In a decision that reaffirms its previous rulings on the jurisdictional limits of bankruptcy courts, the US Court of Appeals for the Third Circuit recently held in W.R. Grace & Co. v. Chakarian (In re W.R. Grace & Co.)1 that bankruptcy courts lack subject matter jurisdiction over third-party actions against non-debtors if such actions could affect a debtor’s bankruptcy estate only following the filing of another lawsuit.

To promote equal treatment of creditors, the US Congress has armed debtors with the power to bring suit to recover a variety of pre-bankruptcy transfers. Prominent among these is a debtor’s ability under Section 548 of the Bankruptcy Code to recover constructively fraudulent transfers — i.e., transfers made without fair consideration when a debtor is insolvent.

To promote equal treatment of creditors, the US Congress has armed debtors with the power to bring suit to recover a variety of pre-bankruptcy transfers. Prominent among these is a debtor’s ability under Section 548 of the Bankruptcy Code to recover constructively fraudulent transfers — i.e., transfers made without fair consideration when a debtor is insolvent.

The U.S. Court of Appeals for the Fourth Circuit recently issued a decision that has the potential to have a major impact on how contracts that provide for physical delivery of commodities are treated under U.S. bankruptcy law.  

This alert has been prompted by a recent decision of the U.S. Court of Appeals that has a potentially huge impact on the treatment under U.S. bankruptcy law of contracts that entail a physical delivery of commodities. The decision is a positive development for those that had entered into a physically settled transaction with an entity which has subsequently become subject to a U.S. bankruptcy procedure as such transactions may qualify as a "swap agreement" and therefore fall within the "safe harbor" provisions of the U.S.