A New York federal bankruptcy judge on Monday recommended a judgment of $41.8 million against distressed-debt maverick Lynn Tilton after a bench trial in a Chapter 7 trustee's adversary case over the collapse of ambulance company TransCare Corp.

U.S. Bankruptcy Judge Stuart M. Bernstein also levied a $39.2 million judgment against Tilton's private equity firm Patriarch Partners Agency Services LLC, finding that it accepted TransCare collateral with the intent to hinder and delay TransCare's creditors and avoid the strict foreclosure of its most valuable assets.

Judge Bernstein, however, noted that the damages for Tilton's breach of fiduciary duty and Patriarch's fraudulent conveyance remedy the same injury, and that trustee Salvatore LaMonica is entitled to just a "single satisfaction," meaning that he will collect the greater of the two judgments — not a combination of the two.

Judge Bernstein's recommended judgment against Tilton will be reviewed de novo by the district court before it has the chance to be confirmed. The judgment against Patriarch is all but final — waiting only for a hearing on possible attorney fees for the trustee.

Brooklyn-based TransCare had been a contractor to New York City's Access-a-Ride program for people with disabilities. The company employed 1,700 to 2,700 employees in the greater New York City area before filing for Chapter 7 in February 2016.

Patriarch Partners LLC first invested in TransCare in 2003 through subsidiary Patriarch Partners Agency Services. Things went smoothly for a while, and in 2014, TransCare took in roughly $130
million in revenue. But LaMonica says the company began to fall apart the next year as Tilton and Patriarch refused to inject capital for repairs, payroll and other critical costs.

At the same time, LaMonica says, Patriarch insisted that TransCare continue to pay the full value of its debt payments to PPAS, an administrative agent for the company's lenders, every month.

According to the trustee's suit, in the last months before TransCare's bankruptcy, Tilton began plotting to strip the same assets that competitors were offering to buy and transfer them to a new entity, Transcendence Transit Inc.

On Monday, Judge Bernstein sided with the trustee, recommending to the district court a judgment of breach of fiduciary duty against Tilton.

"Tilton failed to sustain her burden of proving the entire fairness in connection with the formulation and execution of the part of the Tilton plan involving the strict foreclosure and sale to Transcendence and breached her fiduciary duties of loyalty and good faith owed to TransCare," he said.

The trustees had argued that they were entitled to $10 million from Patriarch plus punitive damages. They said Patriarch's claims in the TransCare bankruptcy should be equitably subordinated, or put below even the general unsecured claims that usually get paid last in bankruptcy. Alternatively, LaMonica has proposed reclassifying the millions of dollars in debt Patriarch loaned to TransCare as equity investments, a move that would also put Patriarch at the end of the line.

On Monday, Judge Bernstein found that PPAS failed to show that it accepted the collateral in good faith, noting the court has already determined that TransCare made its transfer with the intent to hinder and delay creditors.

"Its wrongful intent was imputed from Tilton," the judge said. "Tilton's same wrongful intent is imputed to PPAS which participated with TransCare (and Transcendence) in the Tilton plan and received the subject collateral in bad faith and with the knowledge of Tilton's intent to hinder and delay TransCare's creditors."

Judge Bernstein also dismissed an equitable subordination claim and a bid to recover $800,000 from PPAS.

Representatives for Tilton did not immediately respond to requests for comment.

The trustee is represented by Bijan Amini and Avery Samet of Amini LLC.

Patriarch and Tilton are represented by Timothy Karcher, Michael Mervis and Nicole Eichberger of Proskauer Rose LLP.

The case is In re: TransCare Corp. et al., case number 1:16-bk-10407, in the U.S. Bankruptcy Court for the Southern District of New York.