- Court: United States Supreme Court
- Area(s) of Law: Bankruptcy Law
- Date Filed: February 27, 2018
- Case #: 16-784
- Judge(s)/Court Below: SOTOMAYOR, J., delivered the opinion for a unanimous Court.
- Full Text Opinion
Two horse-racing companies competed for the last state-issued horse-racing license required to operate a “racino”—a “horse racing casino.” As a compromise, the companies agreed that the entity obtaining the license would buy out the other’s stock for $55 million dollars. The purchaser obtained the racing license, but later filed for bankruptcy. Petitioner, a shareholder of the seller’s stock, stood to profit $16.5 million dollars from the purchase agreement. Pursuant to an exception in the bankruptcy code, 11 U.S.C. §548(a)(1)(b), Respondent, the trustee for the bankruptcy estate, tried to avoid paying Petitioner the $16.5 million. Under §548(a), a trustee can avoid “constructively fraudulent transfers” when the debtor “received less than a reasonably equivalent value in exchange” for the transfer. Petitioner argued that §546(e), the “safe harbor exception,” applies to prevent a trustee from avoidance when it is a payment “made by or to benefit financial institutions.” The Supreme Court rejected Petitioners argument, holding that Respondent could avoid paying Petitioner. The Court reasoned that the context of the “safe harbor exception” indicates that the Court should consider the “overarching” transaction between two entities, not just the fact that two banks brokered exchange of stock between them. AFFIRMED.