Yesterday, the U.K. government published a report entitled "Developing effective resolution arrangements for investment banks" which sets forth, primarily in response to the September 2008 collapse of Lehman Brothers Holding, Inc. (in particular its U.K. arm, Lehman Brothers International (Europe)), the U.K.

The recent case of In re Tousa, Inc. (Official Committee of Unsecured Creditors of Tousa, Inc., v. Citicorp North America, Inc., Adv. Pro. No. 08-1435-JKO (Bankr. S.D. Fla., October 13, 2009)) has attracted considerable attention – and dread – in the banking and legal communities.

On February 11, 2011, the United States District Court for the Southern District of Florida reversed the controversial decision of the Bankruptcy Court in In re TOUSA that required a group of lenders to disgorge nearly a half billion dollars in repayment of indebtedness which the Bankruptcy Court found constituted a fraudulent transfer under Sections 548 and 550 of the Bankruptcy Code.

In a second decision of the United States District Court for the Southern District of Florida involving secured lenders to bankrupt homebuilder TOUSA, Inc., on March 4, 2011, Judge Adalberto Jordan affirmed the dismissal of fraudulent conveyance claims brought against the lenders on a revolving credit facility. In dismissing those claims, the Bankruptcy Court had emphasized that, because the revolving credit agreement was entered into, and the liens securing it were pledged, well before the company's alleged insolvency, they were immune from fraudulent conveyance attack.

We reported to you last month a significant development in the matter of In re TOUSA USA, when the United States District Court for the Southern District of Florida issued its opinion and order reversing the controversial holdings of the Bankruptcy Court in the TOUSA chapter 11 case as to the so-called “Transeastern Lenders,” a group of lenders who had previously been ordered to disgorge nearly ½ billion dollars received in repayment of indebtedness which the Court found constituted a fraudulent transfer under Sections 548 and 550 of the Bankruptcy Code.

On August 10, the FDIC in its capacity as receiver for Colonial Bank filed five lawsuits – three in Alabama state court, one in New York federal court, and one in California federal court – seeking $741 million in damages from a number of investment banks, including Bank of America Corp., JPMorgan Chase & Co., Citigroup, Inc., and others, for making allegedly false and misleading statements that induced Colonial Bank into buying mortgage-backed securities.

Every lender sincerely hopes that, even when its borrower is flat on the floor and seems down for the proverbial count, the borrower will still find the wherewithal to repay it. A lender often starts counting the days after it is repaid until the 90-day preference period (11 U.S.C. §547) has passed. The lender generally breathes a sigh of relief on the 91st day, confident that if its borrower files for bankruptcy, the money paid to the lender is safe from being clawed back by the Bankruptcy Court.

On May 15, 2012, the United States Court of Appeals for the Eleventh Circuit held that security interests and liens granted by subsidiaries of a borrower to refinance obligations owed to the borrower’s lenders constituted fraudulent transfers under section 548(a)(1) of the Bankruptcy Code in the borrower’s and subsidiaries’ bankruptcy cases.Senior Transeastern Lenders v. Official Committee of Unsecured Creditors (In re TOUSA, Inc.), 2012 WL 1673910 (11th Cir. 2012).

Dissatisfied with the ongoing multistate and federal efforts to reach a settlement agreement with major U.S. banks over unlawful foreclosure practices, Massachusetts Attorney General Martha Coakley indicated that her office was independently preparing to file several lawsuits. A number of U.S. states, along with the U.S. Department of Justice, have accused the five largest mortgage servicers, Bank of America Corp., Citigroup Inc., JPMorgan Chase & Co., Ally Financial and Wells Fargo & Co., of failing to follow proper foreclosure procedures.

On August 27, 2007, United States District Judge Shira Scheindlin held that Springfield Associates, an innocent transferee of a claim from Citigroup against Enron, was not subject to certain counterclaims and defenses so long as Springfield was a “purchaser” and not an “assignee” of the claim. See In re Enron Corp. v. Springfield Assocs. L.L.C., No. 07 Civ. 1957, 2007 U.S. Dist. LEXIS 63129 (S.D.N.Y. Aug. 27, 2007).