LexisNexis Emerging Issues Analysis, 2018 Emerging Issues 8627

In a 9—0 decision authored by Justice Sotomayor, the Supreme Court concludes that the relevant “transfer” for purposes of applying the safe harbor in Bankruptcy Code section 546(e) is the specific transfer that an estate representative seeks to avoid pursuant to the statutory avoiding powers.  When the transfer sought to be avoided is an “overarching transfer” from one private party to another private party, the involvement of a “financial institution” or other covered entity in transactional steps within the overarching transfer will not insulate the overarching transfer from avoidance attack.

This commentary analyzes the holding and implications of the Merit Management opinion.