Today, the Supreme Court granted certiorari in two cases of interest to the business community:
Separation of Powers—Authority of Congress to Target Specific Lawsuits
Patchak v. Jewell, No. 16-498
In Patchak v. Jewell, a landowner challenged the Secretary of the Interior's decision to take a nearby property into trust for the Gun Lake Tribe on the ground that the Secretary lacked the power to do so under the Indian Reorganization Act. The case went up to the Supreme Court, which held in 2012 that the plaintiff had standing to proceed with the lawsuit. In 2014, Congress enacted a statute that terminated plaintiff's lawsuit by requiring dismissal of any pending or future case relating to the property in question—without changing any generally applicable substantive or procedural law. The Supreme Court granted certiorari to decide whether in so doing Congress violated separation of powers principles and deprived the plaintiff of his right to due process under the Fifth Amendment.
Bankruptcy Code—Safe-Harbor Transfers to Financial Institutions
Merit Management Group, LP v. FTI Consulting, Inc., No. 16-784
Section 546(e) of the Bankruptcy Code, 11 U.S.C. § 546(e), protects certain prepetition payouts by or to financial institutions from clawback by the trustee of the ensuing bankruptcy estate. In particular, the safe harbor protects transfers made by a debtor by or to a broker, financial institution, or similar intermediary in connection with a "securities contract," unless the transfer was made with actual intent to hinder, delay, or defraud creditors.
The majority of circuits have construed this provision broadly to preclude clawback actions, even if the broker or financial institution had only a minor role in the transaction—e.g., as a conduit. The Seventh Circuit, in the decision below, held otherwise, finding that a trustee was entitled to pursue a constructive fraudulent transfer claim to avoid a debtor's purchase of the stock of a competing harness-racing company. In another petition pending before the Court, the Second Circuit adopted the majority position, holding that a creditors' committee could not pursue a constructive fraudulent transfer claim against shareholders of The Tribune Company, in an attempt to claw back billions of dollars they received in a leveraged buyout before the company filed for bankruptcy.
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