Fraudulent-Transfer Claims
Reid Collins has litigated billions of dollars in fraudulent transfer claims over the last decade. We know how to establish insolvency, prove actual fraud, and overcome good-faith and other defenses. Trustees and creditors come to us with some of their toughest cases because when legal obstacles stand in the way, we find a path around them—or we change the law itself.
Changing the Law in Merit Management
Reid Collins was the first firm in decades to overcome a defense under the so-called securities “safe harbor” in section 546(e) of the Bankruptcy Code. The victory was the result of careful planning and creative legal argument.
We worked with the trustee in Merit Management to bring the trust’s largest fraudulent transfer claim in the Seventh Circuit—one of few circuits that had not yet considered the scope of the safe harbor. We defeated a motion to transfer the case back to Delaware, where, given Third Circuit law at the time, the claim would have been dead on arrival.
Once before the Seventh Circuit, we made novel arguments and convinced the court to reject over two decades of precedent from its sister circuits, significantly limiting the scope of the section 546(e) defense. We then defended this ruling before the United States Supreme Court, which issued a unanimous ruling affirming the Seventh Circuit’s opinion. The Merit Management decision opened additional avenues for recovery for bankruptcy trustees across the country.
Deploying Other Creative Strategies
Our creativity extends well beyond litigating safe-harbor defenses. In one case, we analyzed fraudulent transfer statutes across multiple states and developed a plan on behalf of a creditor to file claims in the only state in the country where that creditor still had viable claims. When the debtor later commenced bankruptcy, we represented the trustee in pursuing and settling over $100 million in fraudulent transfer claims. In other cases, we found creative solutions to extend limitations and the statutory look-back period and pushed the limits of the application of the Ponzi-scheme presumption beyond traditional Ponzi-schemes.
Because we get results, trustees continue to come to us with their largest and toughest fraudulent transfer cases.