating Company’s factual allegations are correct: one way or the

other, PHP violated Section 160 when it purchased Defendants’ shares. Thus the issue

presented is whether the Liquidating Company may sue Defendants for PHP’s violation

of Section 160. We conclude that the Liquidating Company cannot sue, regardless of

whether it asserts its rights as the assignee of the creditors or as the assignee of the

debtor-in-possession.

       As a creditor’s assignee, the Liquidating Company’s standing only extends as far

as its creditor’s standing, and an individual creditor of a debtor may not assert a general

claim belonging to all creditors. Board of Trs. of Teamsters Local 863 Pension Fund v.

Foodtown, Inc., 296 F.3d 164, 169 (3d Cir. 2002) (“[O]nce a company or individual files

for bankruptcy, creditors lack standing to assert claims that are ‘property of the

                                              -9-
estate.’”)(citation omitted); see also, e.g., St. Paul Fire & Marine Ins. Co. v. PepsiCo, Inc.,

884 F.2d 688, 701 (2d Cir. 1989) (“If a claim is a general one, with no particularized

injury arising from it, and if that claim could be brought by any creditor of the debtor, the

trustee is the proper person to assert the claim, and the creditors are bound by the outcome

of the trustee’s action.”).

       If Section 160 creates a private right of action, it is a general right of action that

seeks to redress an injury common to all creditors. Section 160 in its entirety reads as

follows:

       (a) Every corporation may purchase, redeem, receive, take or otherwise acquire,
       own and hold, sell, lend, exchange, transfer or otherwise dispose of, pledge, use
       and otherwise deal in and with its own shares; provided, however, that no
       corporation shall:

               (1) Purchase or redeem its own shares of capital stock for cash or other
               property when the capital of the corporation is impaired or when such
               purchase or redemption would cause any impairment of the capital of the
               corporation, except that a corporation may purchase or redeem out of
               capital any of its own shares which are entitled upon any distribution of its
               assets, whether by dividend or in liquidation, to a preference over another
               class or series of its stock, or, if no shares entitled to such a preference are
               outstanding, any of its own shares, if such shares will be retired upon their
               acquisition and the capital of the corporation reduced in accordance with §§
               243 and 244 of this title. Nothing in this subsection shall invalidate or
               otherwise affect a note, debenture or other obligation of a corporation given
               by it as consideration for its acquisition by purchase, redemption or
               exchange of its shares of stock if at the time such note, debenture or
               obligation was delivered by the corporation its capital was not then
               impaired or did not thereby become impaired;

               (2) Purchase, for more than the price at which they may then be redeemed,
               any of its shares which are redeemable at the option of the corporation; or

               (3) Redeem any of its shares unless their redemption is authorized by
               subsection (b) of § 151 of this title and then only in accordance with such
               section and the certificate of incorporation.

                                              -10-
       (b) Nothing in this section limits or affects a corporation’s right to resell any of its
       shares theretofore purchased or redeemed out of surplus and which have not been
       retired, for such consideration as shall be fixed by the board of directors.

       (c) Shares of its own capital stock belonging to the corporation or to another
       corporation, if a majority of the shares entitled to vote in the election of directors
       of such other corporation is held, directly or indirectly, by the corporation, shall
       neither be entitled to vote nor be counted for quorum purposes. Nothing in this
       section shall be construed as limiting the right of any corporation to vote stock,
       including but not limited to its own stock, held by it in a fiduciary capacity.

       (d) Shares which have been called for redemption shall not be deemed to be
       outstanding shares for the purpose of voting or determining the total number of
       shares entitled to vote on any matter on and after the date on which written notice
       of redemption has been sent to holders thereof and a sum sufficient to redeem such
       shares has been irrevocably deposited or set aside to pay the redemption price to
       the holders of the shares upon surrender of certificates therefor.

       Even if we assume for the sake of argument that the statute implicitly creates a

private right of action for creditors, it certainly does not distinguish between creditors, or

even mention reliance or specific damages. Moreover, the previous versions of Section

160 and the various amendments to it (in 1967, 1970, 1973, 1974, and 1996) do not reveal

pertinent ambiguities or shades of meaning that contradict the initial reading. See 8 Del.

