New Cases For the Week of October 28, 2002 - November 1, 2002

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October 30, 2002

Case

Court

Holding

In re Hannover Corporation
(DBN Subscription Required)
5th Cir. In assessing the application of the "good faith transferee" defense under 11 USC 548(c), the most important set of questions concerns the transferee's state of mind. First, what level of knowledge -- knowledge itself or some form of notice -- vitiates a claim of "good faith"? Second, need the knowledge be actual or merely constructive? Third, what duty of inquiry does notice impose?

The question of valuation under § 548(a) is "largely a question of fact, as to which considerable latitude must be allowed to the trier of the facts. Courts are understandably chary of interpreting § 548 to regard promises of future support as "valuable." "Value," for purposes of 11 USC 548(a)(1)(B)(i), is measured from the perspective of the debtor (i.e. what the debtor got in return).  However, "value," for the purposes of 11 USC 548(c) is measured from the perspective of the transferee (i.e., what the transferee gave). The bankruptcy court correctly held that: (i) a transferee's sale of short-term call options to a party unable to exercise them have "value" and (ii) the transfer was an equitable exchange.  Since value for defensive purposes is evaluated from the transferee's standpoint, the debtor's practical inability to exercise the options it purchased was irrelevant; the options had value from the transferee's perspective  thus warranting a defense under 548(c).

October 28, 2002

Case

Court

Holding

In re Housecraft Industries USA, Inc.
(DBN Subscription Required)
2nd Cir. Although not explicitly authorized in the Code, parties other than a DIP or trustee have standing to bring fraudulent conveyance claims under §§ 548 and 549 when to do so is in the best interest of the estate and the DIP or trustee unreasonably refuses to bring the litigation.
 
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