§ 550(a)(2) subsequent transferee NO recovery from (inquiry notice good faith subsequent transferee § 550(b) standard of good faith either knew OR should have known, NO reward for deliberate ignorance) Thus, even if a is strictly liable (NO BFP, initial transferee § 550(b) defense) in best position to monitor $$ came from (OR, at least, in better position than subsequent transferee) Assume president of D-corp. owes gambling debt to casino, issues check w/ D-corp.’s $$ casino liable as (even initial transferee though casino does NOT know that president is ripping off BUT, if president had put D-corp.’s $$ into own bank account … then casino NOT liable president as casino initial transferee, as (YES defense) good faith subsequent transferee § 550(b) has dominion/control over $$ NOT a mere conduit/ Initial transferee messenger (thus, if recipient of D’s funds appears to be initial transferee, look for some escape hatch/limitation) Attorney disbursing $$ out of client trust account NOT initial (acting as fiduciary to client) transferee Telecommunications company receives $$ from D, required by statute to give portion to non-profit YES (despite initial transferee statutory requirement, still had dominion/control over $$… though, Schechter disagrees) states that may recover broadly § 550(a) trustee the benefit of the estate” “for construed… Assume, in C (as loans $$ to estate, takes on Ch. 11, DIP lender) lien recovery recovery arguably NOT if trustee’s the benefit of the estate” “for going to C… BUT, estate does by getting $$ from C thus, if recovery … “benefit” the estate, then it IS the benefit of the estate” “benefitted” “for Conflict b/w and § 550(a) CUFTA § 8(c)… Assume D house to friend, then files for bankruptcy (fraudulent at time of house worth $600K… BUT, by the time transfer) transfer, is (as per house is worth fraudulent transfer avoided § 544(b)/CUFTA), $400K… thus, if can’t recover the house itself, then which value does trustee … recover? trustee
§ 550(a)(2) subsequent transferee § 550(b) NO recovery from good faith subsequent transferee (inquiry notice standard of good faith either knew OR should have known, NO reward for deliberate ignorance) Thus, even if a BFP, initial transferee is strictly liable (NO § 550(b) defense) in best position to monitor $$ came from (OR, at least, in better position than subsequent transferee) Assume president of D-corp. owes gambling debt to casino, issues check w/ D-corp.’s $$ casino liable as initial transferee (even though casino does NOT know that president is ripping off … BUT, if president had put D-corp.’s $$ into own bank account then casino NOT liable president as initial transferee, casino as good faith subsequent transferee (YES § 550(b) defense) Initial transferee has dominion/control over $$ NOT a mere conduit/ messenger (thus, if recipient of D’s funds appears to be initial transferee, look for some escape hatch/limitation) Attorney disbursing $$ out of client trust account NOT initial transferee (acting as fiduciary to client) Telecommunications company receives $$ from D, required by statute to give portion to non-profit YES initial transferee (despite statutory requirement, still had dominion/control over $$… though, Schechter disagrees) § 550(a) states that trustee may recover “for the benefit of the estate” broadly construed… Assume, in Ch. 11, C (as DIP lender) loans $$ to estate, takes lien on trustee’s recovery recovery arguably NOT “for the benefit of the estate” if going to C… … BUT, estate does “benefit” by getting $$ from C thus, if recovery “benefitted” the estate, then it IS “for the benefit of the estate” Conflict b/w § 550(a) and CUFTA § 8(c)… Assume D house to friend, then files for bankruptcy (fraudulent transfer) at time of transfer, house worth $600K… BUT, by the time fraudulent transfer is avoided (as per § 544(b)/CUFTA), house is worth $400K… … thus, if trustee can’t recover the house itself, then which value does trustee recover?
Bankruptcy_Schechter-Fall-2009.docx