Title
Subsequent Transferee’s Good Faith for Value Defense: The Second and Ninth Circuit’s Perspective
Document Type
Research Memorandum
Publication Date
2022
Abstract
(Excerpt)
Under section 548(a)(1) of title 11 of the United States Code (the “Bankruptcy Code”), a trustee may “avoid any transfer . . . incurred by the debtor, that was made or incurred on or within 2 years before the date of the filing of the petition” if there is either an “actual intent” fraudulent transfer or a “constructive” fraudulent transfer. The trustee, however, may not recover if a subsequent transferee can satisfy the good faith for value defense and demonstrate that it “t[ook] for value . . . in good faith, and without knowledge of the voidability of the transfer avoided” or “any immediate or mediate good faith transferee” under section 550(b).
This memorandum analyzes the good faith for value defense exclusively in “actual intent” fraudulent transfer cases within the Second and Ninth Circuits. Part I of this memorandum analyzes the Bankruptcy Code’s subsequent transferee’s good faith for value defense. Part II examines the interpretation of the good faith for value defense under section 550(b)(1) in the Second Circuit, which includes New York. Part III examines the interpretation of the good faith for value defense under section 550(b)(1) in the Ninth Circuit, which includes California. Part IV explores the distinction between the Second and Ninth Circuits’ interpretation and application of the good faith for value defense under section 550(b)(1).