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ARTICLE · 03 FEBRUARY 2021

Expanded Safe Harbor? Samson Resources Suggests Debtor's Status Can Preclude Avoidance Of Fraudulent Transfers

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Section 546(e) of the US Bankruptcy Code, which Congress enacted to promote stability and finality in financial markets, provides a safe harbor against the avoidance ...

United StatesInsolvency/Bankruptcy/Re-Structuring
Aaron Gavant
Aaron Gavant
Sean Scott
Sean Scott
Joshua R. Gross
Joshua R. Gross
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Section 546(e) of the US Bankruptcy Code, which Congress enacted to promote stability and finality in financial markets, provides a safe harbor against the avoidance of certain securities transactions. Since the safe harbor's inclusion in the original Bankruptcy Code, Congress repeatedly has expanded its protections to a growing assortment of financial transactions involving an increasing array of parties, whose involvement in the transaction may give rise to a defense to certain avoidance actions, including constructive fraudulent transfer claims.

In a recent decision arising out of the Samson Resources Chapter 11 case in Delaware, the bankruptcy court interpreted the safe harbor to protect securities transactions in which the qualifying transaction party—there, a statutorily defined "financial participant"—that allows the defendant to invoke the safe harbor was not the defendant, but its counterparty, the debtor itself.1 The fraudulent transfer litigation

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