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UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF INDIANA INDIANAPOLIS DIVISION
IN RE: ) ) ITT EDUCATIONAL SERVICES, INC., et al.1 ) Case No. 16-07207-JMC-7A ) Debtors. ) Jointly Administered ______) ) DEBORAH J. CARUSO, the chapter 7 trustee for ) the bankruptcy estates of ITT Educational Services, ) Inc., ESI Service Corp., and Daniel Webster ) College, Inc., ) ) Plaintiff, ) Adversary No. ______) vs. ) ) NBCUNIVERSAL MEDIA, LLC; ) UNIVERSAL TELEVISION, LLC d/b/a ) USA NETWORK; TELEMUNDO OF ) GALVESTON-HOUSTON PARTNERS, LLC ) d/b/a KTMD HOUSTON TM; ESTRELLA ) COMMUNICATIONS, LLC d/b/a ) KVEA ESTRELLA LOS ANGELES; ) NBC SUBSIDIARY (WTVJ-TV), LLC, d/b/a ) WTVJ TV MIAMI; TELEMUNDO ) MID-ATLANTIC, LLC d/b/a WWSI ATLANTIC ) CITY; TELEMUNDO LAS VEGAS, LLC d/b/a ) KBLR LAS VEGAS TM; TELEMUNDO OF ) DENVER, LLC d/b/a KDEN DENVER TM; ) TELEMUNDO OF TEXAS, LLC d/b/a KVDA ) SAN ANTONIO TM; TELEMUNDO OF ) DALLAS, LP d/b/a KXTX DALLAS TM; ) TELEMUNDO OF CHICAGO, LLC d/b/a WSNS ) CHICAGO TM; TELEMUNDO NETWORK ) GROUP, LLC d/b/a TELEXITOS TV; ) NBC UNIVERSAL DIGITAL SOLUTIONS, LLC; ) and JOHN/JANE DOES, ) ) Defendants. )
1 The debtors in these cases, along with the last four digits of their respective federal tax identification numbers are ITT Educational Services, Inc. [1311]; ESI Service Corp. [2117]; and Daniel Webster College, Inc. [5980]. Case 16-07207-JMC-7A Doc 2915 Filed 09/12/18 EOD 09/12/18 17:24:45 Pg 2 of 11
COMPLAINT TO AVOID AND RECOVER TRANSFERS PURSUANT TO 11 U.S.C. §§ 547, 548 AND 550, TO DISALLOW CLAIMS PURSUANT TO 11 U.S.C. § 502 AND FOR UNJUST ENRICHMENT
Deborah J. Caruso, the chapter 7 trustee (the “Trustee”) in the chapter 7 bankruptcy cases
of ITT Educational Services, Inc. (“ITT”), ESI Service Corp. (“ESI”), and Daniel Webster
College, Inc. (“Webster College,” and together with ITT and ESI, the “Affiliated Debtors”), and
as plaintiff in the above-captioned adversary proceeding, by counsel, hereby alleges for her
Complaint to Avoid and Recover Transfers Pursuant to 11 U.S.C. §§ 547, 548 and 550, to
Disallow Claims Pursuant to 11 U.S.C. § 502 and for Unjust Enrichment (the “Complaint”)
against NBCUniversal Media, LLC (“NBCUniversal”), Universal Television, LLC d/b/a USA
Network (“USA”), Telemundo of Galveston-Houston Partners, LLC d/b/a KTMD Houston TM
(“KTMD”), Estrella Communications, LLC d/b/a KVEA Estrella Los Angeles (“KVEA”), NBC
Subsidiary (WTVJ-TV), LLC d/b/a WTVJ Miami (“WTVJ”), Telemundo Mid-Atlantic, LLC
d/b/a WWSI Atlantic City (“WWSI”), Telemundo Las Vegas, LLC d/b/a KBLR Las Vegas TM
(“KBLR”); Telemundo of Denver, LLC d/b/a KDEN Denver TM (“KDEN”); Telemundo of
Texas, LLC d/b/a KVDA San Antonio TM (“KVDA”), Telemundo of Dallas, LP d/b/a KXTX
Dallas TM (“KXTX”), Telemundo of Chicago, LLC d/b/a WSNS Chicago TM (“WSNS”),
Telemundo Network Group, LLC d/b/a TeleXitos TV (“Telemundo”), NBC Universal Digital
Solutions, LLC (“NBCDigital”) and John/Jane Does (together with NBCUniversal, USA,
KTMD, KVEA, WTVJ, WWSI, KBLR, KDEN, KVDA, KXTX, WSNS, Telemundo, and
NBCDigital, the “Defendants”), as follows:
JURISDICTION AND VENUE
1. The Court has subject matter jurisdiction over this adversary proceeding pursuant
to 28 U.S.C. §§ 151, 157 and 1334.
