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The U.S. Court of Appeals for the Second Circuit recently issued an opinion concluding that trustees can pursue recovery from foreign subsequent transferees who received property in transactions that occurred entirely outside the United States. The opinion reversed two lower court rulings and arguably conflicts with Supreme Court precedent on extraterritoriality of U.S. legislation.
The fraudulent transfer provisions of the Bankruptcy Code give trustees broad power to avoid transfers of property that were made by the debtor before the bankruptcy case if either: 1) the debtor transferred the property with actual intent to hinder, delay or defraud creditors; or 2) the debtor received less than reasonably equivalent value in exchange for the transferred property. 11 U.S.C. §548(a)(1). If the transfer is avoidable, then a separate provision of the Bankruptcy Code gives trustees power to recover the property from the initial transferee or any subsequent transferee who received the property directly or indirectly from the initial transferee. 11 U.S.C. §550(a). In cases where trustees seek to recover property from subsequent transferees located outside the United States who received the property from transferors also located outside the United States, the question arises whether the Bankruptcy Code’s fraudulent transfer recovery provision reaches that transaction — in other words, whether §550(a) applies extraterritorially to allow trustees to recover property from foreign subsequent transferees.
By Michael L. Cook
The Third Circuit recently took a “pragmatic approach” when affirming lower court orders denying a stay of bankruptcy settlement distributions pending appeal. After holding that the district court’s “stay denial order” was “final” for jurisdictional purposes, it also confirmed “the applicable standard of review” on motions for stays pending appeals.
By Theresa A. Driscoll
Voluntary Turnover or Face Contempt
Lessors who repossess property immediately prior to a lessee bankruptcy filing may be required to return such property or face sanctions by the bankruptcy court. Federal courts are currently split on the issue of whether the lessor must voluntary surrender property seized pre-petition or may hold such property until such time as the debtor seeks, and obtains, an order of turnover.
By Rudolph J. Di Massa Jr. and Drew S. McGehrin
The U.S. Court of Appeals for the Fourth Circuit recently held that a debt incurred as a result of a willful and malicious injury may nevertheless be dischargeable notwithstanding the provisions of 11 U.S.C. Section 523(a)(6).
By Daniel A. Lowenthal
A Tension Between §§363(f) and 365(h)
How do bankruptcy judges resolve the competing desires of buyers and tenants? Must buyers bid for property knowing that tenants might have the right to stay if their leases are rejected? Are tenants in jeopardy that they might have to move elsewhere to live or work?