AP Services LLP v. Silva
483 B.R. 63
S.D.N.Y.2012Background
- CRC trustee sues to avoid transfers from a 2007 LBO funded by Paramount; Silvas were sellers and CRC’s insiders.
- Paramount borrowed $177 million to pay CRC’s sellers; Silvas allegedly misrepresented CRC’s finances to obtain financing.
- CRC defaulted on loan covenants within a year and filed for bankruptcy in 2010; estate liquidated thereafter.
- Trustee claims payments to the Silvas were fraudulent transfers and breach fiduciary duties; counts include fraudulent transfer, breach, aiding and abetting, and unjust enrichment.
- Defendants move to dismiss under Rule 12(b)(6) and invoke § 546(e) safe harbor shielding settlement payments.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether payments to the Silvas are avoidable fraudulent transfers. | Trustee argues payments were fraudulent and insolvent transfers. | Silvas contend § 546(e) safe harbor applies; payments are settlement payments. | Count One dismissed; § 546(e) protects the payments. |
| Whether common law claims are preempted by § 546(e). | Trustee maintains common law claims survive post-Enron as non-avoidance relief. | Silvas argue preempted or inadequately pleaded under § 546(e). | Unjust enrichment preempted; remaining common law claims dismissed without prejudice for lack of jurisdiction. |
| Whether unjust enrichment is precluded by the safe harbor. | Unjust enrichment recovers same funds avoided under § 546(e). | Unjust enrichment would circumvent safe harbor. | Unjust enrichment claim dismissed as preempted by § 546(e). |
Key Cases Cited
- Enron Creditors Recovery Corp. v. Alfa, S.A.B. de C.V., 651 F.3d 329 (2d Cir. 2011) (settlement payments scope includes leveraged buyouts; no intermediary required)
- In re Plassein International Corp., 590 F.3d 252 (3d Cir. 2009) (LBOs with direct wire transfers fall within § 546(e) safe harbor)
- In re QSI Holdings, Inc., 571 F.3d 545 (6th Cir. 2009) (bank as intermediary; expansive view of settlement payments)
- Contemporary Indus. Corp. v. Frost, 564 F.3d 981 (8th Cir. 2009) (settlement payments broad; prevents unraveling transactions)
- Kaiser Steel Corp., 952 F.2d 1230 (10th Cir. 1991) (settlement payments broadly defined)
- Resorts Int’l, Inc. v. Kovab, 651 F.3d 329 (2d Cir. 2011) (contextual framework for preemption and § 546(e) scope)