Mallickrodt Trust Asserts Novel Argument in Response to Safe Harbor Defense (US)

April 2024
Region: Americas

This article was originally published in the April 2024 edition of ‘INSOL Restructuring Alert’ and is republished here with permission.

A common defense to a fraudulent transfer claim in bankruptcy concerning a securities transaction is the “safe harbor” defense under section 546(e) of the Bankruptcy Code. In a unique twist, a post-confirmation trust in Delaware recently argued that the safe harbor defense should not be available if the underlying transaction was illegal under the law where the debtor/transferor was incorporated. Both sides present thoughtful and well-reasoned arguments, and the bankruptcy court is now set to rule on whether a fraudulent transfer complaint should be dismissed for three defendants.