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Fennell 2nd Response

Fennell 2nd Response

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Published by keeganfederal
Objections filed on behalf of Valerie Fennell in the bankruptcy case of former University of Georgia head football coach James M. Donnan.
Objections filed on behalf of Valerie Fennell in the bankruptcy case of former University of Georgia head football coach James M. Donnan.

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Published by: keeganfederal on Aug 30, 2011
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07/10/2013

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August 28, 2011 1:43 PM
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C:\WLR\A\Fennell\settle obj resp F.doc
UNITED STATES BANKRUPTCY COURTMIDDLE DISTRICT OF GEORGIAATHENS DIVISIONIn re ) Chapter 11)JAMES M. DONNAN, III and ) Case No. 11-31083-JPSMARY W. DONNAN, ))Debtors. ) __________________________________________)
)
GLC LIMITED, ))Movant, ))v. ) Contested Matter )JAMES M. DONNAN, III and )MARY W. DONNAN, ))Respondents. ) __________________________________________)
REPLY OF VALERIE V. FENNELL, AS EXECUTOR OF THE PROBATE ESTATE OFDR. STEPHEN S. FENNELL, TO GLC’S AND ITS CREDITOR COMMITTEE’SRESPONSE CONCERNING AGREEMENT COMPROMISING A CONTROVERSY
Valerie V. Fennell (“Mrs. Fennell”), as executor of the probate estate (the “ProbateEstate”) of Dr. Stephen S. Fennell (“Dr. Fennell”) hereby replies to the response (the “GLCResponse”) filed by the movant (“GLC”) and its creditors’ committee (the “GLC Committee”)on August 26, 2011 at docket no. 64. This reply assumes the reader’s familiarity with Mrs.Fennell’s objection filed at docket no. 59 on August 22, 2011 and uses the operational definitionsfound there.
Case 11-31083 Doc 67 Filed 08/28/11 Entered 08/28/11 13:51:37 Desc MainDocument Page 1 of 13
 
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Introduction
GLC cannot sue here for at least three reasons: GLC is in pari delicto with the Donnans;the complaint does not plead the requirements for a constructive trust under Georgia law; and – from the Eleventh Circuit case directly on point -- GLC has suffered no injury:. . . [T]he trustee . . . is not the right party to pursue any damages resultingfrom the Ponzi scheme itself. . . . [T]he complaint does pervasively describeGreater Ministries as an organization run by Payne for the sole purpose of  perpetrating his Ponzi scheme. . . . Given these allegations, there is little doubtthat the complaint alleges Greater Ministries to be one of the principal culprits inthe Ponzi scheme. Thus, neither Greater Ministries nor its bankruptcy trustee cansue anyone . . . for the Ponzi scheme torts. Greater Ministries, whose primaryexistence was as a perpetrator of the Ponzi scheme, cannot be said to havesuffered injury from the scheme it perpetrated.O’Halloran v. First Union National Bank (In re Greater Ministries International, Inc.), 350 F.3d1197, 1202 (11
th
Cir. 2003).The GLC Response does not help. It confuses harm to GLC, which gives GLC standingto sue, with harm to GLC’s investors, which does not. It fails to recognize that GLC’sconstructive trust claim is subject to all defenses that could have been raised against the pre- bankrupt GLC. It never addresses the elements of proof on its constructive trust claim, whichleads it to ignore what GLC did and did not plead in the Complaint. And the GLC Responsedoes not direct us to the only precedent that binds this court: Eleventh Circuit decisions onfederal law, and Georgia Supreme Court decisions on applicable Georgia law.The GLC Response boils down to this:
GLC 
’s creditors have given this settlement greatthought and are all for it (why would they not be?); and (whether accurate or not) every other  bankruptcy court lets us do it, so why won’t you? But those thoughts do not help this courtdetermine (i) whether transferring property to the
GLC 
estate is best for the
 Donnan
estatecreditors, or more importantly (ii) whether the law of the Eleventh Circuit and the State of Georgia, as applicable, even permit that result.
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Mrs. Fennell appreciates all the work that GLC as debtor in possession and the GLCCommittee have done over the past few months. She recognizes that their knowledgeconcerning the alleged Ponzi scheme far exceeds what the objectors and this court now know.She sympathizes with their frustration against those who would now thwart the capstone of their efforts, namely, the transfer of $5 million in assets from the Donnan estate to the GLC estate tofund GLC’s already-filed liquidation plan. But no matter how admirable those efforts are, theydo not prove GLC’s right to relief in this court.If the Motion is to be decided under the Justice Oaks II factors at all, then its settlementfails because (a) the probability of success on the complaint as pled is nil, and (d) the creditors of this estate have different paramount interests. But we don’t even get there. The Donnans asdebtors in possession have irreconcilable conflicts in advancing the settlement in the first place,and their request to take property from the estate has been improperly noticed to those who mayassert competing claims.
I. WHAT IS GLC’S CLAIM TO TAKE ESTATE ASSETS?
The first question is, what is the claim that the Donnans seek to settle with an immediate$5 million in estate assets? The Complaint at par. 73 says:73. GLC is entitled to the imposition of a constructive trust and/or a purchase money resulting trust covering any and all property or assets owned byeach of the Defendants or in which one or both of the Defendants has or mayclaim to have an interest of any nature, kind, or description, including but notlimited to, any and all real property, personal property, cash or cash equivalents,accounts, general intangibles, or contract rights.
See, e.g.
, O.C.G.A. § 53-12-132(a);
City Nat’l Bank of Miami v. Gen. Coffee Corp. (In re: Gen. Coffee Corp.)
,828 F.2d 699 (11th Cir. 1987)].Those words describe a claim under Georgia law, which GLC’s bankruptcy estateinherited from the pre-bankruptcy GLC through 11 U.S.C. § 541(a). It is not an avoidance claimcreated when GLC filed its bankruptcy case through 11 U.S.C. §§ 544 – 550.
Case 11-31083 Doc 67 Filed 08/28/11 Entered 08/28/11 13:51:37 Desc MainDocument Page 3 of 13

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