453 B.R. 201
Bankr. S.D.N.Y.2011Background
- Prepetition transfers totaling approximately $376 million were paid by Quebecor World (USA) Inc. to holders of private placement notes within the 90 days before Quebecor's insolvency filings.
- The notes were issued in 2000 by Quebecor World Capital Corp. and guaranteed by QWI and QWUSA, with a Make-Whole Premium and a repayment/conversion structure under the Note Purchase Agreements.
- On September 28, 2007, Quebecor authorized a redemption of all outstanding notes; QWUSA funded the redemption and then surrendered the notes for cancellation, with payment directed to a trustee for the noteholders.
- The Disputed Transfer wired approximately $376 million to CIBC Mellon, the note trustee, which then distributed funds to each noteholder, with some notes delivered for cancellation weeks to months later.
- The Official Committee of Unsecured Creditors seeks to avoid the transfer as a preferential transfer, arguing it is not protected by section 546(e) safe harbor as a settlement payment, while defendants rely on Enron v. Alfa to treat it as a settlement payment.
- Post-Enron briefing and an evidentiary hearing led the court to grant summary judgment for the defendants, holding the transfer is a protected settlement payment under 546(e).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does the Disputed Transfer qualify as a settlement payment under 546(e)? | Committee contends it is not a settlement payment due to non-traditional settlement process. | Notes qualify as a settlement payment per Enron, as cash was transferred to complete a securities transaction. | Yes; the transfer is a settlement payment protected by 546(e). |
| Must a clearing intermediary be involved to satisfy 741(8) 'settlement payment' in Enron's sense? (Enron rejects strict settlement-process requirement) | Settlement payments require a formal settlement process through a clearing agency. | Enron rejects a required intermediary; payment can complete a securities transaction without traditional clearing; focus on plain language. | Intermediary not required; Enron broad interpretation applies. |
| Are the facts distinguishable from Enron due to settlement risk or procedural differences in Quebecor's repurchase? | Differences in delivery and settlement risk distinguish this from Enron. | Enron's plain-language rule controls; differences are immaterial for §546(e) analysis. | Distinctions are immaterial; Enron controls and supports exemption. |
| Does the transaction have systemic significance that would limit 546(e) immunity? | The amount is large and could be systemically significant; safe harbor should be limited. | Systemic significance is not a prerequisite; the plain definition suffices. | Not required to show systemic significance; the transfer fits the definition. |
Key Cases Cited
- In re Enron Creditors Recovery Corp., 407 B.R. 17 (Bankr.S.D.N.Y. 2009) (established that some private-redemption payments may be settlement payments under 546(e))
- In re Plassein Int'l Corp., 590 F.3d 252 (3d Cir. 2009) (held settlement payments can apply beyond public-market trades)
- In re QSI Holdings, Inc., 571 F.3d 545 (6th Cir. 2009) (expands 546(e) applicability to private transactions)
- Contemporary Indus. Corp. v. Frost, 564 F.3d 981 (8th Cir. 2009) (another expansion of 546(e) interpretation beyond traditional settlement)
- In re Norstan Apparel Shops, Inc., 367 B.R. 68 (Bankr.E.D.N.Y. 2007) (cited for systemic-risk rationale of 546(e))
- In re MacMenamin's Grill, Ltd., 450 B.R. 414 (Bankr.S.D.N.Y. 2011) (MacMenamin discusses scope of 546(e) in context of smaller private transfers)