Official Committee of Unsecured Creditors of Quebecor World (USA) Inc. v. American United Life Insurance
719 F.3d 94
2d Cir.2013Background
- Committee seeks to avoid and recover October 29, 2007 transfer by debtor to noteholders; NPAs governed purchase and prepayment mechanics; QWUSA wired $376M to trustee CIBC Mellon for purchasing notes; notes could be prepaid, redeemed, or purchased by affiliates; QWI/QWUSA guarantees and restructuring linked to debt-to-capitalization ratio; bankruptcy filed within 90 days of transfer; courts held safe harbor under §546(e) applies.
- Notes were issued by QWCC to appellees; the Cooperation Agreement affected note transfers but not validity of the QWUSA purchase; district court and bankruptcy court found the transfer fit §546(e) safe harbor; Enron decision provided the governing definition of settlement payments for this context.
- The court need not resolve whether the payments were settlements; it held the transfer clearly falls within the securities contract safe harbor because it was a transfer to a financial institution in connection with a securities contract.
- QWUSA’s transfer to CIBC Mellon was a transfer to a financial institution in connection with a securities contract, exempt from avoidance.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the transfer falls within §546(e) securities contract safe harbor | Committee argues not redeem/purchase; disputed intermediary role | QWUSA purchase of Notes fits security contract safe harbor via intermediary | Yes, exempt under §546(e) |
| Whether intermediary conduit suffices for safe harbor | Committee asserts conduit status does not affect exemption | Enron and circuit precedent allow conduit intermediaries | Yes, conduit suffices; safe harbor applies |
Key Cases Cited
- In re Enron Creditors Recovery Corp., 651 F.3d 329, 651 F.3d 329 (2d Cir. 2011) (defined settlement payments and approved safe harbor scope for intermediaries)
- In re QSI Holdings, Inc., 571 F.3d 545, 571 F.3d 545 (6th Cir. 2009) (intermediary may qualify safe harbor even without title transfer)
- Frost v. Contemporary Indus. Corp., 564 F.3d 987, 564 F.3d 987 (8th Cir. 2009) (supports intermediary conduit approach to §546(e))
- In re Resorts Int’l, Inc., 181 F.3d 516, 181 F.3d 516 (3d Cir. 1999) (conduit intermediary suffices for safe harbor)
- Munford, Inc. v. Valuation Research Corp., 98 F.3d 604, 98 F.3d 604 (11th Cir. 1996) (intermediary title requirement not required for safe harbor)
- Kaiser Steel Corp. v. Charles Schwab & Co., 913 F.2d 846, 913 F.2d 846 (10th Cir. 1990) (contextual guidance on safe harbor purposes)