BG Law Prevails in Published Opinion from the Ninth Circuit Bankruptcy Appellate Panel on the Reach-Back Period in Fraudulent Transfer Actions

Corey R. Weber of BG Law LLP argued an appeal at the United States Bankruptcy Appellate Panel of the Ninth Circuit (the “BAP”) in October 2014 on behalf of Jason M. Rund, the Chapter 7 bankruptcy trustee for the bankruptcy estate of consolidated debtors EPD Investment Co., LLC and Jerrold S. Pressman on the issue of whether the Bankruptcy Code allows trustees to bring fraudulent transfer claims as to transfers up to seven years prior to the bankruptcy petition date (or Order for Relief date in involuntary bankruptcy cases) under 11 U.S.C. §§ 544 and 546 and the California Civil Code, as opposed to up to seven years prior to the filing of the complaint.  The BAP issued a published opinion ruling in favor of the trustee on January 7, 2015 in what the BAP called an issue of first impression in this circuit.

The BAP stated that “[t]he narrow question of whether section 546(a) preempts a state-law statute of repose such as CAL. CIV. CODE §3439.09(c) is an issue of first impression in this circuit.  At least no published decisions have addressed it.  While relatively few courts have addressed this particular issue, virtually all have held in favor of the Trustee.  We conclude that the bankruptcy court erred in its application of §546(a), and we REVERSE.”

In reversing the Bankruptcy Court, the BAP held that “so long as a state-law fraudulent transfer claim exists on the petition date (or the date the order for relief is entered), i.e., the state’s applicable repose period governing the action has not yet expired on the petition date (or the order for relief date), the trustee may bring the avoidance action under § 544(b), provided it is filed within the limitations period in § 546(a).  The “reach back” period is established on the petition date (or order for relief date) and encompasses all transfers within the relevant period provided by state law.”

The BAP’s published opinion is available on the BAP website by clicking here.

Corey R. Weber, a partner at BG Law LLP, is a litigator in bankruptcy, business and commercial litigation.  He is the Co-Vice Chair of the Insolvency Law Committee (a standing committee of the Business Law Section of the State Bar of California). Corey represents parties in adversary proceedings in bankruptcy cases, and frequently litigates complex fraudulent transfer cases involving Ponzi schemes and fraud.