Petr v. BMO Harris Bank N.A.

In action by bankruptcy Trustee seeking to avoid $25 million transfer to defendant-bank by defendant-corporation that borrowed said money from said bank to purchase stock of subsidiary corporation, where transfer was used to pay off said bridge loan, Dist. Ct. did not err in dismissing Trustee’s complaint, even though Trustee claimed that said transfer was fraudulent, where subsidiary corporation subsequently defaulted on loans made by other creditors, who subsequently filed instant involuntary bankruptcy petition. Section 546(e) of Bankruptcy Code contains safe harbor that precludes Trustee from seeking to avoid transfers made by or to financial institutions in connection with securities contract. Ct. of Appeals found that safe harbor in section 546(e) applied to instant purchase of stock of private corporation. Moreover, state law that allowed same avoidance was preempted by section 456(e).