Peterson v. Somers Dublin, Ltd., No. 12-2463 (7th Cir. 2013)

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Justia Opinion Summary

After the mutual funds, known as the Lancelot or Colossus group, folded in 2008, the trustee in bankruptcy filed independent suits or adversary actions seeking to recover from solvent third parties, including the Funds’ auditor, law firm, and some of the Funds’ investors, which the Trustee believes received preferential transfers or fraudulent conveyances. The Funds had invested in notes issued by Thousand Lakes, which was actually a Ponzi scheme, paying old investors with newly raised money. In these proceedings the trustee contends that investors who redeemed shares before the bankruptcy received preferential transfers, 11 U.S.C. 547, or fraudulent conveyances, 11 U.S.C. 548(a)(1)(B) and raised a claim under the Illinois fraudulent-conveyance statute, using the avoiding power of 11 U.S.C. 544. The bankruptcy court rejected the claims, citing the statutory exception: “the trustee may not avoid a settlement payment or transfer made to a financial participant in connection with a securities contract, except under section 548(a)(1)(A) of this title.” The Seventh Circuit affirmed. A transfer from the Funds to each redeeming investor occurred “in connection with” a securities contract.

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In the United States Court of Appeals For the Seventh Circuit ____________________   Nos.  12-­ 2463,  12-­ 2464,  12-­ 2493,  12-­ 2494  &  12-­ 2495   RONALD   R.   PETERSON,   as   Trustee   for   the   estates   of   Lancelot   Investors  Fund,  L.P.,  and  related  entities,   Plaintiff-­ Appellant,   v.   SOMERS  DUBLIN  LTD.,  et  al.,   Defendants-­ Appellees.   ____________________   Appeals  from  the  United  States  District  Court  for  the   Northern  District  of  Illinois,  Eastern  Division.   No.  08  B  28225    Jacqueline  P.  Cox,  Bankruptcy  Judge.   ____________________   ARGUED  APRIL  8,  2013    DECIDED  SEPTEMBER  6,  2013   ____________________   Before   EASTERBROOK,   Chief   Judge,   and   BAUER   and   SYKES,   Circuit  Judges.   EASTERBROOK,   Chief   Judge.   After   Gregory   Bell s   mutual   funds,  known  as  the  Lancelot  or  Colossus  group  (collectively   the  Funds ),  folded  in  late  2008,  their  trustee  in  bankruptcy   filed  many  independent  suits  or  adversary  actions  seeking  to   recover   from   solvent   third   parties.   Last   year   we   considered   Nos.  12-­ 2463  et  al.   2   the   Trustee s   claims   against   the   Funds   auditor.   Peterson   v.   McGladrey  &  Pullen,  LLP,  676  F.3d  594  (7th  Cir.  2012).  These   appeals   concern   the   Trustee s   claims   against   some   of   the   Funds  investors,  which  the  Trustee  believes  received  prefer-­ ential   transfers   or   fraudulent   conveyances.   Another   appeal,   also   decided   today,   addresses   a   suit   against   one   of   the   Funds  law  firms.   The   Funds   invested   in   notes   issued   by   Thousand   Lakes,   LLC,   and   other   ventures   operated   by   Thomas   Petters.   For   simplicity  we  refer  to  Thousand  Lakes  as  the  only  borrower.   Although   Bell   may   have   believed   at   the   outset   that   Thou-­ sand  Lakes  was  a  commercial  factor that  is,  a  lender  financ-­ ing   other   businesses   inventory Petters   did   not   have   cus-­ tomers  and  was  running  a  Ponzi  scheme,  paying  old  inves-­ tors  with  newly  raised  money.  Ponzi  schemes  must  grow  to   survive,   and   eventually   they   collapse   when   they   cannot   maintain  the  necessary  growth.  See  Saul  Levmore,  Rethinking   Ponzi-­ Scheme  Remedies  in  and  out  of  Bankruptcy,  92  Boston  U.   L.  Rev.  969  (2012).   In  fall  2007  Thousand  Lakes  stopped  remitting  money  to   the   Funds.   It   contended   that   Costco,   a   customer,   had   been   late  in  paying;  the  Funds  extended  the  notes  due  dates.  By   February  2008  Thousand  Lakes  still  had  not  paid,  and  Bell  at   last   discovered   the   problem.   (He   may   have   learned   earlier,   or   been   wilfully   blind   to   what   Petters   was   doing,   but   we   need  not  decide.)  Instead  of  taking  the  news  to  prosecutors,   Bell   began   operating   the   Funds   as   a   second-­ tier   Ponzi   scheme.   He   placed   new   investments   with   Thousand   Lakes,   which   used   the   money   the   same   day   to   repay   out-­ standing  notes.  These  round-­ trip  transactions  meant  that  the   Funds  were  not  receiving  any  net  cash  from  Thousand  Lakes   3   Nos.  12-­ 2463  et  al.   and   thus   needed   to   pay   their   own   investors,   when   they   sought   to   redeem   shares,   with   newly   raised   money.   But   by   fall   2008   that   was   no   longer   possible.   Both   the   Funds   and   Petters s  empire  collapsed;  about  60%  of  the  roughly  $2.5  bil-­ lion  nominally  held  by  the  Funds  had  been  stolen  or  disap-­ peared.  Bell  pleaded  guilty  to  fraud  and  was  sentenced  to  37   months  imprisonment.  Petters  denied  liability  but  was  con-­ victed  after  a  trial  and  sentenced  to  50  years  imprisonment.   United  States  v.  Petters,  663  F.3d  375  (8th  Cir.  2011).   The  Trustee  contends  in  the  current  proceedings,  filed  as   adversary   actions   in   the   Funds   bankruptcy,   that   investors   who   redeemed   shares   before   the   bankruptcy   received   pref-­ erential  transfers,  11  U.S.C.  §547,  or  fraudulent  conveyances,   11  U.S.C.  §548(a)(1)(B).  The  Trustee  also  invoked  the  Illinois   fraudulent-­ conveyance  statute,  using  the  avoiding  power  of   11   U.S.C.   §544.   These   parts   of   the   Bankruptcy   Code   allow   trustees  to  recoup  payouts  for  the  benefit  of  all  creditors.  The   bankruptcy   judge   granted   summary   judgment   to   the   inves-­ tors,  467  B.R.  643  (Bankr.  N.D.  Ill.  2012),  relying  on  11  U.S.C.   §546(e),  which  provides:   Notwithstanding   sections   544,   545,   547,   548(a)(1)(B),   and   548(b)  of  this  title,  the  trustee  may  not  avoid  a  transfer  that   is  a  margin  payment,  as  defined  in  section  101,  741,  or  761   of   this   title,   or   settlement   payment,   as   defined   in   section   101  or  741  of  this  title,  made  by  or  to  (or  for  the  benefit  of)   a   commodity   broker,   forward   contract   merchant,   stock-­ broker,  financial  institution,  financial  participant,  or  securi-­ ties  clearing  agency,  or  that  is  a  transfer  made  by  or  to  (or   for   the   benefit   of)   a   commodity   broker,   forward   contract   merchant,   stockbroker,   financial   institution,   financial   par-­ ticipant,  or  securities  clearing  agency,  in  connection  with  a   securities  contract,  as  defined  in  section  741(7),  commodity   Nos.  12-­ 2463  et  al.   4   contract,   as   defined   in   section   761(4),   or   forward   contract,   that  is  made  before  the  commencement  of  the  case,  except   under  section  548(a)(1)(A)  of  this  title.   Deleting   words   not   relevant   to   the   current   dispute,   and   omitting  ellipses,  we  have:   the  trustee  may  not  avoid  a  set-­ tlement   payment   or   transfer   made   to   a   financial   participant   in  connection  with  a  securities  contract,  except  under  section   548(a)(1)(A)  of  this  title.   The   bankruptcy   court   entered   its   decision   on   May   11,   2012,   and   on   May   24   the   Trustee   appealed   to   the   district   court.  The  Trustee  and  the  defendants  agreed  to  request  di-­ rect   review   by   this   court,   bypassing   a   district   judge,   as   28   U.S.C.  §158(d)  allows.  Certifications  under  Fed.  R.  Bankr.  P.   8001(f)  were  filed  on  June  19  and  20,  and  a  joint  petition  un-­ der  Fed.  R.  App.  P.  5  was  filed  on  July  16.  This  court  author-­ ized  the  appeals  but  directed  the  parties  to  discuss  whether   they  are  timely.  That  is  the  first  question  we  must  address and,   if   the   papers   are   late,   we   must   decide   whether   any   problem  is  a  jurisdictional  defect.   