467 B.R. 726
Bankr. S.D.N.Y.2012Background
- MF Global Inc. (MFGI) SIPA liquidation contemplates bulk transfers of customer property to satisfy distributions.
- Third Bulk Transfer Order authorized liquidating non-liquid assets and certain property, including warehouse receipts, for pro rata distributions.
- Trustee seeks Court approval to liquidate remaining Physical Customer Property (precious metal certificates) via bulk sale to Jefferies for 99% of futures prices.
- Sale would be free and clear of liens, subject to Court approval; any disposal before closing would leave remaining certificates subject to the Purchase Agreement.
- Hamann objects, arguing MF Global lacked clear title and contends his property may be SIPA-protected securities, not commodities, affecting treatment.
- Court must determine whether the sale complies with the Third Bulk Transfer Order, applicable regulations, and SIPA/CEA regimes.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Authority to approve bulk sale under 363 and Third Bulk Transfer Order | Trustee's sale aligns with the Third Bulk Transfer Order and business judgment. | Hamann challenges Trustee's title validity and authority to liquidate his property. | Yes; Court approves the Purchase Agreement and sale. |
| Notice, good faith, and fair value under 363 sale standard | Trustee provided adequate notice; price fair; sale pursued in good faith. | Hamann disputes valuation and potential conflicts in good faith. | Satisfied; sale approved as sound with adequate notice and fair value. |
| Treatment of Hamann's warehouse receipts under SIPA vs CEA | Receipts are 'specifically identifiable property' and belong in the estate; SIPA protections do not apply to Hamann's property as an FCM commodity account. | Hamann asserts SIPA protections and title issues, challenging liquidation of his property. | Hamann's claim rejected; property identified in MFGI books is estate property under Part 190 and not SIPA-protected securities. |
Key Cases Cited
- In re Chateaugay Corp., 973 F.2d 141 (2d Cir. 1992) (sound business justification governs 363 sales; debtor's business rationale recognized)
- In re Lionel Corp., 722 F.2d 1063 (2d Cir. 1983) (courts defer to debtor's business judgment absent arbitrary or capricious conduct)
- In re Johns-Manville Corp., 60 B.R. 612 (Bankr.S.D.N.Y. 1986) (threshold for recognizing valid business justification in bankruptcy sales)
- In re Integrated Res., Inc., 147 B.R. 650 (S.D.N.Y. 1992) (presumption of good faith and best interests once business justification shown)
- In re Del. & Hudson Ry. Co., 124 B.R. 169 (D. Del. 1991) (steps for evaluating 363 sale: notice, fair price, good faith)
- HSBC Bank, USA, N.A. v. Fane (In re MF Global Inc.), 466 B.R. 244 (Bankr.S.D.N.Y. 2012) (distribution among customer property classes under SIPA/CEA framework)