Boston Generating Creditors Lose Appeal Seeking to Claw Back Distribution

Herrick's Restructuring & Finance Litigation co-chair, Sean E. O’Donnell, spoke with The Wall Street Journal - Pro Bankruptcy about a recent ruling by the Second Circuit which affirmed the dismissal of all claims in In re: Boston Generating, LLC—a matter that has been litigated for over a decade involving fraudulent conveyance claims arising from a $2 billion leveraged recapitalization. In so doing, the Second Circuit ruled that the Bankruptcy Code’s safe harbor provision for securities contracts payments, 11 U.S.C. § 546(e), applied to the leveraged buyout and pre-empted the plaintiff-appellant-trustee’s state-law fraudulent conveyance claims, which attempted to claw back approximately $708 million from the defendants-appellees. Herrick represented the largest ad hoc group of defendants-appellees in this matter.

Sean noted, "What it does is it affirms the standard that is continuing to crystallize, certainly in the Second Circuit, that the safe-harbor provision will be honored in transactions like this."

All told, the case took more than a decade to litigate, transferring between four district court judges throughout that time. Because of the length of the case, some of the defendant funds, particularly those that were winding down, settled with the trustee rather than remain in court, Sean concluded. 

Read the full article in The Wall Street Journal - Pro Bankruptcy here. Access may require a subscription.