An  interlocutory  appeal  from  a  bankruptcy  judge s  deci-­ sion  to  the  court  of  appeals  requires  three  steps:  first  a  certi-­ fication   by   the   bankruptcy   judge,   district   judge,   or   the   par-­ ties   acting   jointly;   second   a   petition   to   the   court   of   appeals   under   Rule   5;   and   finally   a   discretionary   decision   by   the   court   of   appeals.   Bankruptcy   Rule   8001(f)(3)(A)   says   that   a   request   for   certification   must   be   filed   within   the   time   specified   by   28   U.S.C.   §  158(d)(2) .   This   provision   governs   requests  by  a  party  to  a  judge.  Rule  8001(f)(4)  covers  certifi-­ cation  on  a  judge s  initiative.  As  far  as  we  can  see  Rule  8001   does  not  set  a  time  limit  for  certification  on  a  judge s  initia-­ tive  or  by  agreement  of  the  litigants.  In  re  American  Mortgage   5   Nos.  12-­ 2463  et  al.   Holdings,   Inc.,   637   F.3d   246,   254   (3d   Cir.   2011),   says   that   the   outer  limit  for  the  parties  joint  certification  is  60  days,  which   it   drew   from   §158(d)(2)(E).   But   that   provision   deals   with   a   request   to   a   judge,   not   with   the   litigants   joint   certification.   Section   158(d)(2)(E)   reads:   Any   request   under   subpara-­ graph   (B)   for   certification   shall   be   made   not   later   than   60   days  after  the  entry  of  the  judgment,  order,  or  decree.  Sub-­ paragraph  (B)  deals  with  judicial  certification,  while  subpar-­ agraph  (A)  is  what  authorizes  certification  by  the  parties.   We  have  considered  the  possibility  that  Rule  5(a)(2)  sup-­ plies  a  time  limit.  It  reads:   The  petition  must  be  filed  within   the  time  specified  by  the  statute  or  rule  authorizing  the  ap-­ peal  or,  if  no  such  time  is  specified,  within  the  time  provided   by  Rule  4(a)  for  filing  a  notice  of  appeal.  Because  Bankrupt-­ cy   Rule   8001(f)   does   not   supply   a   time,   Appellate   Rule   5(a)(2)   sends   us   to   Appellate   Rule   4(a),   which   specifies   30   days.   By   that   standard,   the   joint   certification   would   be   late.   But   Rule   5(a)   deals   with   petitions   for   leave   to   appeal the   second   step   in   the   process   under   §158(d) rather   than   with   certifications  by  judges  or  litigants.  The  parties  petition  un-­ der  Rule  5(a)  came  within  30  days  of  the  joint  certification,  so   Rule  5(a)  has  been  satisfied.   This  leaves  the  conclusion  that  there  is  no  time  limit  for  a   joint   certification.   Probably   none   is   necessary.   If   the   parties   take  too  long,  the  court  of  appeals  can  deny  the  petition  for   interlocutory  review.  But  whether  or  not  a  time  limit  would   be  a  good  idea,  a  court  must  follow  the  statute  and  rules  as   written.  See,  e.g.,  Spivey  v.  Vertrue,  Inc.,  528  F.3d  982  (7th  Cir.   2008).   If   we   are   wrong   about   this,   and   there   is   either   a   30-­ day   limit   from   Rules   4(a)   and   5(a)   or   a   60-­ day   limit   from   Nos.  12-­ 2463  et  al.   6   §158(d)(2)(E),  we  still  would  hear  these  appeals,  which  pre-­ sent  legal  issues  not  yet  addressed  in  this  circuit.  If  the  limit   is  60  days,  the  certifications  are  timely.  And  if  the  limit  is  30   days,  none  of  the  parties  has  asked  us  to  dismiss  the  appeal   on   that   account.   The   time   established   by   Rule   5(a)   is   not   a   limit  on  appellate  jurisdiction.  See  In  re  Turner,  574  F.3d  349,   354  (7th  Cir.  2009).   Statutory   time   limits   for   appeal   can   be   jurisdictional,   see  Bowles   v.   Russell,   551   U.S.   205   (2007),   but   time   limits   in   the  Rules  of  Appellate  Procedure  are  not.  See  United  States  v.   Neff,  598  F.3d  320  (7th  Cir.  2010);  Carter  v.  Hodge,  No.  13-­ 2243   (7th  Cir.  Aug.  8,  2013).  