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2. Venue is proper in this district pursuant to 28 U.S.C. § 1409.
3. This adversary proceeding is commenced pursuant to sections 502, 547, 548 and
550 of title 11 of the United States Code (the “Bankruptcy Code”) and Rules 3007 and 7001 of
the Federal Rules of Bankruptcy Procedure (the “Bankruptcy Rules”).
4. Each count of this adversary proceeding is a “core” proceeding under 28 U.S.C. §
157(b)(2).
5. As required by Bankruptcy Rule 7008, the Trustee consents to entry of final
orders or judgment by the Court.
6. NBCUniversal filed a proof of claim against one or more of the Affiliated Debtors
on October 19, 2016 (Claim No. 413, filed in Case No. 16-07207), and thereby has submitted to
the jurisdiction of the Court.
THE PARTIES
7. On September 16, 2016 (the “Petition Date”), the Affiliated Debtors filed
voluntary petitions for relief under chapter 7 of the Bankruptcy Code. The Trustee was
appointed interim trustee under section 701 of the Bankruptcy Code in each of the Affiliated
Debtors’ bankruptcy cases on the Petition Date, and in accordance with section 702(d) of the
Bankruptcy Code, became the permanent case trustee on November 1, 2016 following the
conclusion of the meeting of creditors held pursuant to section 341(a) of the Bankruptcy Code.
8. Upon information and belief, NBCUniversal is a limited liability company
incorporated under the laws of the state of Delaware, with its principal place of business located
at 30 Rockefeller Plaza – 1221 Campus, New York, NY 10112.
9. Upon information and belief, KTMD is a limited liability company incorporated
under the law of the state of Delaware, with its principal place of business located at 1235 North
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Loop West, Suite 125, Houston, TX 77008.
10. Upon information and belief, KVEA is a limited liability company incorporated
under the law of the state of Delaware, with its principal place of business located at 100
Universal City Plaza, Universal City, CA 91608.
11. Upon information and belief, USA is a limited liability company incorporated
under the law of the state of New York, with its principal place of business located at 100
Universal City Plaza, Universal City, CA 91608.
12. Upon information and belief, WTVJ is a limited liability company incorporated
under the law of the state of Delaware, with its principal place of business located at 15000 SW
27th Street, Miramar, FL 33027.
13. Upon information and belief, WWSI is a limited liability company incorporated
under the law of the state of Delaware, with its principal place of business located at 10
Monument Road, Bala Cynwyd, PA 19004.
14. Upon information and belief, KBLR is a limited liability company incorporated
under the law of the state of Delaware, with its principal place of business located at 5000 W.
Oakey Blvd. Suite B2, Las Vegas, NV 89146.
15. Upon information and belief, KDEN is a limited liability company incorporated
under the law of the state of Delaware, with its principal place of business located at 4100 E. Dry
Creek Road, Centennial, CO 80122.
16. Upon information and belief, KVDA is a limited liability company incorporated
under the law of the state of Delaware, with its principal place of business located at 6234 San
Pedro Avenue, San Antonio, TX 78216.
17. Upon information and belief, KXTX is a limited partnership under the law of the
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state of Delaware, with its principal place of business located at 34805 Amon Carter Blvd., Fort
Worth, TX 76155.
18. Upon information and belief, WSNS is a limited liability company incorporated
under the law of the state of Delaware, with its principal place of business located at 454 N.
Columbus Drive, Chicago, IL 60611.
