Tabb Treatise Cited in SCOTUS Decision on Bankruptcy Code’s ‘Safe Harbor’ Provision

Of Counsel Charles Tabb’s treatise, The Law of Bankruptcy, was cited by the U.S. Supreme Court in a decision Tuesday holding that the only relevant transfer for purposes of the securities “safe harbor” provision in the bankruptcy code is the transfer that the trustee seeks to avoid, rather than the component parts of the transfer.

At issue in the case, Merit Management Group, LP v. FTI Consulting, Inc., was a circuit split over the scope of the bankruptcy code’s safe harbor provision exempting certain securities transactions from clawbacks.

The court, in a unanimous opinion by Justice Sonia Sotomayor, sided with the Seventh Circuit’s 2016 interpretation of the law, saying that when determining whether a transfer can be avoided in bankruptcy, courts should look at the overarching transfer instead of its component parts.

“The court concludes that the plain meaning of Section 546(e) dictates that the only relevant transfer for purposes of the safe harbor is the transfer that the trustee seeks to avoid,” the court wrote.