C. 1953, § 160; 56 Del. Laws, c. 50 (1967); 57 Del. Laws, c. 649, § 1 (1970); 59 Del.

Laws, c. 106, § 3 (1973); 59 Del. Laws, c. 437, § 9 (1974); 70 Del. Laws, c. 349, § 3

(1996). And at all events, the Liquidating Company does not allege reliance or specific

harm; its claim is a general one which, if it can be brought, would be equally available to

any creditor of the debtor. Thus, the Liquidating Company does not, as a creditor’s

assignee, have standing to assert its claim.

       As the District Court observed, however, there is some indication that a debtor-in-

possession or its assignee could sue certain stockholders under Section 174. Subsection

                                               -11-
(c) provides that a director “against whom a claim is successfully asserted under

[subsection(a)] is entitled” to bring suit against certain stockholders, and the way

subsection (c) describes a director’s right of action suggests that a corporation’s assignee

may bring suit against such stockholders too. Subsection (c) states:

       Any director against whom a claim is successfully asserted under this section shall
       be entitled, to the extent of the amount paid by such director as a result of such
       claim, to be subrogated to the rights of the corporation against stockholders who
       received the dividend on, or assets for the sale or redemption of, their stock with
       knowledge of facts indicating that such dividend, stock purchase or redemption
       was unlawful under this chapter, in proportion to the amounts received by such
       stockholders respectively.

8 Del. C. § 174(c) (emphasis added). On its face, this text does not “provide that anyone,

apart from the director, can assert the rights of the corporation.” Barbara Black,

Corporate Dividends and Stock Repurchases § 4.33 (2003). One court, however, has

ruled that a corporate right of action exists under Delaware law against any shareholders

who knowingly received an unlawful dividend. See In re Integra Realty Resources, Inc.,

198 B.R. 352, 365 (Bankr. D. Colo. 1996). This interpretation of Section 174 makes

sense; it would be strange if a third-party who profited from an injury was liable to the

victim, but only the person who inflicted that injury could vindicate the victim’s rights.

       But if Section 174 creates or recognizes a right of debtors-in-possession to sue

stockholders who receive payments for unlawful stock redemptions, it does so only

against those stockholders “with knowledge of facts indicating that such [ ] redemption

was unlawful.”

       The Amended Complaint does not allege Defendants knew PHP’s capital was

impaired when they redeemed their stock, and at oral argument counsel for the

                                            -12-
Liquidating Company admitted that his client probably could not allege Defendants knew.

Thus Counsel was unable to represent that such an allegation would be made if further

pleading were allowed. Accordingly, even if Section 174 does imply a right of action by

debtors-in-possession or their assignees against shareholders who knowingly receive

unlawful stock redemptions, Section 174 does not give this Plaintiff a cause of action

against these Defendants. The Liquidating Company has indicated that it cannot allege its

claim differently, and an implied remedy applicable to the present case as alleged would

subvert the statutory scheme.

                                            V.

       The only Defendants charged with Count II were ProFutures Special Equities

Fund, L.P., ProFutures Fund Management, Inc., Charles H. Robbins (“Robbins”), the

founder and former Chairman of PHP, and members of Robbins’s family. After filing

briefs in this appeal, the ProFutures entities settled with the Liquidating Company. Thus

the only Defendants still in the action charged with Count II are Robbins and his family.

Count II of the Amended Complaint asserts that the redemption transactions between

PHP and the Robbins Family were fraudulent transfers of property under 11 U.S.C. § 548

and 6 Del. C. §1301, et seq. We need not discuss the provisions of the Delaware

Fraudulent Transfer Act, 6 Del. C. §1301 et seq. (2002) because they are substantially the

same as the relevant parts of the Bankruptcy Code. Compare 11 U.S.C. § 548 (2002)

with 6 Del. C. §§ 1302 -1306 (2002).

       To properly plead a fraudulent transfer claim against the Robbins Family, the

Liquidating Company would have had to allege either, pursuant to Section 548(a)(1)(A),

                                           -13-
that the debtor redeemed the stock with actual intent to defraud creditors or, pursuant to

Section 548(a)(1)(B), that (i) PHP received less than a reasonably equivalent value for the

stock and (ii) that PHP was insolvent on the date of the redemptions or was rendered

insolvent by the redemptions. The Liquidating Company does not meet the requirements

of Section 548(a)(1)(A) because it does not plead actual intent; the Liquidating Company

does not meet the requirements of Section 548(a)(1)(B)(ii) because it does not plead that

PHP received less than a reasonably equivalent value for the stock. Count II is therefore

facially deficient with respect to the Robbins family.

