Fraudulent Transfer Claims: LBOs and Sec. 546(e), Law Partner Profit Clawbacks, Jurisdiction, and Limiting Damages

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The limits of fraudulent transfer litigation have been tested in the Tribune bankruptcy case, with the most recent ruling from the Southern District of New York allowing creditors to bring state law fraudulent transfer claims against shareholders of the Tribune LBO deal.  

Courts continue to wrestle with the applicability of safe harbors to privately held securities. In 2013, the Western District of New York Bankruptcy Court held that the safe harbor applied to private company LBOs, in direct contradiction to the Southern District of New York's ruling in McMenanmin's Grill.

The recent ruling in Crescent Resources Litigation Trust, in which the court reduced a $1.2 billion fraudulent transfer claim against Duke Energy by $961 million, provides ammunition to defendants seeking to limit damages in fraudulent transfer and preference actions.

The limits of asset recovery actions have been tested in litigation attempting to clawback “unfinished business profits” from partners of bankrupt firms on the theory that a Jewel waiver inserted shortly before firm dissolution constitutes a fraudulent transfer.

Listen as our authoritative panel of bankruptcy practitioners discusses recent developments in fraudulent transfer litigation involving payments to shareholders in LBO deals, clawbacks of law firm partner “unfinished business profits,” and the arguments for limiting damages in fraudulent transfer recoveries. The panel will also provide an overview of the Supreme Court's ruling in Executive Benefits Insurance Agency v. Arkison.