See  also  Kontrick  v.  Ryan,  540  U.S.  443   (2004)  (time  limits  in  Federal  Rules  of  Bankruptcy  Procedure   are   not   jurisdictional).   A   mandatory,   though   non-­ jurisdictional,   rule   must   be   enforced   if   a   party   invokes   its   protection,  but  no  one  wants  us  to  dismiss  these  appeals.   A   second   issue   potentially   affects   jurisdiction.   Stern   v.   Marshall,  131  S.  Ct.  2594  (2011),  holds  that  bankruptcy  judg-­ es,   who   lack   tenure   under   Article   III   of   the   Constitution,   cannot   entertain   certain   actions   by   debtors   or   trustees   in   bankruptcy.   We   concluded   in   In   re   Ortiz,   665   F.3d   906   (7th   Cir.   2011),   that,   when   a   bankruptcy   judge   is   not   entitled   to   enter   a   dispositive   order,   28   U.S.C.   §158(d)   does   not   allow   the  court  of  appeals  to  review  the  decision;  instead  the  case   must  be  heard  initially  by  a  district  judge.   The  parties,  well  aware  of  Stern,  sought  to  eliminate  any   problem  by  consenting  to  the  bankruptcy  court s  exercise  of   jurisdiction.  It  is  established  that  parties  may  consent  to  the   entry  of  final  decision  by  a  magistrate  judge  under  28  U.S.C.   §636(c),   followed   by   an   appeal   that   bypasses   the   district   court,   even   though   a   magistrate   judge   lacks   Article   III   ten-­ 7   Nos.  12-­ 2463  et  al.   ure.   See,   e.g.,   Roell   v.   Withrow,   538   U.S.   580   (2003);   Geras   v.   Lafayette   Display   Fixtures,   Inc.,   742   F.2d   1037   (7th   Cir.   1984);   Gibson  v.  Gary  Housing  Authority,  754  F.2d  205  (7th  Cir.  1985).   The  parties  assumed  that  consent  to  decision  by  a  bankrupt-­ cy  judge  would  be  treated  the  same  way.  But  a  panel  stated   in   Wellness   International   Network,   Ltd.   v.   Sharp,   No.   12-­ 1349   (7th  Cir.  Aug.  21,  2013),  that  Article  III  forbids  decision  by  a   bankruptcy  judge  on  the  basis  of  a  party s  waiver.   The  issue  in  Wellness  International  Network  was  forfeiture   rather  than  waiver.  None  of  the  parties  objected  to  the  bank-­ ruptcy   judge s   handling   of   the   case   until   it   reached   the   dis-­ trict  court,  when  the  loser  in  the  bankruptcy  court  first  relied   on   Stern.   A   case   pending   in   the   Supreme   Court In   re   Bel-­ lingham   Insurance   Agency,   Inc.,   702   F.3d   553   (9th   Cir.   2012),   cert.   granted   under   the   name   Executive   Benefits   Insurance   Agency   v.   Arkison,   133   S.   Ct.   2880   (2013)   (No.   12-­ 1200) likewise  arises  from  a  belated  objection  rather  than  a  unani-­ mous  consent.   Wellness  International  Network  did  not  discuss  this  circuit s   decisions  in  Geras  or  Gibson,  which  hold  that  consent  on  the   record   authorizes   decision   by   an   untenured   magistrate   judge,  even  though  the  parties  failure  to  object  does  not.  The   panel   also   reserved   judgment   on   the   constitutionality   of   28   U.S.C.   §157(c)(2),   which   authorizes   the   parties   to   consent   to   adjudication   by   a   bankruptcy   judge   of   certain   proceedings   that  otherwise  would  go  to  a  district  judge.  Wellness  Interna-­ tional   Network,   slip   op.   39.   So   we   think   the   effect   of   an   ex-­ press  and  mutual  waiver  open  in  this  circuit.  Given  the  grant   of   certiorari   in   Executive   Benefits   Insurance   Agency,   the   fact   that   the   parties   have   not   filed   briefs   discussing   the   distinc-­ tion   between   waiver   and   forfeiture,   and   the   fact   that   the   Nos.  12-­ 2463  et  al.   8   bankruptcy   court s   authority   over   these   proceedings   does   not   depend   on   consent,   we   do   not   try   to   resolve   today   whether   waiver   and   forfeiture   should   be   treated   the   same   way.   