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“[L]ack of good faith in a SIPA [Securities Investor Protection Act] liquidation applies an inquiry notice, not willful blindness, standard, and that a SIPA trustee does not bear the burden of pleading the transferee’s lack of good faith,” held the U.S. Court of Appeals for the Second Circuit on Aug. 30, 2021 in In re Bernard L. Madoff Investment Securities, LLC, 2021 WL 3854761, 91 (2d Cir. Aug. 30, 2021) (Madoff). Reversing the district court’s imposition of federal securities law in this fraudulent transfer action, the Second Circuit applied federal bankruptcy law when holding that good faith is an affirmative defense under sections 548(c) and 550(b)(1). It rejected the district court’s requiring the trustee to” bear the burden of pleading the transferee’s lack of good faith,” Id. at 17, refusing to depart “from the well-established rule that the defendant bears the burden of pleading an affirmative defense.” Id. at 57.
By Eva D. Gadzheva, Jeremy M. Downs and David E. Morrison
This article reminds us of the conflict-of-laws analysis at the heart of such retention of title disputes, and then discuss the multi-step UCC analysis that is also required.
By Thomas R. Califano and Anna Gumport
Members of Congress recently introduced the Nondebtor Release Prohibition Act, which proposes to amend the Bankruptcy Code to, among other things, restrict courts’ ability to approve third-party releases of nondebtors and related injunctions under plans of reorganization or otherwise in Chapter 11 cases.
By Steven B. Smith and Rachel Ginzburg
If you think public policy favoring the freedom to file a Chapter 11 trumps the freedom to negotiate specific restrictions to such a filing, think again.
By Joseph Pack and Jessey Krehl
With federal student loan forbearance set to expire at the end of September, many hoped the high court would provide, if not clarity, at least uniformity for the millions of Americans who currently are on the hook for student loans.