Is It Law or Something Else?: A Divided Judiciary in the Application of Fraudulent Transfer Law under § 546(e) of the Bankruptcy Code

Abstract

In Part I of this Note, I will provide a general overview of leveraged buyouts. The discussion of how and why LBOs are implemented is particularly relevant to the application of fraudulent transfer analysis. In Part II, I will discuss fraudulent transfer law as defined by the Bankruptcy Code. In Part III, I will discuss which transfers within the LBO should be attacked under fraudulent transfer law and why; this section will focus on the various stakes of the parties involved in the leveraged buyout transaction. I will provide an overview of the specific factors that bankruptcy and federal appellate judges may or may not consider in applying § 546(e). Part IV will then more thoroughly define § 546(e) and its application to fraudulent transfer analysis. In Part V, I will describe the split of interpretation of § 546(e) as demonstrated by an empirical study. In Part VI, I will discuss the formal legal rules for the disagreement among the bankruptcy and federal appellate judges. Finally, in Part VII, I propose several explanations for the remarkably divided application of the statute.