Two makers of spray-tanning machines, Mist-On and Laughlin Products, sued a customer, Nouveau Body & Tan, for saying ugly things about their devices.
Bad move.
Nouveau struck back by charging Mist-On with selling it bad spray-tanners. Nouveau won a judgment against Mist-On and its president, Thomas J. Laughlin, for more than $1 million. They couldn't pay, and Mr. Laughlin filed for bankruptcy under Chapter 7.
Less than two months before he went into the tank, Mr. Laughlin had renounced his right to an inheritance of around $155,000 from his father's estate. Nouveau asked the bankruptcy court to treat the renunciation as a fraudulent transfer and order that his daughter, who succeeded to the inheritance, to put the proceeds back into Mr. Laughlin's bankruptcy estate. The bankruptcy court granted the request.
The Fifth Circuit reversed. It held that, under Texas fraudulent transfer law, the property never passed to Mr. Laughlin and that, therefore, he couldn't have "transferred" it to his daughter. The court thus agreed with the Ninth Circuit's like decision in Gaughan v. Dittlof Revocable Trust (In re Costas), 555 F.3d 790 (9th Cir. 2009). Laughlin v. Nouveau Body & Tan, Inc. (In re Laughlin), No. 09-10622 (5th Cir. Mar. 29, 2010).
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