• TOUSA Redux: The Eleventh Circuit Court of Appeals Affirms Bankruptcy Court’s Avoidance of Constructively Fraudulent Transfers and Reverses the District Court
  • May 24, 2012
  • Law Firm: Alston Bird LLP - Atlanta Office
  • The outcome of the TOUSA appeal has been much anticipated and closely watched by the lending community, their counsel and advisors, and legal scholars. On May 15, 2012, the Eleventh Circuit Court of Appeals issued its opinion, reversing the District Court for the Southern District of Florida and affirming the Bankruptcy Court for the Southern District of Florida, at least insofar as to the bankruptcy court’s factual findings, but not remedies. The appellate court held that the bankruptcy court got it right when (a) it avoided as fraudulent transfers the liens granted by certain TOUSA subsidiaries (the “Conveying Subsidiaries”) to TOUSA’s new lenders and (b) required disgorgement of the $403 million in loan proceeds paid to certain lenders (the “Transeastern Lenders”). “We hold that bankruptcy court did not clearly err when it found that the Conveying Subsidiaries did not receive reasonably equivalent value for the liens and that the bankruptcy court correctly ruled that the Transeastern Lenders were entities ‘for whose benefit’ the liens were transferred.”