The Breed matter was a Constructively Fraudulent Transfer action, coupled with claims of Fraud and Misrepresentation, in which the central economic issues were the Solvency of the acquirer and the fair value of the acquired business. In October 1997, Breed Technologies, Inc. (“Breed”), a Lakeland, Florida manufacturer of automobile occupant-safety systems, purchased the Safety Restraints Systems Division (“SRS”) of AlliedSignal, Inc. (“AlliedSignal”) for an initial purchase price of $710 million in cash under an Asset Purchase Agreement dated August 27, 1997; the transaction closed on October 30, 1997. Breed filed for Chapter 11 bankruptcy protection in September 1999.
As debtor-in-possession, Breed sued under 11 U.S.C. § 544(b) to avoid and recover the $710 million transfer, alleging that it was a constructively fraudulent transfer—that Breed did not receive reasonably equivalent value for the cash it paid and was rendered insolvent—and that AlliedSignal had fraudulently misrepresented SRS’s earnings during due diligence. Breed’s experts asserted that Breed “overpaid” for SRS and that the acquisition left Breed insolvent on the closing date.
On behalf of AlliedSignal, Professor Mark E. Zmijewski—Professor Emeritus at the University of Chicago Booth School of Business—was retained to evaluate the plaintiff’s valuation and solvency analyses. Professor Zmijewski, supported by Keith Bockus, (i) evaluated the report of the plaintiff’s valuation expert; (ii) analyzed the value of SRS as of October 30, 1997; (iii) evaluated the solvency report of the plaintiff’s expert; and (iv) analyzed whether the fair market value of Breed’s assets exceeded its liabilities on the closing date of the transaction. He also examined whether Breed received reasonably equivalent value for the purchase price and remained solvent following the transaction.