What are the limits of a bankruptcy court’s authority to issue final orders and judgments? Does a bankruptcy court have authority under Article III of the U.S. Constitution to enter final orders in quintessential bankruptcy matters such as fraudulent transfer claims, or are the court’s powers more constrained? While the Supreme Court’s rulings in Stern … Continue Reading
Can the recipient of an actual fraudulent transfer effectively “cleanse” the transfer if the funds are returned to the debtor? In a recent opinion, the United States Bankruptcy Court for the Eastern District of Pennsylvania answered that question in the affirmative. In Holber v. Nikparvar (In re Incare, LLC), the Chapter 7 Trustee (the “Trustee”) … Continue Reading
Each year, millions of parents across America write checks to institutions of higher learning, in payment of tuition and charges for their children to pursue a college degree. Inevitably, some of those parents end up in the bankruptcy courts. In recent years, trustees have found an attractive potential source of estate recovery: pursuing the colleges … Continue Reading
Earlier this month, the United States Supreme Court agreed to review a Seventh Circuit decision regarding the scope of the so-called “safe harbor” from avoidable transfers provided in Section 546(e) of the Bankruptcy Code. Many in the U.S. bankruptcy industry expect that the Supreme Court granted certiorari to hear Merit Management Group, LP v. FTI … Continue Reading
Dickinson v NAL (Realisations) Staffordshire Ltd is a useful case on how directors’ duties are looked at following a formal insolvency and ways in which an office holder can challenge transactions if there is evidence of wrongdoing or a concerted strategy to frustrate creditors’ recourse to a Company’s asset base which would ordinarily be available … Continue Reading
In Meoli v. The Huntington National Bank (In re Teleservices Group, Inc.), the U.S. Court of Appeals for the Sixth Circuit examined the elements of “good faith” and “knowledge of the voidability of the transfer avoided” that initial and subsequent transferees must establish when defending against fraudulent transfer claims brought under sections 548 and 550 … Continue Reading
“Reasonably equivalent value” – – part of the standard for evaluation of potential constructive fraudulent transfers – – is both subjective and imprecise. The words “equivalent value” require the court to make a subjective judgment whether consideration received in exchange for a transfer is worth the same as the consideration transferred by the debtor. And … Continue Reading
In a decision last month in Whyte v. SemGroup Litig. Trust (In re Semcrude L.P.), No. 14-4356, 2016 U.S. App. LEXIS 7690 (3d Cir. Apr. 28, 2016), the United States Court of Appeals for the Third Circuit held that proving that a debtor was left with unreasonably small capital will not turn on either hindsight … Continue Reading
A bankruptcy court wrote that filing for bankruptcy is “powerful magic.” By finding federal preemption of state law fraudulent transfer claims, the Second Circuit Court of Appeals’ decision in the long-running Tribune case showed just how powerful this magic can be. The Tribune saga began in 2007 when, during steep changes in the publishing industry, … Continue Reading
When can a bank be at risk of unknowingly receiving a fraudulent transfer? How much information does a bank need to have before it is on “inquiry notice”? A recent decision from the Seventh Circuit Court of Appeals highlights the risks that a bank takes when it ignores red flags and fails to investigate. In … Continue Reading
Insiders who loot their corporate entities often dispose of the cash proceeds in transactions with third parties. A recent Seventh Circuit opinion, In re Equipment Acquisition Resources, Inc., 14-2174 (7th Cir. October 13, 2015) (the “EAR Opinion”) addresses a common risk faced by a third party who receives cash from the defrauding insider. Generally, a … Continue Reading
Suppliers of good and services (“trade creditors”) generally have no duty to determine whether their customers are operating an illegal enterprise. However a recent Fifth Circuit opinion presents an unprecedented “claw-back” risk facing trade creditors who unknowingly provide goods and services to a “Ponzi-scheme” enterprise. The Janvey Opinion In Janvey v. The Golf Channel, 13-11305 … Continue Reading
