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Vol 12, Num 5 l July 2016

Technology and Intellectual Property

► In This Issue:

Good-Faith Transferees and the Madoff Proceedings

ABI

Scott J. Bogucki
Amigone, Sanchez, &
Mattrey, LLP
Buffalo, N.Y.

 

 

 

In Picard v. Legacy Capital Ltd., the U.S. Bankruptcy Court for the Southern District of New York recently set forth the burden of pleading fraudulent transfers in bankruptcy cases decided under the Securities Investor Protection Act (SIPA). At issue were two complaints seeking the avoidance and recovery of various transfers under the fraudulent transfer provisions of the Code and New York Debtor and Creditor Law (NYDCL). After first turning to the § 546(e) safe harbor provision, the court dismissed one of the complaints in its entirety and left only part of one count in the other complaint, which sought to avoid and recover fictitious profits pursuant to actual fraud under the Code. The court made clear that the transferee’s good faith — which, under other facts not governed by both SIPA and the Code, would be the defendant’s burden as an affirmative defense — here became part of the trustee’s burden of pleading. Specifically, the court held that the trustee failed to sufficiently plead that the transferees either had actual knowledge of, or willfully blinded themselves to, the fact that the investment arm of Madoff’s enterprise, Bernard L. Madoff Investment Securities (BLMIS), was not engaged in trading securities.» Read More

Husky International and the Extension of Bankruptcy Court Jurisdiction over Nondebtor Transferors

ABI

Bradley E. Pearce
Pearce Law PLLC
Charlotte, N.C.

 

Most of the recent commentary around the Supreme Court’s Husky International Electronics Inc. v. Ritz opinion has centered on the holding that a debt may be nondischargeable under § 523(a)(2)(A), even if the debt was not obtained by a false representation.The facts underlying Husky International reveal another issue that is unrelated to the actual fraud prong of § 523(a)(2), but that is core to fraud litigation and the jurisdictional reach of bankruptcy courts: the solvency of the non-debtor transferor.

Indeed, Husky International raises the jurisdictional issue of whether bankruptcy courts may also determine whether a transferor that is not a debtor in bankruptcy was insolvent. As is well known, bankruptcy judges have the authority to determine whether the debtor was insolvent at a given point in time. That, however, is not what was at issue inHusky International» Read More

 

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