In re Tribune: Defendants Successfully Challenge Individual Creditors Standing But District Court Rules that Section 546(e) Safe Harbor Does Not Bar Individual Creditors’ State Law Based Constructive Fraudulent Conveyance Claims
27 September 2013
Mayer Brown Legal Update
In In re Tribune, the US District Court for the Southern District of New York ruled that the right of individual creditors in a multidistrict litigation to assert claims for constructive fraudulent conveyance under state law was not preempted by the safe harbor provision of Section 546(e) of the Bankruptcy Code. While the Defendants ultimately prevailed, the Tribune court’s ruling on Section 546(e) of the Bankruptcy Code is troubling because it could provide a path for debtors and creditors to do an end run around the Bankruptcy Code’s safe harbors that exempt certain pre-bankruptcy financial transactions from avoidance as constructive fraudulent transfers.