Merit Management Group, LP v. FTI Consulting, Inc.

Holding: The Bankruptcy Code allows trustees to set aside and recover certain transfers for the benefit of the bankruptcy estate, including certain fraudulent transfers “of an interest of the debtor in property”; the Bankruptcy Code also sets out a number of limits on the exercise of these avoiding powers, including the Section 546(e) safe harbor – which, inter alia, provides that a “trustee may not avoid a transfer that is a … settlement payment … made by or to (or for the benefit of) a … financial institution .. or that is a transfer made by or to (or for the benefit of) a … financial institution … in connection with a securities contract.” In the Chapter 11 bankruptcy filed by Valley View Downs and its parent company, the only relevant transfer for purposes of the Section 546(e) safe harbor is the transfer that the trustee, FTI Consulting Inc., seeks to avoid, i.e., the transfer from Valley View to Merit Management Group for the sale of Bedford Downs Management’s stock.

Judgment: Affirmed and remanded, 9-0, in an opinion by Justice Sotomayor on February 27, 2018.

SCOTUSblog Coverage

• Opinion analysis: Justices reject limits on bankruptcy recovery of fraudulently transferred assets (Ronald Mann)
• OT2017 #6: "Year of Munsingwear" (First Mondays)
• Argument analysis: Justices dubious about limiting bankruptcy court’s right to recover fraudulently transferred assets (Ronald Mann)
• OT2017 #5: “Oglethorpe’s Second Cousin” (First Mondays)
• Argument preview: Justices to parse Bankruptcy Code’s fine print in high-stakes dispute over recovering assets for creditors of bankrupts (Ronald Mann)
• Today's orders (Amy Howe)
• Petition of the day (Kate Howard)