In the case of In re MBS Management Services, Inc., the United States Bankruptcy Court for the Eastern District of Louisiana (the "Bankruptcy Court") analyzed whether payments made by MBS Management Services, Inc. ("MBS") to MX Energy, Inc. ("MX") under a retail electricity contract (the "Contract") were recoverable by the MBS bankruptcy trustee (the "Trustee") pursuant to fraudulent conveyance and preference actions. The Bankruptcy Court ultimately held that (i) the Contract qualifies as a forward contract under the U.S. Bankruptcy Code (the "Code"); and (ii) as a result, all payments made by MBS to MX thereunder constitute "settlement payments" exempt from the Trustee's avoidance actions. The United States District Court for the Eastern District of Louisiana (the "District Court") affirmed the Bankruptcy Court's holding.
The Trustee appealed to the United States Court of Appeals for the Fifth Circuit (the "Fifth Circuit"). On August 2, 2012, the Fifth Circuit issued an opinion (the "Opinion") affirming the prior courts' holdings that payments under the Contract were settlement payments under a "forward contract" and therefore expressly exempt from the Code's preference provision under 11 U.S.C. § 546(e).
Please see full alert below for more information.
Firefox recommends the PDF Plugin for Mac OS X for viewing PDF documents in your browser.
We can also show you Legal Updates using the Google Viewer; however, you will need to be logged into Google Docs to view them.
Please choose one of the above to proceed!
LOADING PDF: If there are any problems, click here to download the file.