## Facts

- Video Depot, Ltd. operated as a consumer electronics company; Jeffrey Arlynn served as its president and exercised near-total operational control.
- Arlynn frequently gambled at the Las Vegas Hilton and maintained a casino credit line that eventually increased to $75,000.
- In early May 1990, Arlynn incurred a $225,000 personal gambling debt to Hilton and left without making a payment.
- On June 15, 1990, Video Depot purchased a $65,000 cashier’s check payable to Hilton; the check identified Video Depot as the purchaser.
- On June 16, 1990, Arlynn delivered to Hilton (i) the $65,000 cashier’s check purchased by Video Depot and (ii) a separate $10,000 personal cashier’s check.
- Hilton applied the $65,000 cashier’s check to Arlynn’s personal gambling debt.
- Video Depot filed for bankruptcy on September 14, 1990; the trustee sought to avoid and recover the $65,000 payment as a fraudulent transfer.
- The parties stipulated the $65,000 cashier’s-check payment was a fraudulent transfer avoidable under 11 U.S.C. § 548, leaving only the § 550 “initial transferee” question.

## Issues

1. Whether Hilton was the “initial transferee” of the $65,000 fraudulent transfer under 11 U.S.C. § 550(a)(1), or instead a subsequent transferee potentially protected by the § 550(b) good-faith defense.
2. Whether Arlynn’s delivery of the cashier’s check made him the initial transferee based on dominion and control over the transferred property.

## Decision

- The Ninth Circuit affirmed judgment for the trustee.
- Hilton was the “initial transferee” under § 550(a)(1) because it was the first entity to receive the debtor’s property with dominion and control.
- Arlynn was not an initial transferee; he functioned as a mere courier/conduit because the cashier’s check was payable only to Hilton and he lacked discretion to redirect the funds.

## Legal Principles

- After a transfer is avoided (including under § 548 by stipulation), § 550 determines from whom the trustee may recover the transferred value.
- “Initial transferee” status under § 550(a)(1) turns on dominion and control: the right to use the money for one’s own purposes.
- An intermediary who merely delivers funds without the ability to negotiate, redirect, or otherwise deploy them is a conduit, not an initial transferee.
- When a cashier’s check is purchased by the debtor and made payable directly to the ultimate recipient, delivery by an insider does not, by itself, create a separate intermediate transfer to the insider.

## Conclusion

Because the debtor purchased a cashier’s check payable solely to Hilton and Arlynn lacked the ability to use the funds for any other purpose, Hilton—rather than Arlynn—was the first recipient with dominion and control and therefore the initial transferee liable for recovery under § 550(a)(1).


In re Video Depot, Ltd., 127 F.3d 1195 (9th Cir. 1997)