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Adelphia Recovery Trust v. Bank of America, __ B.R. __ (S.D.N.Y. 6/18/08) (no avoidance action on behalf of solvent debtor where solvent debtor was not substantively consolidated with other debtors).
Creditor negotiating to buy assets lent funds shortly before involuntary filing but failed to perfect its security interest, and the trustee sought to avoid the security interest under section 544. The creditor argued that equitable principles precluded avoidance because it would result in a windfall to other creditors, but the Court held that the creditor exhibited a lack of diligence and could have easily recorded its interest, thus precluding the application of equitable principles. In re Millivision, Inc., 474 F. 3d 4 (1st Cir. 2007).
A number of cases involve payments to shareholders in buyouts which were potentially avoidable as fraudulent conveyance which courts held were protected under section 546(b). See In re Stewart Fin. Co., 367 B.R. 900 (Bk. M.D. Ga. 2007) (transfers to broker to pay margin debt of debtor's principal were within margin payment/settlement definitions and it made no difference that the recipient was not the debtor's broker); In re IT Group, Inc., 359 B.R. 97 (Bk. D. Del. 2007) (payment for stock was settlement payment); In re Plassein Int'l Corp., 366 B.R. 318 Int'l Corp., 366 B.R. 318 (Bk D. Del. 2007) (payment to stockholders for stock in private corporations through a bank by wire transfers were settlement payments); In re Quality Stores, Inc., 355 B.R. 629 (Bk. W.D. Mich 2006) (in LBO, shareholders paid for stock through bank; court held statute clearly required the result even though there was a question whether Congress intended section 546(b) to apply only to routine public transactions); In re National Forge Co., 344 B.R. 340 (W.D. Pa. 2006) (payments for stock made to financial institution and were protected). Contra In re Norstan Apparel Shops, Inc., 367 B.R. 68 (Bk. E.D.N.Y. 2007) (payment to shareholders for interests in sub S corporation in connection with LBO not protected; to be protected under 546(e) as a settlement payment, the transaction must involve public securities and here the purchased stock was not publicly traded); In re Manhattan Inv. Fund Ltd., 359 B.R. 510 (Bk. S.D.N.Y. 2007) (not protected because payments were on account of Ponzi scheme which involved actual fraud).
A number of reclamation cases under the new law continue to recognize the principle that a seller of goods has no right of reclamation when its rights were subordinate to those of a secured lender and there was no "equity" for the seller because the lender was undersecured. See In re Advanced Marketing Services, Inc., 360 B.R. 421 (Bk. D. Del. 2007); In re Dana Corp., 367 B.R. 409 (Bk. S.D. N.Y. 2007); In re Incredible Auto Sales LLC, 2007 WL 927615 (Bk. D. Mont. 2007).
Several cases involves preference actions against critical vendors who claimed the actions were barred because they were protected by a critical vendor order (even though the order
