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Bankruptcy Keyed to Bussel, 12th Ed.
Merit Management Group LP v. FTI Consulting, Inc.
Citation:
138 S. Ct. 883 (2018)Facts
Valley View Downs and Bedford Downs were competing for Pennsylvania’s last harness-racing license to open a “racino” (racetrack with slot machines). Instead of continuing to compete, they entered into an agreement whereby Bedford Downs would withdraw its application and Valley View would purchase all of Bedford Downs’ stock for $55 million if it obtained the license. Valley View secured the license and arranged for Credit Suisse to finance the purchase. Credit Suisse wired $55 million to Citizens Bank, which served as the escrow agent. Citizens Bank then disbursed $47.5 million to Bedford Downs shareholders (including $16.5 million to Merit) with the remaining $7.5 million held in escrow and later distributed. Valley View ultimately failed to secure a gaming license for slot machines and filed for Chapter 11 bankruptcy along with its parent company. FTI, as trustee, filed suit against Merit seeking to avoid the $16.5 million transfer as constructively fraudulent, arguing Valley View was insolvent and overpaid for the stock. Merit argued the transfer was protected by the §546(e) safe harbor because it involved financial institutions.
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