In the 1912 case of Lovell, Trustee in Bankruptcy of Knight v. Newman & Son, the U.S Supreme Court was tasked with determining whether a trustee in bankruptcy could recover payments made by an insolvent debtor prior to declaring bankruptcy. The debtor had transferred property and money to Newman & Son within four months before filing for bankruptcy. According to Section 60b of the Bankruptcy Act, such transfers can be deemed voidable preferences if they were made while insolvent and enabled one creditor to receive more than they would have under normal circumstances during liquidation proceedings. The court ruled that these transactions did indeed constitute voidable preferences as defined by law because it allowed Newman & Son to obtain a greater percentage of their debt compared with other creditors at the time when Knight was insolvent. Therefore, Lovell (as trustee) had every right under federal law to recover those assets on behalf of all creditors involved in this case.

In the dissenting opinion for Lovell, Trustee in Bankruptcy of Knight v. Newman & Son, it was argued that the court majority erred in their interpretation and application of bankruptcy law. The dissent emphasized that a trustee's role is to collect and distribute assets among creditors fairly; however, this does not grant them unlimited power over all property ever owned by the bankrupt party. They disagreed with the majority view that a transfer made before filing for bankruptcy could be invalidated if deemed fraudulent under state law even though it occurred outside of statutory limits set by federal bankruptcy laws. This perspective held that such an approach would unjustly expand trustees' powers beyond intended boundaries while potentially infringing upon states' rights to regulate fraud within their jurisdictions independently from federal oversight or intervention.