Second Circuit’s Latest 546(e) Safe Harbor Decision in Boston Generating Answers Open Questions After Nine West

Legal Research: Josh Neifeld Relevant Document: Summary Order On Sept. 19, the U.S. Court of Appeals for the Second Circuit issued a summary order in the case of Holliday v. Credit Suisse, a $720 million fraudulent transfer suit that arose from Boston Generating’s 2010 bankruptcy. The Second Circuit affirmed district court and bankruptcy court rulings dismissing fraudulent transfer claims because the transaction in question qualified for the Bankruptcy Code’s safe harbor for securities contract transactions. Although the summary order is not precedential, it is meaningful because it provides guidance on how to analyze transactions to determine whether the safe harbor could apply to defeat fraudulent transfer litigation. The Boston Generating decision is also important in the context of the Second Circuit’s last major safe harbor decision, In re: Nine West LBO Securities Litigation, which was notable for adopting a “transfer-by-transfer” approach to the safe harbor that could result in some transfers under a leveraged buyout, or LBO, or other transaction being protected, while leaving others vulnerable. The approach in Nine West was arguably a narrowing of the Second Circuit’s case law on when the safe harbor applies, raising the question of whether it would continue to narrow the safe harbor.[...]