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Home New Cases Debtor-Defendant Robert Smallwood Seeks to Dismiss Complaint Concerning Alleged Alter Ego and Fraudulent Conveyance Claims

Debtor-Defendant Robert Smallwood Seeks to Dismiss Complaint Concerning Alleged Alter Ego and Fraudulent Conveyance Claims


January 11, 2022, Eastern District of New York Debtor-Defendant Robert Smallwood brings a motion to dismiss a complaint brought by Trustee Debra Kramer against multiple defendants. The Defendants include – Lightning Stainless Bolt, Inc., Fastenere Inc., Robert Smallwood, Carol Choi, Kevin Chan, Discount Distributors, LLC, Fastener Depot, LLC,, Inc., Ebay, Inc., Paypal, Inc.

Specifically, the Trustee brought the lawsuit to recover money damages against the Defendants under various claims for relief and sought to avoid the transfers allegedly made by Debtor as sole shareholder and alter ego of Defendant Lightning Stainless to the other defendants. The Trustee argues that the transfers were allegedly made when Defendant Lightning Stainless was insolvent under the Debtor’s control.

The Motion to dismiss argues that the linchpin of the Trustee’s complaint is that Smallwood is allegedly an alter ego of Lightning Stainless Bolt Inc., and for the same reason, the Trustee also seeks to set aside transfers of the assets of Lightning for the benefit of Smallwood’s estate. Smallwood argues that by asserting this claim, the Trustee seeks to circumvent the well-settled principle that ownership of one hundred percent (100%) of the stock of a corporation is not the equivalent of ownership of the corporations’ property or assets. Smallwood contends that upon the filing of his Chapter 7 case, his 100% ownership of Lightning did not render the assets of Lightning to be the property of his estate. Thus, the Motion contends that Court should analyze New York law to determine the validity of the Trustee’s claims, and precisely, the Trustee’s ability to bring these claims in the first place.

The hearing on Smallwood’s Motion to Dismiss is scheduled for February 9, 2022, before Honorable Nancy Lord in the United States Bankruptcy Court for Eastern District of New York.

In re Robert Smallwood, Case No. 21-01189-NHL


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