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Fraudulent Transfer Claims After Merit Management v. FTI: Implications for Safe Harbor Litigation

Recording of a 90-minute CLE webinar with Q&A

This program is included with the Strafford CLE Pass. Click for more information.
This program is included with the Strafford All-Access Pass. Click for more information.

Conducted on Tuesday, January 29, 2019

Recorded event now available

or call 1-800-926-7926

This CLE course will provide bankruptcy and insolvency counsel with a review of the Supreme Court's decision in Merit Management Group v. FTI Consulting, holding that the §546(e) safe harbor does not protect allegedly fraudulent transfers in which financial institutions served as mere conduits. Because the decision is the Supreme Court's first to address safe harbors under the U.S. Bankruptcy Code, the panel will also discuss the decision's impact on how lower courts will interpret safe harbors more generally.


The Supreme Court's Merit decision has wide-ranging implications on the finality of securities transactions effected through financial institutions, including tender offers, leveraged buyouts, and other transactions challenged during bankruptcy. It enhances a trustee's ability to recover preferential or constructively fraudulent transfers in a bankruptcy proceeding and is likely to have substantial practical ramifications.

In addition to expanding a trustee's ability to recover fraudulent transfers, the decision also increases the bankruptcy estate's leverage against recipients of pre-petition transfers. Debtors or trustees may strategically frame avoidance actions to limit the scope of the safe harbor and may expose investors, investment funds, and similar entities to fraudulent transfer litigation risks.

But the decision also leaves open several ambiguities. First, the Court left open possible arguments that any "customer" of a "financial institution" is also itself a "financial institution" under §546(e). Second, the Court did not address whether the transaction qualified as a transfer that is a "settlement payment" or made in connection with a "securities contract" under §546(e). Third, the decision raises the question of how the preemption of state law creditor remedies under §546(e) will apply in light of the narrow construction of the safe harbor. These ambiguities will draw the attention of defendants in future fraudulent transfer litigation.

Listen as our authoritative panel of attorneys discusses this case, its effect on other bankruptcy litigation, and the practical implications for bankruptcy practitioners.



  1. Overview of Merit Management v. FTI
  2. Merit's impact on other fraudulent transfer litigation
  3. Practical implications for safe harbor issues in bankruptcy proceedings
  4. Applicability of safe harbor defenses to claims outside bankruptcy


The panel will review these and other essential questions:

  • What are the key takeaways and implications of the decision?
  • What is the trustee's enhanced ability to recover fraudulent transfers?
  • How does the decision expose entities to fraudulent transfer litigation risk?
  • What effect does the Court's decision have on other safe harbor disputes, such as what instruments constitute qualified financial contracts covered by the statute?
  • What is the applicability of the bankruptcy safe harbor exemptions in non-bankruptcy court fraudulent transfer suits?


Bentley, James
James T. Bentley

Special Counsel
Schulte Roth & Zabel

Mr. Bentley represents clients in complex transactions, litigation financing, advisory matters relating to...  |  Read More

Gussman, William
William H. Gussman, Jr.

Schulte Roth & Zabel

Mr. Gussman focuses on complex commercial litigation, including securities fraud actions, fraudulent transfer actions,...  |  Read More

Hammer, Brandon
Brandon M. Hammer

Cleary Gottlieb Steen & Hamilton

Mr. Hammer’s practice focuses on financial institutions and transactions.

 |  Read More
Scott, Sean
Sean T. Scott

Mayer Brown

Mr. Scott represents institutional lenders, bank groups, hedge funds and other creditors in out-of-court workouts and...  |  Read More

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