• Third Circuit: Bankruptcy Code Section 502(d) Applies to Subsequent Transferees
  • December 5, 2013
  • Law Firm: Alston Bird LLP - Atlanta Office
  • In a recent decision, the Court of Appeals for the Third Circuit (the “Third Circuit”) affirmed the bankruptcy court’s decision in In re KB Toys, Inc., and held that a claim that is subject to disallowance under section 502(d) of the Bankruptcy Code in the hands of the original claimant is similarly disallowable when that claim is held by a subsequent transferee because the section is applicable to “claims” rather than “claimants.” This holding is in contrast to a prior decision of the District Court for the Southern District of New York in In re Enron Corp., which viewed the language of section 502(d) as focusing on the “claimant” rather than the “claim,” and could have significant implications for distressed debtor investors (“Claims Traders”).