19. Upon information and belief, Telemundo is a limited liability company
incorporated under the law of the state of Delaware, with its principal place of business located
at 2290 West 8th Avenue, Hialeah, FL 33010.
20. Upon information and belief, NBCDigital is a limited liability company
incorporated under the law of the state of Delaware, with its principal place of business located
at 30 Rockefeller Plaza – 1221 Campus, New York, NY 10112.
21. The defendants, John/Jane Does, include any affiliates, subsidiaries and/or any
other entities related to the Defendants that are either the initial transferee of the Transfers (as
defined herein) or the entity for whose benefit the Transfers were made or any immediate or
mediate transferee of such initial transferee. The Trustee will seek leave of the Court to amend
this complaint to reflect their true names when they have been ascertained.
FACTUAL BACKGROUND
22. ITT was founded in 1946 and became a publicly traded company in 1994. Prior
to filing for bankruptcy, ITT grew to be one of the largest for-profit education companies in the
country, offering master, bachelor and associate degree programs at its approximately 137
campus locations and online programs to students located in all 50 states and the District of
Columbia in a number of subjects, including electronics, drafting and design, criminal justice,
business, information technology, health sciences and nursing.
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23. Prior to the Petition Date, the Affiliated Debtors maintained business relationships
with various media companies, through which the Affiliated Debtors regularly purchased
broadcast (e.g., television and radio) and/or online (e.g., digital) advertising for its campus
locations.
24. Upon information and belief, the Affiliated Debtors purchased broadcast
advertising with various television stations2 owned by one or more of the Defendants and
continued to conduct business with one another during the ninety (90) days immediately
preceding the Petition Date (the “Preference Period”).
25. Upon information and belief, the Affiliated Debtors also purchased online
advertising3 with one or more of the Defendants and continued to conduct business with one
another during the Preference Period.
COUNT I (Avoidance of Preferential Transfers Pursuant to 11 U.S.C. § 547)
26. The Trustee restates and realleges the allegations contained in paragraphs 1
through 25 above, as if fully set forth herein.
27. During the Preference Period, the Defendants received transfer(s) of an interest of
the Affiliated Debtors in property (the “Transfer” or “Transfers”) that were to or for the benefit
of one or more of the Defendants. Upon information and belief, the Transfers total not less than
$2,033,814.16, as detailed in Exhibit 1 attached and incorporated herein. Exhibit 1
notwithstanding, the Defendants may have received additional Transfers which the Trustee has
not yet discovered. The Trustee intends to avoid and recover all Transfers received by the
2 Upon information and belief, the various television stations are part of the NBC Network and include, but are not limited to, the following: (i) KBLR Las Vegas TM; (ii) KDEN Denver TM; (iii) KTMD Houston TM; (iv) KVDA San Antonio TM; (v) KVEA Estrella Los Angeles; (vi) KXTX Dallas TM; (vii) Telemundo Network Group; (viii) USA Network; (ix) WSNS Chicago TM; (x) WTVJ TV Miami; (xi) WWSI Atlantic City; and (xii) TeleXitos TV. 3 Upon information and belief, the online advertising was purchased through NBCUniversal Digital. 6
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Defendants during the Preference Period, and accordingly reserves her right to either amend this
complaint or seek a judgment against the Defendants for the amount of any additional Transfers
that may be discovered through the course of this litigation.
28. At the time of each Transfer, the Defendants were a creditor of the Affiliated
Debtors.
29. The Transfers were for or on account of an antecedent debt owed by the Affiliated
Debtors before the Transfers were made.
30. The Transfers were made while the Affiliated Debtors were insolvent.
31. The Transfers enabled the Defendants to receive more than the Defendants would
have received if the case were a case under chapter 7 of the Bankruptcy Code, if the Transfers
had not been made, and the Defendants received payment of such debt to the extent provided by
the provision of the Bankruptcy Code.
32. Pursuant to section 547(b) of the Bankruptcy Code, the Trustee is entitled to a
judgment against the Defendants avoiding the Transfers, including any Transfers received by the
Defendants during the Preference Period even if not specifically listed in Exhibit 1.
