Tenth Circuit Saves Insider’s Severance Payments

A terminated officer of a corporate debtor, who bargained for “18 months of severance ( … $375,000 …) to ensure that his firing not disrupt [the debtor’s] negotiations for $80 million” of financing gave the debtor “reasonably equivalent value,” held the U.S. Court of Appeals for the Tenth Circuit on Oct. 15, 2015. In re Adam Aircraft Industries, Inc., 2015 U.S. App. LEXIS 17930, at *27 (10th Cir. Oct. 15, 2015). Affirming the lower courts’ dismissal of a Chapter 7 trustee’s fraudulent transfer claims against the officer as a purported insider, the Tenth Circuit stressed that the officer (“W”) was not an insider and “did not end up getting what he bargained for,” but the debtor did get the entire benefit of “a pretty good trade.” Indeed, although W “presented the initial terms of his departure, the [debtor’s] Board[,] after a negotiation,” only agreed on “less favorable terms” for W.