The liens outweighed the assets by $21M - and that was the plaintiff's own math
Cleveland-Cliffs shipped Boomerang Tube $7.35 million in steel and never saw a dime. A Delaware court said tough luck.
Vice Chancellor Will of the Court of Chancery ruled on September 28 that PTC Liberty Tubulars - which bought Boomerang's equipment at a secured creditor sale - owes nothing on those unpaid invoices.
Boomerang made specialized tubing for oil and gas customers out of Texas. It emerged from Chapter 11 in February 2016 as a portfolio company of Black Diamond Capital Management, which held a 70.30% controlling stake. Between 2017 and 2019, Boomerang posted nearly $139 million in cumulative losses. One witness testified the company had a "run it till it dies" mentality. Then COVID-19 hit, oil prices turned negative, and by late 2020 Boomerang was bleeding roughly $3 million a month.
That is when Boomerang bought approximately $7.35 million in hot-rolled steel from ArcelorMittal, later acquired by Cleveland-Cliffs. It defaulted on every invoice.
Black Diamond's lending arm moved to collect. A sale notice landed in roughly 300 inboxes on Christmas Day 2020, with a January 3 bidding deadline. The auction went forward January 4. Two bidders showed. PTC Liberty bid $16.5 million for all of Boomerang's personal property. Proceeds paid off Fifth Third Bank's $16.1 million senior lien first.
Cleveland-Cliffs came after PTC Liberty on two fronts. The fraudulent transfer claim under Delaware's Uniform Fraudulent Transfer Act (DUFTA) collapsed at the threshold. Under DUFTA, property saddled with liens exceeding its value does not count as a transferable "asset." Boomerang's personal property carried approximately $126.4 million in perfected liens. Cleveland-Cliffs' own expert valued it at $104.7 million - still short by over $21 million. The court also refused to treat the Article 9 sale and later real estate foreclosures as one transaction, finding they happened months apart under different legal regimes.
Successor liability went the same way. Delaware narrowly reads the "mere continuation" exception as requiring continuity of the legal entity, not the business. No officer overlap. PTC Liberty's executives came through a management agreement with a separate company, and none had worked at Boomerang. PTC Liberty sank over $43 million into upgrading equipment, changed its branding, and built its own customer base.
On fraud, the court found no evidence Boomerang intended to stiff its creditors. An information barrier had separated Black Diamond personnel supporting the board from those running the sale.
For lenders and servicers watching asset dispositions: if the liens exceed the value, the fraudulent transfer claim is dead on arrival.
Judgment was entered for PTC Liberty on all counts.