WHEREFORE, the Trustee requests judgment in her favor and against the Defendants
(i) declaring that the Transfers are avoidable preferences pursuant to section 547(b) of the
Bankruptcy Code; (ii) avoiding the Transfers; and (iii) granting the Trustee all other just and
proper relief.
COUNT II (Avoidance of Fraudulent Transfers Pursuant to 11 U.S.C. § 548)
33. The Trustee restates and realleges the allegations contained in paragraphs 1
through 32 above, as if fully set forth herein.
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34. To the extent one or more of the Transfers are not avoidable under section 547 of
the Bankruptcy Code, the Trustee alternatively alleges that such Transfers were fraudulent.
35. The Transfers were not in exchange for reasonably equivalent value.
36. The Transfers were made with actual intent to hinder, delay, or defraud any entity
to which the Affiliated Debtors were or became indebted on or after the date that the Transfers
were made.
37. The Transfers were made when the Affiliated Debtors (a) were insolvent or
became insolvent as a result of such transfer; (b) were engaged in business or a transaction or
was about to engage in business or a transaction, for which any property remaining with the
Affiliated Debtors was unreasonably small capital; or (c) intended to incur, or believed that the
Affiliated Debtors would incur debts that would be beyond the Affiliated Debtors’ ability to pay
as such debts matured.
38. Pursuant to section 548(a) of the Bankruptcy Code, the Trustee is entitled to
judgment against the Defendants avoiding the Transfers, and any other avoidable transfers under
the Bankruptcy Code.
WHEREFORE, the Trustee requests judgment in her favor and against the Defendants
(i) declaring that the Transfers are avoidable pursuant to section 548(a) of the Bankruptcy Code;
(ii) avoiding the Transfers and any other avoidable transfers under the Bankruptcy Code; and (iii)
granting the Trustee all other just and proper relief.
COUNT III (Recovery of Avoided Transfers Pursuant to 11 U.S.C. § 550)
39. The Trustee restates and realleges the allegations contained in paragraphs 1
through 38 above, as if fully set forth herein.
40. The Trustee is entitled to avoid the Transfers pursuant to section 547(b) of the
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Bankruptcy Code, or alternatively pursuant to section 548(b) of the Bankruptcy Code.
41. Pursuant to section 550(a) of the Bankruptcy Code, the Trustee is entitled to
recover the Transfers from the Defendants, plus interest thereon to the date of payment.
WHEREFORE, the Trustee requests judgment in her favor and against the Defendants
(i) declaring that the Trustee may recover the Transfers from the Defendants for the benefit of
the Affiliated Debtors’ bankruptcy estates pursuant to section 550(a) of the Bankruptcy Code;
(ii) ordering the Defendants to pay the Trustee the aggregate amount of the Transfers, plus all
interest thereon to the date of payment; and (iii) granting the Trustee all other just and proper
relief.
COUNT IV (For Disallowance of Claims Pursuant to 11 U.S.C. §§ 502(d) and 550)
42. The Trustee restates and realleges the allegations contained in paragraphs 1
through 41 above, as if fully set forth herein.
43. Section 502(d) of the Bankruptcy Code provides that, unless an entity from which
property is recoverable under section 550 of the Bankruptcy Code or that is a transferee of a
transfer avoidable under sections 547 or 548 of the Bankruptcy Code turns over any such
property for which such entity or transferee is liable under section 550 of the Bankruptcy Code,
any claims of such entity or transferee shall be disallowed.
44. Pursuant to section 502(j) of the Bankruptcy Code, any and all claims of the
Defendants and/or its assignee that have previously been allowed in the Affiliated Debtors’
bankruptcy cases must be reconsidered and disallowed until such time as the Defendant pays to
the Trustee an amount equal to the aggregate amount of the Transfers.
45. The Defendants have not paid or surrendered the Transfers to the Trustee.
Therefore, any claim that the Defendants have filed in this case or otherwise asserts against the
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Affiliated Debtors must be disallowed.
WHEREFORE, the Trustee requests judgment in her favor and against the Defendants
(i) disallowing any and all claims of the Defendants against the Affiliated Debtors’ bankruptcy
estates pursuant to sections 502(d) and 550 of the Bankruptcy Code; (ii) reconsidering and
disallowing any previously allowed claims of the Defendants against the Affiliated Debtors’
bankruptcy estate pursuant to sections 502(j) and 550 of the Bankruptcy Code; and (iii) granting
the Trustee all other just and proper relief.
