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In re Video Depot, Ltd.

United States Court of Appeals for the Ninth Circuit
127 F.3d 1195 (1997)


Jeffrey Arlynn was the president of Video Depot, Ltd. (debtor) and controlled all of the company’s operations. Arlynn frequently gambled at the Las Vegas Hilton (Hilton) (creditor) and for years accumulated gambling debts with Hilton that he would typically pay off within a short time. In May 1990, Arlynn incurred a debt of $225,000 with Hilton and failed to pay it off. In June 1990, Video Depot purchased a cashier’s check made payable to Hilton for $65,000. Arlynn gave that check and a personal cashier’s check for $10,000 to Hilton, with both intended to be applied toward his gambling debt. Video Depot filed for bankruptcy in September 1990. The bankruptcy trustee sought to recover the proceeds of the $65,000 check as a fraudulent transfer under 550(a) of the bankruptcy code. The parties stipulated that the check was a fraudulent transfer. Hilton denied that it was the initial transferee of the funds, because Video Depot transferred the funds to Arlynn in his individual capacity before Arlynn transferred the funds to Hilton. The bankruptcy court held that Hilton was an initial transferee from whom the transfer could be recovered. The district court affirmed the bankruptcy court’s ruling, and Hilton appealed.

Rule of Law


Holding and Reasoning (Nelson, J.)

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