The Supreme Court is sending signals that the justices may decide in the next few days to review a decision from the Second Circuit holding that the safe harbor for “settlement payments” under Section 546(e) bars virtually every theory individual creditors might use to sue selling shareholders in a leveraged buyout.
The certiorari petition in Deutsche Bank Trust Co. Americas v. Robert R. McCormick Foundation was first scheduled for a conference among the justices on December 2. Perhaps because they had been awaiting the appointment of a ninth justice, the Court adjourned the conference on Deutsche Bank petition eight times.
In ordinary circumstances when the Court is not shorthanded, postponing the conference on a certiorari petition can indicate that some justices are inclined toward reviewing the case.
The petition is now scheduled for consideration at the justices’ conference on April 21. A decision to grant or deny the petition could come as early as April 24. On occasion, the justices will issue an order granting view on the afternoon of the conference.
The Deutsche Bank decision from the Second Circuit in March 2016 arose from the mammoth reorganization of Tribune Co. The creditors, who lost in the court of appeals, contend that the Second Circuit’s decision raised several splits among the circuits.
For instance, the Seventh Circuit held in July in FTI Consulting Inc. v. Merit Management Group LP that employing a bank as a “mere conduit” does not invoke the safe harbor. Hearing Deutsche Bank would enable the Supreme Court to decide that question and explore whether the safe harbor in Section 546(e) goes so far as to preempt state fraudulent transfer law by preventing private parties, not just trustees and debtors, from suing for damages from a leveraged buyout that rendered a company insolvent.
To read ABI’s discussion of the Second Circuit opinion in Deutsche Bank, click here.
A petition for certiorari in General Motors LLC v. Elliott, 16-674, will also be considered by the justices at the April 21 conference. The conference on that petition has been rescheduled three times, presumably to await the arrival of Justice Neil M. Gorsuch.
The automaker believes the Second Circuit split with other circuits and ignored Section 363(m) by holding that a good faith purchaser can be liable even if the sale was “free and clear” of claims. Those who oppose certiorari believe there is no circuit split and that the Second Circuit applied law that is followed throughout the country. General Motors is not a “pure” Section 363(m) case because known creditors were not given notice of GM’s bankruptcy.
To read ABI’s discussion of the GM petition, click here. To read the story about the briefs for and against granting certiorari, click here.
This week, the Supreme Court denied the certiorari petition in Ozenne v. Chase Manhattan Bank (In re Ozenne), 16-7904, where the Ninth Circuit, sitting en banc, ducked a constitutional question by holding in November that the Bankruptcy Appellate Panel lacked jurisdiction because petition for mandamus is not a substitute for a timely appeal. The full circuit court vacated the decision by the three-judge panel, which had ruled that bankruptcy appellate panels were not “established by an Act of Congress” and thus lacked jurisdiction to issue writs of mandamus under the All Writs Act contained in 28 U.S.C. Section 1651(a).