Southern District of New York Judge Holds That Bankruptcy Courts Cannot Decide Fraudulent Transfer Actions

17 May 2012
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Key takeaways:

  • In Kirchner v. Agoglia, decided on May 9, 2012, the District Court for the Southern District of New York held that bankruptcy courts may not enter final judgment in fraudulent transfer actions – whether pursued under state law or the Bankruptcy Code.
  • The decision in Kirchner may also apply to other “private rights” actions, such as contract damages claims, unless they are resolved in the course of determining creditors’ proofs of claims (or the parties consent).
  • Bankruptcy courts may continue to hear such disputes and issue a report and recommendations to the district court for final judgment. While that offers a measure of continuity, the two-court process is likely to add uncertainty and delay to resolution of fraudulent conveyance actions.