Term: 2017
Docket: 16-784
Merit Management Group, Lp v. Fti Consulting, Inc
- Pro
16-784 MERIT MANAGEMENT GROUP V. FTI CONSULTING DECISION BELOW: 830 F.3d 690 CERT. GRANTED 5/1/2017 QUESTION PRESENTED: Section 546(e) of the Bankruptcy Code prohibits a trustee from avoiding a transfer that, among other things, is made "by or to (or for the benefit of)" a financial institution. The payment at issue in this case was made by one financial institution to another financial institution, but the benefit and detriment of this transfer ultimately impacted companies that are not financial institutions. The question presented is thus: Whether the safe harbor of 11 U.S.C. § 546(e) prohibits avoidance of a transfer made by or to a financial institution, without regard to whether the institution has a beneficial interest in the property transferred, consistent with decisions from the Second, Third, Sixth, Eighth, and Tenth Circuits, but contrary to decisions from the Eleventh Circuit and now the Seventh Circuit. LOWER COURT CASE NUMBER: 15-3388
In the case of Merit Management Group, LP v. FTI Consulting, Inc., the U.S. Supreme Court had to decide whether a transfer of assets that involves financial institutions as intermediaries can be shielded from avoidance in bankruptcy under section 546(e) of the Bankruptcy Code. The court ruled unanimously that such transfers are not protected by this safe harbor provision if they only pass through these entities on their way to ultimate recipients who did not qualify for protection under section 546(e). This decision resolved a split among lower courts and clarified how broadly this important bankruptcy law provision should be interpreted.
In the case of Merit Management Group, LP v. FTI Consulting, Inc., there was no dissenting opinion recorded as the decision was unanimous. The Supreme Court ruled 9-0 in favor of FTI Consulting, stating that section 546(e) of the Bankruptcy Code does not protect transfers made through financial institutions where such institutions have only a minor and administrative role in the transfer. This ruling clarified that it is not enough for a transaction to merely pass through a 'safe harbor' entity; instead, this entity must be an actual party to gain protection under Section 546(e).
