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Settlement Payment Exception To Avoidance Powers In Bankruptcy: An Unsettling Method Of Avoiding Recovery From Shareholders Of Failed Closely Held Company Lbos, Irina V. Fox
Irina V. Fox
This is the first scholarly article to analyze the recent jurisprudential expansion of 11 U.S.C. § 546(e), the settlement payment exception to bankruptcy avoidance powers. This provision was originally enacted by Congress to protect the securities market from the ripple effect of bankruptcy of one of the market players. In 2009, the Third, Sixth, and Eighth Circuits broadly interpreted section 546(e) so as to shield from avoidance leveraged buyouts (LBOs) of both public and closely held companies. This Article questions the results reached by these (and other) circuits by exploring the goals of avoidance powers in preventing equity holders from …