In re Tribune Co. Fraudulent Conveyance Litigation, No. 13-3992 (2d Cir. 2019)Annotate this Case
Representatives of certain unsecured creditors of the Chapter 11 debtor Tribune Company appealed the district court's grant of a motion to dismiss their state law, constructive fraudulent conveyance claims brought against Tribune's former shareholders. The district court held that appellants lacked statutory standing under the Bankruptcy Code.
The Second Circuit affirmed the dismissal of appellants' state law, constructive fraudulent conveyance claims on preemption grounds rather than standing grounds. The court held that appellants were not barred by the Bankruptcy Code's automatic stay provision from bringing claims while avoidance proceedings against the same transfers brought by a party exercising the powers of a bankruptcy trustee on an intentional fraud theory are ongoing, because appellants have been freed from its restrictions by orders of the bankruptcy court and by debtors' confirmed reorganization plan. However, the court held that appellants' claims were preempted by section 546(e) of the Bankruptcy Code, because this section shields certain transactions from a bankruptcy trustee's avoidance powers, including, inter alia, transfers by or to a financial institution in connection with a securities contract, except through an intentional fraudulent conveyance claim.
This opinion or order relates to an opinion or order originally issued on March 24, 2016.