The   current   dispute   comes   within   a   bankruptcy   judge s   authority,   notwithstanding   Stern,   because   all   of   the   defend-­ ants   submitted   proofs   of   claim   as   the   Funds   creditors   and   thus  subjected  themselves  to  preference-­ recovery  and  fraud-­ ulent-­ conveyance   claims   by   the   Trustee.   See   11   U.S.C.   §502(d).   The   Supreme   Court   held   in   Katchen   v.   Landy,   382   U.S.  323,  329 36  (1966),  and  Langenkamp  v.  Culp,  498  U.S.  42,   44 45  (1990),  that  Article  III  authorizes  bankruptcy  judges  to   handle  avoidance  actions  against  claimants.  See  also  Granfi-­ nanciera  S.A.  v.  Nordberg,  492  U.S.  33,  57 59  (1989).  Stern  stat-­ ed  that  its  outcome  is  consistent  with  those  decisions.  131  S.   Ct.   at   2616 18.   Wellness   International   Network   likewise   ob-­ serves  (slip  op.  44 45)  that  there  is  no  constitutional  problem   when   a   bankruptcy   judge   adjudicates   a   trustee s   avoidance   actions   against   creditors   who   have   submitted   claims.   The   bankruptcy   judge   thus   acted   within   her   authority,   and   28   U.S.C.  §158(d)  allows  a  direct  appeal.   To  the  merits.  Here  again  is  the  short  version  of  §546(e):   the  trustee  may  not  avoid  a  settlement  payment  or  transfer   made   to   a   financial   participant   in   connection   with   a   securi-­ ties   contract,   except   under   section   548(a)(1)(A)   of   this   title.   The   Trustee   does   not   deny   that   entities   that   invested   in   the   Funds   were   financial   participants a   term   that   11   U.S.C.   §101(22A)  defines  as  an  investor  whose  stake  exceeds  $1  mil-­ lion,   which   was   the   Funds   minimum-­ purchase   require-­ ment or  that,  when  the  Funds  redeemed  some  or  all  of  an   investor s  holdings,  a   transfer  [was]  made  to  that  investor.   9   Nos.  12-­ 2463  et  al.   It  seems  to  follow  that  the  transfer  cannot  be  recovered   ex-­ cept   under   section   548(a)(1)(A)   of   this   title.   That   subpara-­ graph  covers  a  payment   made   ¦  with  actual  intent  to  hin-­ der,  delay,  or  defraud  any  entity  to  which  the  debtor  was  or   became   ¦  indebted .   The   Trustee   did   not   rely   on   §548(a)(1)(A)   in   the   bank-­ ruptcy   court   or   his   appellate   briefs.   At   oral   argument   the   Trustee   confirmed   that   he   made   a   conscious   choice   not   to   invoke   the   exception.   We   are   puzzled   by   that   decision,   be-­ cause   actual  intent  to   ¦  defraud  seems  an  apt  description   of   a   Ponzi   scheme s   payouts.   The   round-­ trip   transactions   that   began   in   February   2008   extended   the   life   of   the   Petters   scam  and  turned  the  Funds  themselves  into  a  Ponzi  scheme.   Such  schemes  can  operate  only  as  long  as  they  pay  existing   investors  claims.  Once  they  stop  paying  old  investors,  new   investments   stop   coming   in   and   the   scams   collapse.   Thus   ongoing  payments  are  integral  to  the  fraud.  Although  some   of  the  payments  the  Trustee  wants  to  recover  predate  Febru-­ ary   2008,   the   Trustee   has   contended   in   other   litigation   that   Bell   knew   the   truth   about   Petters s   business   earlier;   and,   at   all  events,  even  if  the  §548(a)(1)(A)  exception  to  §546(e)  were   available  only  for  payments  the  Funds  made  after  Bell  threw   in   with   Petters,   still   some   recovery   is   better   than   none.   The   Trustee  said  at  oral  argument  that  he  understands  the  excep-­ tion  to  be  limited  to  an  investor s  profits,  as  opposed  to  the   return   of   principal,   in   light   of   §548(c).   Given   the   Trustee s   decision   not   to   rely   on   the   exception,   we   need   not   decide   whether  that  understanding  is  correct.   What   the   Trustee   does   contend   is   that   §546(e)   contains   some   ambiguities,   such   as   what   is   a   settlement   payment   and  when  is  a  payment  made   in  connection  with  a  securi-­ Nos.  12-­ 2463  et  al.   10   ties  or  commodities  contract.   