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Southern District of New York Deepens Internal Split Over Loophole in Bankruptcy Safe Harbor for Capital Markets Transactions

by Joaquin M. C De Baca
Mayer Brown LLP - New York Office

Joel Moss
Mayer Brown LLP - New York Office

Brian Trust
Mayer Brown LLP - New York Office

January 29, 2014

Previously published on January 24, 2014

The Bankruptcy Court for the Southern District of New York recently held in Edward S. Weisfelner, as Litigation Trustee of the LB Creditor Trust v. Fund 1., et al. (In re Lyondell Chemical Company, et al.) (“Lyondell”), that section 546(e) of the Bankruptcy Code does not bar fraudulent transfer claims when such claims are brought by an entity other than the bankruptcy trustee (or its successors) under state fraudulent transfer laws rather than the Bankruptcy Code. Section 546(e) is the Bankruptcy Code’s safe harbor for certain prebankruptcy transfers made in connection with securities contracts by, to or for the benefit of financial institutions.


The views expressed in this document are solely the views of the author and not Martindale-Hubbell. This document is intended for informational purposes only and is not legal advice or a substitute for consultation with a licensed legal professional in a particular case or circumstance.

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