MEMORANDUM OPINION AND ORDER
In this bankruptcy appeal, Deutsche Bank A.G. London Branch ("Deutsche Bank") seeks review of a bankruptcy court's grant of summary judgment against it. The three principal questions raised on appeal can be stated as follows: (1) Did the bankruptcy judge properly admit WorldCom, Inc.'s ("WorldCom") consolidated, restated balance sheet in granting WorldCom's motion for summary judgment? (2) Did the bankruptcy judge properly apply Section 14-2-640 of the Georgia Business Corporations Code in granting summary judgment? (3) Was there sufficient evidence before the bankruptcy court for it to find that there was no genuine issue of material fact and WorldCom was entitled to a judgment as a matter of law? The Court answers all three questions in the affirmative and denies Deutsche Bank's appeal.
The underlying facts that constitute the basis for this appeal are not disputed. Prior to bankruptcy, WorldCom had two classes of common stock, WorldCom Group and MCI Group. MCI Group shares were a tracking stock, intended to reflect the performance of certain of WorldCom's lines of business. Deutsche Bank held 13,178,200 shares of MCI Group common stock, or approximately eleven percent of the outstanding shares. In May 2002, WorldCom's board of directors unanimously voted to return to a single class of common stock by converting MCI Group shares to WorldCom Group shares. At the same time, WorldCom declared a final quarterly dividend of $0.60 per MCI Group share, payable on July 15, 2002.
On June 26, 2002, WorldCom announced its intention to restate its financial statements for 2001 and the first quarter of 2002 as a result of serious accounting problems. Nonetheless, WorldCom announced on July 1, 2002 that it still intended to pay the dividend. By July 11, 2002, however, WorldCom determined that it would not pay the dividend and issued a press release to that effect. The dividend was never paid. On July 21, 2002, WorldCom filed a Chapter 11 petition in the Bankruptcy Court of the Southern District of New York. Deutsche Bank timely filed two proofs of claim against WorldCom, 25985 and 25986, only the former of which is at issue in this appeal.
Deutsche Bank sought payment of $7,906,920 for breach of contract for the dividend on MCI Group shares that was announced but never paid. In WorldCom's 14th Omnibus Objection to Claims, it asserted that the contract claim was subject to mandatory subordination and should be expunged without payment. After briefing and argument on the subordination objection, Bankruptcy Judge Hardin noted that state law generally precluded an insolvent company from paying a dividend to shareholders (Tr. of Proceedings, May 11, 2005, at 46--56) and directed WorldCom to file a motion for summary judgment addressing the merits of Deutsche Bank's claim. Accompanying this motion was a Declaration by Adam P. Strochak, counsel for WorldCom, which attached WorldCom's consolidated, audited, restated balance sheet for year-end 2003, identifying the document as an excerpt from the company's 10-K dated March 12, 2004 filed with the Securities Exchange Commission ("SEC"). The balance sheet showed that WorldCom's liabilities exceeded its assets by nearly $9.5 billion at the end of 2001 and by $19.5 billion at the end of 2002. In its opposition brief, Deutsche Bank attempted to argue that WorldCom was solvent in between those dates, and was thus allowed to make the distribution. In support of this claim, Deutsche Bank questioned the underlying analysis and the authorship of the balance sheet, but did not conduct nor ask for more time to conduct additional discovery on the matter.
Following oral argument held telephonically on September 28, 2005, Judge Hardin granted WorldCom's motion for summary judgment, articulating his reasoning on the record. Judge Hardin held:
[T]here's no dispute that if the debtors were insolvent then the declaration of and payment of the dividend was and would have been unlawful and could not have been done.
Something that is unlawful cannot give rise to a valid allowable claim . . . . [T]he gross insolvency as of 2001 year end and 2002 year end gives rise to a presumption, a most compelling inference that WorldCom was insolvent during the entire year between those two dates. . . . [T]here has never to my knowledge and so far as the record before me reveals been the slightest suggestion from any source in any context that the debtor and its subsidiaries were solvent during that one-year period. (Tr. of Proceedings, Sept. 28, 2005, at 21--23.) Deutsche Bank now challenges that ruling.
On appeal, a district court reviews a bankruptcy court's finding of facts under a clearly erroneous standard, Fed. R. Bankr. 8013, and its conclusions of law de novo, In re AroChem Corp., 176 F.3d 610, 620 (2d Cir. 1999); In re Bennett Funding Group, Inc., 146 F.3d 136, 138 (2d Cir.1998). A bankruptcy court's evidentiary rulings are reviewed for an abuse of discretion. Ball v. A.O. Smith Corp., 321 B.R. 100, 106 (N.D.N.Y. 2005) (citing Manley v. AmBase Corp., 337 F.3d 237, 247 (2d Cir. 2003)).
1. Admissibility of WorldCom's Restated, Consolidated Balance Sheet
In granting WorldCom's motion for summary judgment, the bankruptcy court relied heavily, if not exclusively, on WorldCom's consolidated balance sheet. (See Tr. of Proceedings, Sept. 28, 2005, at 14.) Deutsche Bank argues that this balance sheet, attached as an exhibit to the declaration of WorldCom's attorney, Adam Strochak, is inadmissible because the declarant had no personal knowledge of the contents of the exhibit.*fn1 If it were properly excluded under the Federal Rules of Evidence, Deutsche Bank continues, there would be insufficient evidence in the record to merit the grant of summary judgment. WorldCom responds that Deutsche Bank waived any ...