Settlement  payment  is  a  de-­ fined   term,   but   the   definitions   in   11   U.S.C.   §§  101(51A)   and   741(8)   are   circular.   Section   741(8)   says   that   a   settlement   payment   means  a  preliminary  settlement  payment,  a  partial   settlement   payment,   an   interim   settlement   payment,   a   set-­ tlement  payment  on  account,  a  final  settlement  payment,  or   any  other  similar  payment  commonly  used  in  the  securities   trade .   Section   101(51A)   has   similar   language   about   the   commodities   trade.   In   connection   with   does   not   have   a   definition   in   the   Bankruptcy   Code or   for   that   matter   the   statutes  covering  the  commodities  and  securities  businesses.   Given  statutory  ambiguity,  the  Trustee  turns  to  the  legis-­ lative   history.   It   is   easy   to   sum   up   what   the   Trustee   finds   there:  Congress  enacted  §546(e)  to  ensure  that  honest  inves-­ tors  will  not  be  liable  if  it  turns  out  that  a  leveraged  buyout   (LBO)   or   other   standard   business   transaction   technically   rendered  a  firm  insolvent.  For  a  recap  of  the  legislative  his-­ tory  see  Peter  S.  Kim,  Navigating  the  Safe  Harbors:  Two  Bright   Line  Rules  to  Assist  Courts  in  Applying  the  Stockbroker  Defense   and  the  Good  Faith  Defense,  2008  Colum.  Bus.  L.  Rev.  657.  Of-­ ten  the  goal  of  a  transaction  is  to  replace  equity  with  debt  in   order  to  change  managers  incentives.  If  the  business  fails,  a   trustee   may   attempt   to   argue   that   the   very   nature   of   the   transaction  made  the  debtor  insolvent  and  subjected  the  in-­ vestors  to  liability.  Section  546(e)  prevents  that.  The  Trustee   concludes  that  §546(e)  is  designed   to  protect  this  country s   legitimate   market   transactions   that   promote   the   stability   of   and   confidence   in   the   financial   markets.   But   the   Funds   were  not  operating   legitimately  at  the  end  and  were  con-­ duits   for   the   Petters   scam   all   along.   The   Trustee   concludes   from  this  that  §546(e)  is  irrelevant.   11   Nos.  12-­ 2463  et  al.   It  is  fair  to  say  that  some  courts  have  been  restive  at  the   idea  that  people  who  received  money  from  a  crooked  enter-­ prise  can  keep  it,  to  the  detriment  of  other  investors  who  did   not  get  out  while  the  going  was  good,  and  have  interpreted   §546(e)   narrowly.   See   the   discussion   in   Samuel   P.   Roth-­ schild,  Bad  Guys  in  Bankruptcy:  Excluding  Ponzi  Schemes  From   the   Stockbroker   Safe   Harbor,   112   Colum.   L.   Rev.   1376   (2012).   For  example,  In  re  Slatkin,  525  F.3d  805  (9th  Cir.  2008),  and  In   re  Wider,  907  F.2d  570  (5th  Cir.  1990),  hold  that  the  operators   of  particular  Ponzi  schemes  were  not   stockbrokers  for  the   purpose   of   the   statute,   which   therefore   did   not   block   re-­ coupment.   But   the   second   circuit   has   held   §546(e)   fully   ap-­ plicable   to   businesses   that   engaged   in   fraud.   See   In   re   Que-­ becor  World  (USA)  Inc.,  719  F.3d  94  (2d  Cir.  2013)  ( transfer   has  its  normal  meaning);  Enron  Creditors  Recovery  Corp.  v.  Al-­ fa,   S.A.B.   de   C.V.,   651   F.3d   329   (2d   Cir.   2011)   ( settlement   payment  has  its  normal  meaning).   The   Trustee   is   not   asking   us   to   choose   sides   in   a   debate   about   interpretive   method   so   much   as   he   is   asking   us   to   chuck   §546(e)   out   the   window.   Yet   a   court   can t   say   this   statute   is   ambiguous,   so   we   will   implement   the   legislative   history   unencumbered   by   enacted   text.   Ambiguity   some-­ times   justifies   resort   to   legislative   history,   but   it   is   used   to   decipher  the  ambiguous  language,  not  to  replace  it.  The  text   is   what   it   is   and   must   be   applied   whether   or   not   the   result   seems  equitable.  