COUNT V (For Unjust Enrichment)
46. The Trustee restates and realleges the allegations contained in paragraphs 1
through 45 above, as if fully set forth herein.
47. To the extent one or more of the Transfers are not avoidable under either sections
547 or 548 of the Bankruptcy Code, the Trustee alternatively alleges that the Defendants have
been unjustly enriched by retaining such Transfers.
48. The Defendants received a benefit as a result of the Transfers.
49. The Defendants have unjustly retained the Transfers at the expense and to the
detriment of the Affiliated Debtors’ bankruptcy estates.
50. The Transfers were made at a time:
(a) when the Affiliated Debtors were under a mistake of fact that the broadcast and/or online advertising was needed throughout the time period covered by the Transfers;
(b) without consideration; or
(c) the consideration for the Transfers has failed.
51. The Transfers belong to the Affiliated Debtors’ bankruptcy estates.
52. In equity and good conscience the Transfers should be returned to the Affiliated
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Debtors’ bankruptcy estates.
WHEREFORE, the Trustee requests judgment in her favor and against the Defendants
(i) for return of the Transfers the Defendants have unjustly retained at the expense and to the
detriment of the Affiliated Debtors’ bankruptcy estates; and (ii) granting the Trustee all other just
and proper relief.
Respectfully submitted,
RUBIN & LEVIN, P.C.
By: /s/ Meredith R. Theisen Meredith R. Theisen
Meredith R. Theisen (Atty. No. 28804-49) RUBIN & LEVIN, P.C. 135 N. Pennsylvania Street, Suite 1400 Indianapolis, Indiana 46204 Tel: (317) 634-0300 Fax: (317) 263-9411 Email: [email protected] Attorneys for Deborah J. Caruso, Trustee
f:\wp80\trustee\caruso\itt avoidance actions - 86700001\defendants\nbc universal-86700334\drafts\complaint - draft.docx
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Case 16-07207-JMC-7A Doc 2915-1 Filed 09/12/18 EOD 09/12/18 17:24:45 Pg 1 of 1 ITT Educational Services, Inc. et al., Case No. 16-07207-JMC
Transfers During Preference Period Check/EFT Check/EFT Name Number Payment Type Clear Date Amount KVEA Estrella Los Angeles 1386090 CHECK 6/17/2016 $ 68,142.50 KXTX Dallas TM 1386098 CHECK 6/17/2016 $ 19,890.00 TeleXitos TV 1386139 CHECK 6/17/2016 $ 21,760.00 KBLR Estrella Los Angeles 1386008 CHECK 6/20/2016 $ 4,131.00 KDEN Denver TM 1386015 CHECK 6/20/2016 $ 5,894.74 KVDA San Antonio TM 1386089 CHECK 6/20/2016 $ 3,459.50 Telemundo Network Group 1386127 CHECK 6/20/2016 $ 737,624.05 USA Network 1386141 CHECK 6/20/2016 $ 476,340.00 WSNS Chicago TM 1386282 CHECK 6/20/2016 $ 8,521.25 KTMD Houston TM 1386074 CHECK 6/27/2016 $ 19,370.50 NBCUniversal Digital 1388550 CHECK 6/27/2016 $ 65,384.61 USA Network 1389853 CHECK 7/29/2016 $ 561,000.00 KBLR Las Vegas TM 1389729 CHECK 8/29/2016 $ 3,485.00 KDEN Denver TM 1389736 CHECK 8/29/2016 $ 3,740.00 KVDA San Antonio TM 1389803 CHECK 8/29/2016 $ 3,196.00 WSNS Chicago TM 1390011 CHECK 8/29/2016 $ 4,377.50 WTVJ TV Miami 1390029 CHECK 8/29/2016 $ 21,037.50 WWSI Atlantic City 1390055 CHECK 8/29/2016 $ 6,460.00 TOTAL $ 2,033,814.15
Exhibit 1 Page 1 of 1