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ARTICLE · 01 MARCH 2018

Supreme Court Issues Decision On Section 546(E) Safe Harbor Provision Resolving Long-Standing Circuit Split

Herbert Smith Freehills Kramer LLP
Herbert Smith Freehills Kramer LLP
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Herbert Smith Freehills Kramer LLP

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On February 27, 2018, the Supreme Court handed down a unanimous opinion, authored by Justice Sotomayor, resolving a Circuit split over the interpretation of Section 546(e) of the Bankruptcy Code...

United StatesInsolvency/Bankruptcy/Re-Structuring
Andrew Pollack
Andrew Pollack
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On February 27, 2018, the Supreme Court handed down a unanimous opinion, authored by Justice Sotomayor, resolving a Circuit split over the interpretation of Section 546(e) of the Bankruptcy Code, the "safe harbor" provision that shields specified types of payments "made by or to (or for the benefit of)" a financial institution from avoidance on fraudulent transfer grounds.

Bankruptcy Code Section 546(e) provides that a debtor or trustee cannot avoid settlement payments, payments made in connection with a securities contract, or certain other specified types of transfers if "made by or to (or for the benefit of) a commodity broker, forward contract merchant, stockbroker, financial institution, financial participant, or securities clearing agency . . . ." 11 U.S.C. Section 546(e) (emphasis added).

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