Supreme Court Clarifies Securities Safe Harbor Under Bankruptcy Code

Richard E Lear is a Partner in our Washington DC office.

John J Monaghan is a Partner in our Boston office.

HIGHLIGHTS:

• In a unanimous decision, the U.S. Supreme Court ruled against the petitioner in Merit Management Group, LP, Petitioner v. FTI Consulting, Inc., affirming the decision of the U.S. Court of Appeals for the Seventh Circuit.
• The Supreme Court determined that the relevant transfer for purposes of the Section 546(e) safe harbor inquiry is the transfer that is sought to be avoided under the Bankruptcy Code and not any intermediate transfers that are components of the overarching transfer.
• As grounds for its decision, the Supreme Court determined that the language of Section 546(e), the specific context in which that language is used and the broader statutory structure of the Bankruptcy Code all supported the conclusion that the relevant transfer for purposes of the Section 546(e) safe harbor inquiry is the overarching transfer that the