Ned S. Schodek

Shearman & Sterling discusses Making the Safe Harbors Safe Again: Second Circuit Holds State Law Constructive Fraudulent Conveyance Claims Are Preempted by the Safe Harbor of Section 546(e) of the Bankruptcy Code

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In a March 29, 2016 decision,[1] the United States Court of Appeals for the Second Circuit (the “Court of Appeals”) held that creditors are preempted from asserting state law constructive fraudulent conveyance claims by virtue of the Bankruptcy Code’s “safe harbors” that, among other things, exempt transfers made in connection with a contract for the purchase, sale or loan of a security (here, in the context of a leveraged buyout (“LBO”)), from being clawed back into the bankruptcy estate for distribution to creditors. The decision will serve to promote finality and certainty for investors by limiting the circumstances (e.g.… Read more

Shearman & Sterling explains SDNY Bankruptcy Court Holding That Avoidance Powers Can Be Applied Extraterritorially, and Resulting Split Within the SDNY

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On January 4, 2016, the United States Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”) deviated from SDNY precedent and held that, despite the absence of clear Congressional intent, the avoidance powers provided for under Section 548 of the Bankruptcy Code can be applied extraterritorially. As a result, a fraudulent transfer of property of a debtor’s estate that occurs outside of the United States can be recovered under Section 550 of the Bankruptcy Code. This ruling creates a split among courts within the Southern District of New York regarding the reach of avoidance powers when it … Read more