       The Liquidating Company claimed for the first time that PHP received less than

reasonably equivalent value from the Robbins Family only in its brief in response to the

family’s motion to dismiss. While counsel may “clarify” a pleading through subsequent

briefing, a lawyer’s statement in a response brief is no substitute for adequately pleaded

facts in a complaint, and a memorandum cannot provide allegations that are wholly absent

from the Amended Complaint. Grayson v. Mayview State Hosp., 293 F.3d 103, 109 n.9

(3d Cir. 2002).

       The Liquidating Company offered no allegation of fact in its Amended Complaint

as to the value of the shares received by PHP except the market price information. This

information only supports Robbins’s position, for it is undisputed that the

contemporaneous price of PHP’s stock on the NYSE exceeded the consideration paid to

the Robbins Family. In this context the District Court was right to conclude that the

Liquidating Company had not properly pleaded its fraudulent transfer claim.

       Admittedly, the District Court did not explain how its result complied with this

                                            -14-
Circuit’s procedure for evaluating whether reasonably equivalent value is exchanged in a

particular transaction. It would have been better if the District Court had done so. In

Mellon Bank v. The Official Committee of Unsecured Creditors of R.M.L., Inc. (In re

R.M.L., Inc.), 92 F.3d 139 (3d Cir. 1996), we held that a court must “make an express

factual determination as to whether the debtor received any value at all” from the

challenged transaction, keeping in mind that “the price a debtor paid, in and of itself,

reveals nothing about whether the debtor received something of actual ‘value.’” Id. at

149. In that determination, “[t]he touchstone is whether the transaction conferred

realizable commercial value on the debtor . . . .” Id. (emphasis omitted), quoting Mellon

Bank, N.A. v. Metro Communications, Inc., 945 F.2d 635, 647 (3d Cir. 1991). Once that

determination is made, if the court has concluded that the debtor did, in fact, receive

something of actual value, then the court must then apply a “totality of the circumstances

test” to evaluate whether the value received was reasonably equivalent to the value the

debtor relinquished. Id. at 154. The “fair market value” of services rendered or goods

purchased is part of the totality of the circumstances, but other things may be relevant as

well, such as whether the debtor and the transferee had an arm’s-length relationship at the

time of the transaction and whether the transaction was conducted in good faith by the

transferee. See id. at 149. The fair market value of services rendered or goods purchased

is not, by itself, “conclusively determinative” of reasonably equivalent value. See id. at

150.

       However, although the District Court did not explain how its decision conformed

to the two-part RML test, the record below supports a decision to dismiss with prejudice

                                            -15-
for at least two reasons. First, the Liquidating Company did not plead or even argue in its

brief that the market was being manipulated at the time of the redemption, nor did it offer

any other reason why the market price for PHP stock might have been inaccurate. Given

that the Liquidating Company has already been granted leave to amend its complaint

once, the Liquidating Company’s failure suggests that it cannot prove facts sufficient to

support a valid fraudulent conveyance claim. Second, counsel for the Liquidating

Company admitted at oral argument that his client probably could not allege, in support of

Count I of its complaint, that PHP’s shareholders and former shareholders knew facts

indicating their stock redemption was unlawful. Robbins and his family are charged with

Count I, so this admission applies to them. An unlawful stock redemption is a redemption

made while a company is insolvent, or a redemption that renders a company insolvent. If

the Liquidating Company cannot allege that Robbins and his family knowingly received a

redemption while PHP was insolvent, or a redemption that rendered PHP insolvent, it is

hard to see how the Liquidating Company could allege that Robbins and his family

entered into the redemption transactions in bad faith.

       In this context we conclude that the stock the debtor redeemed from Robbins and

his family for $16.75 per share had realizable commercial value, and that the lowest

market price on the day of the transaction – $17.50 per share – was a fair measure of that

value. PHP stock traded on the New York Stock Exchange, one of the most efficient

capital markets in the world. In the absence of any evidence of manipulation or bad faith

we are comfortable presuming that stock the New York Stock Exchange values at $17.50

per share is not only of some actual value, however small, but also of a value reasonably

                                            -16-
equivalent to $17.50 per share, or, barring that, at least $16.75 per share.
