10.10.2006

C.D. Cal. Addresses Circuit Split; Declines to Apply 11 U.S.C. § 548 Extraterritorially

Per In re Bankruptcy Estate of Midland Euro Exchange Inc., 347 B.R. 708 (C.D. Cal. Aug. 16, 2006):

Next, the Court needs to address whether Congress intended universal extraterritorial application of the fraudulent transfer provisions codified in § 548. This is an issue of first impression in the Ninth Circuit, with a split of opinion in the other circuits and a petition for writ of certiorari pending with the Supreme Court, asking, inter alia, to clarify congressional intent on this issue. Most recently, the Fourth Circuit upheld extraterritorial application of § 548. See In re French, 440 F.3d 145 (4th Cir.2006), cert. petition pending, --- U.S. ---- (filed May 15, 2006). A bankruptcy court in the Second Circuit, however, dealing with the Trustee's avoidance power under the similar preferential transfer statute--11 U.S.C. § 547--held that the lack of clearly expressed congressional intent prevents its extraterritorial application. See In re Maxwell Comm'n. Corp., 170 B.R. 800, 814 (Bankr.S.D.N.Y.1994), aff'd on other grounds, In re Maxwell, 93 F.3d 1036 (2nd Cir.1996).



Since neither the plain language of the statute nor its reading in conjunction with other parts of the Code establish congressional intent to apply § 548 extraterritorially, I now turn to other considerations.

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