United States District Court, D. Minnesota
MEMORANDUM OPINION AND ORDER
RICHARD NELSON, UNITED STATES DISTRICT JUDGE
the Court is the Motion to Bifurcate [Doc. No. 5070] filed by
Defendant InterLinc Mortgage Services, LLC
(“InterLinc”). For the reasons set forth below,
Defendant's motion is denied.
December 2013, Plaintiffs Residential Funding Company, LLC
(“RFC”) and Rescap Liquidating Trust
(“ResCap”) sued Defendant Hometown Mortgage
Services, Inc. (“Hometown”). See Compl.,
Residential Funding Co., LLC. v. Hometown Mortg.
Servs., Inc. (“RFC v. Hometown”),
No. 13-cv-3509 (SRN/HB) [Doc. No. 1]. Hometown was a mortgage
originator owned and managed by Defendants Douglas Rohm and
Edward Danielczyk (the “Individual Defendants”).
It sold over 2, 000 residential mortgage loans to RFC with a
principal balance in excess of $200 million. (Am. Compl.
[Doc. No. 2611] ¶5.) The parties' contractual
relationship required Hometown to make numerous
representations and warranties (R&Ws) to RFC about the
characteristics and quality of the loans. (Id.)
lawsuit, Plaintiffs asserted claims for breach of contract
and indemnification, alleging that Hometown breached its
R&Ws by selling defective loans to RFC, for which it was
required to indemnify Plaintiffs for losses that RFC incurred
in bankruptcy settlements that it ultimately entered into in
the Southern District of New York. (See Id.
a few months of the filing of the lawsuit, however,
Plaintiffs contend that InterLinc and the Individual
Defendants, who were co-owners of Hometown, formulated a plan
to transfer Hometown's operations and assets to
InterLinc. (Am. Compl. ¶ 90.) The purpose of this plan,
Plaintiffs allege, was to leave Hometown with insufficient
assets to satisfy any liability to Plaintiffs or to
Hometown's other creditors. (Id.) Plaintiffs
assert that InterLinc and the Individual Defendants were to
be the primary beneficiaries of this plan, under which the
Individual Defendants were to receive “lucrative
employment with InterLinc.” (Id.)
transfer occurred in March 2014, with InterLinc purchasing
certain assets and assuming certain liabilities and contracts
from Hometown, pursuant to an Asset Purchase Agreement
(“APA”). (Id., Ex. G [Doc. No. 2611-35]
(APA)). Among the assets that InterLinc purchased-for a grand
total of $124, 806.70-were furniture and fixtures, property
and equipment, software, and leasehold improvements. (APA
§§ 101, 102; Sch. 101B, 102B.) Plaintiffs allege
that some of Hometown's former employees, utilizing the
acquired assets, continued Hometown's business operations
as a division of InterLinc known as “InterLinc
Alabama.” (Am. Compl. ¶¶ 91-92.)
liabilities, the APA provided:
1.03 Assumed Liabilities. Buyer is not assuming any
of Seller's liabilities, except for the “Assumed
Liabilities” which consist solely of the following:
Seller's interest in, and to, the leases and other
agreements listed on Schedule 1.01, assuming such leases and
other agreements are in effect on the closing date[.]
(APA § 1.03.) Schedule 1.01 listed two leases.
(Id., Sch. 1.01D.)
January 2015, Plaintiffs' case against Hometown was
consolidated, along with numerous others, into the
consolidated case number 13-cv-3451. (Admin. Order [Doc. No.
September 2015, Hometown filed for chapter 7 bankruptcy in
the Northern District of Alabama. (Hometown Notice of Bankr.
[Doc. No. 850].) In Hometown's bankruptcy petition, it
listed total assets of $140, 930.93 and total liabilities of
$286, 999.30. (Am. Compl. ¶ 98.) Plaintiffs allege that
Hometown failed to disclose that its business was continuing
under the InterLinc name and using Hometown's offices,
management, and employees. (Id. ¶ 100.) In the
bankruptcy action, RFC and ResCap filed an unsecured proof of
claim for $44 million. See In ...