Valuing Tendered Shares in Fraudulent Transfer Cases

, New York Law Journal

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Arthur J. Steinberg and Gary A. Ritacco of King & Spalding write: Recently, courts have considered whether the §546(e) "safe harbor" applies to protect public shareholders in constructive fraudulent transfer litigation if the plaintiffs are creditors suing under state fraudulent transfer laws after the bankruptcy estate representative has declined to do so because of the §546(e) "safe harbor" provision. These cases, if upheld on appeal, will require the court to consider the proper result for the passive, tendering shareholder, who happened to be an investor in a company that did the LBO that ultimately failed.

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