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Home New Cases Virgin Islands Defendants Claim FL Clawback Laws Hold No Water in the Islands

Virgin Islands Defendants Claim FL Clawback Laws Hold No Water in the Islands


Download the full pdf of the motion by clicking: here

July 06, 2022, US Bankruptcy Court for Southern Florida – Defendants, United Corporation (“United”) and Fathi Yusuf Mohamad Yusuf (“Yusuf”) move to dismiss count 1 of the adversary complaint pursuant to Fed. R. Bankr. P. 7012 and Fed. R. Civ. P. 12(b)(6).

By background, United sold its interest in Mattress PAL, LLC to Debtor, SOS Furniture Company (“Debtor” or “SOS”) for $17 million via a written agreement in 2016. Pursuant to the purchase agreement, on December 17, 2017, SOS issued both Defendants two checks in the cumulative amount of $1,020,000.00 for the first year’s interest payment.

The Debtors filed Chapter 7 bankruptcy on June 2, 2021. Ross Hartog, the trustee (“Trustee”) for SOS, filed an adversary proceeding to clawback the 2017 interest payments of more than $1 million using the four (4) year look back period under the Florida Uniform Fraudulent Transfer Act (“FUFTA”) and/or the ten (10) year look back period as the IRS is a “triggering” creditor under 26 U.S.C. §§6502(a)(1) & 6901.

The Defendants argue that Yusuf is a resident of the Virgin Islands and United is a Virgin Islands corporation, claiming that they are not subject to the state laws of Florida. The motion alleges that FUFTA does not have an extraterritorial application. It also alleges that the Virgin Islands is “foreign” for purposes of federal income tax purposes and that section 6901 of the Internal Revenue Code does not apply extraterritorially.

Therefore, the motion alleges that the Trustee’s cause of action against the Defendants is time-barred claiming that the Trustee neither has the benefit of ten (10) year collection period under Internal Revenue Code nor that of four (4) year look back period under Florida law.

Ross R. Hartog, Chapter 7 Trustee v. United Corporation (In re SOS Furniture Company, Inc. et al.), AP No. 22-01167, US Bankruptcy Court for the Southern District of Florida


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