See,  e.g.,  Freeman  v.  Quicken  Loans,  Inc.,  132   S.   Ct.   2034,   2044   (2012);   Dodd   v.   United   States,   545   U.S.   353,   359 60   (2005);   In   re   Draiman,   714   F.3d   462,   465 66   (7th   Cir.   2013).   If   the   Trustee   were   right   that   §546(e)   is   irrelevant   when  the  debtor  in  bankruptcy  had  any  role  in  a  fraud,  why   did   Congress   add   the   exception   referring   to   §548(a)(1)(A)?   Nos.  12-­ 2463  et  al.   12   The   presence   of   an   exception   for   actual   fraud   makes   sense   only  if  §546(e)  applies  as  far  as  its  language  goes.   Statutes  often  are  written  more  broadly  than  their  genesis   suggests.   RadLAX   Gateway   Hotel,   LLC   v.   Amalgamated   Bank,   132   S.   Ct.   2065,   2073   (2012),   tells   us   that   [t]he   Bankruptcy   Code  standardizes  an  expansive  (and  sometimes  unruly)  ar-­ ea  of  law,  and  it  is  our  obligation  to  interpret  the  Code  clear-­ ly  and  predictably  using  well  established  principles  of  statu-­ tory   construction.   We   apply   the   text which   both   Houses   of  Congress  approved  and  the  President  signed not  themes   from  a  history  that  was  neither  passed  by  a  majority  of  either   House  nor  signed  into  law.   The  Trustee  has  not  referred  us  to  any  legislative  history   about   the   meaning   of   settlement   payment   or   in   connec-­ tion  with ,  the  phrases  he  thinks  ambiguous.  The  second  cir-­ cuit  held  in  Enron  that   settlement  payment  means  what  it   ordinarily   does   in   the   securities   business:   the   financial   set-­ tling-­ up   after   a   trade.   651   F.3d   at   339.   Brokers   will   sell   cus-­ tomers   shares   of   stock   on   the   market   without   having   them   in  hand.  The  customer  later  turns  over  the  stock  and  receives   the   proceeds;   that s   the   settlement   for   the   transaction.   Here   the  investors  told  the  Funds  to  redeem  some  of  their  shares;   the   swap   of   money   for   shares   was   a   settlement   payment.   And,  as  Quebecor  holds,   transfer  is  a  more  comprehensive   term  and  usually  makes  it  unnecessary  to  decide  whether  a   given  transaction  entailed  a   settlement  payment .  719  F.3d   at  98.  A   transfer  from  the  Funds  to  each  redeeming  inves-­ tor  undoubtedly  occurred.  As  for   in  connection  with :  deci-­ sions   such   as   Merrill   Lynch,   Pierce,   Fenner   &   Smith   Inc.   v.   Dabit,   547   U.S.   71   (2006),   and   United   States   v.   O Hagan,   521   U.S.   642   (1997),   show   that   it   is   more   than   comprehensive   13   Nos.  12-­ 2463  et  al.   enough   to   cover   the   Funds   redemption   of   the   investors   shares.   The   Trustee s   only   textual   argument   is   that   fraudulent   schemes  do  not  have   securities  for  the  purpose  of  §546(e).   That  contention  is  hard  to  fathom,  given  that  a  principal  goal   of  securities  laws  is  to  control  fraud.  If  the  existence  of  fraud   meant   that   an   instrument   were   not   a   security ,   then   the   main  federal  means  to  deal  with  financial  fraud  would  van-­ ish.   Section   741(7)   of   the   Bankruptcy   Code   provides   that   a   securities  contract  is  a  contract  for  the  purchase  or  sale  of  a   security,  and  §101(49)(A)(ii)  says  that  security  includes  stock.   The   definition   in   §101(49)   comes   almost   verbatim   from   the   Securities   Act   of   1933   and   the   Securities   Exchange   Act   of   1934.  No  one  doubts  that  shares  of  stock  issued  by  crooked   mutual   funds   or   hedge   funds   are   securities   for   the   pur-­ pose  of  the  1933  and  1934  Acts.  They  are   securities  for  the   purpose  of  §546(e)  as  well.   Other  arguments  need  not  be  discussed  in  light  of  our   conclusion   that   §546(e)   defeats   the   Trustee s   actions.   The   judgments  of  the  bankruptcy  court  are  affirmed.