Not So Safe After All?

United States Bankruptcy Court for the District of Delaware Holds That Litigation Trustee May Pursue State Law Fraudulent Conveyance Claims, Notwithstanding Bankruptcy Code Safe Harbors

On June 20, 2016, the United States Bankruptcy Court for the District of Delaware (the "Bankruptcy Court") denied in part a motion to dismiss and allowed state law constructive fraudulent transfer claims to proceed, despite the fact that such claims likely would have been precluded by the Bankruptcy Code's safe harbors if brought pursuant to federal law. This decision is notable in that it is at odds with a recent decision by the Second Circuit Court of Appeals in Tribune,¹ which held that state law constructive fraudulent conveyance claims brought by creditors are barred by the Bankruptcy Code's safe harbors.