$800 Million Fraudulent Transfer Action Against Bank of America Dismissed
March 12, 2010
In the Mervyn's Chapter 11 the unsecured creditor's committee brought a fraudulent transfer action against Bank of America as trustee for the real estate trust established after the purchase of Mervyn's from Target by a group of private equity funds. The creditor's committee argued that Mervyn's was stripped of real estate assets as part of the buy-out for less than reasonably equivalent value so that the debt and liens of the trustee should be voided as fraudulent transfers.
Otterbourg, representing Bank of America, prevailed on a motion to dismiss the claims against Bank of America. The committee failed to establish that the Bank was a "subsequent transferee" as required by the Bankruptcy Code or that the Bank had constructive knowledge of the fraudulent transfer. The reasoning of the Bankruptcy Court for the District of Delaware is set out in its memorandum opinion.
