Law360, New York (May 1, 2017, 10:59 PM EDT) -- U.S. Supreme Court justices on Monday gave bankruptcy attorneys hope that they will resolve a troublesome disagreement among circuit courts over when safe-harbor transfers apply, a split that intensified last year after the Seventh Circuit upended a longstanding understanding of clawback law protections.
At hand in the case taken up by the high court is a dispute over whether the Seventh Circuit was correct in its decision last year to look beyond the text of the Bankruptcy Code to find that a safe harbor provision forcing trustees to honor transfers to securities and financial institutions doesn't protect transfers that only move through those institutions. It is not the first federal appeals court to say that a financial institution must have a beneficial interest in a transaction for safe harbor to apply, but its decision contravenes opinions in five circuits.
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