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March 5, 2018

Stroock Special Bulletin

By: Harold A. Olsen, Mark A. Speiser

In its February 27, 2018 decision in Merit Management Group, LP v. FTI Consulting, Inc., the United States Supreme Court resolved a circuit split on the scope of the “safe harbor” defense under section 546(e) to certain avoidance actions of the United States Bankruptcy Code.  Although the decision appears to limit the defense severely in certain situations, the Court’s ruling was guided by the appellant’s failure to argue that it (or the debtor) was a “financial institution” as that term is used in the Bankruptcy Code.  This argument, which the Court noted but did not address in the Merit case, may well lead to a different result in other cases.

This Stroock Special Bulletin provides an overview of the Merit case, and the potential future impact of the Supreme Court’s decision.

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