In re Kaiser Steel

952 F.2d 1230 (1991)

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In re Kaiser Steel

United States Court of Appeals for the Tenth Circuit
952 F.2d 1230 (1991)

  • Written by Heather Whittemore, JD

Facts

In 1984 Kaiser Steel Corporation (Kaiser) (plaintiff) was acquired by outside investors through a leveraged buyout. As part of the leveraged buyout, Kaiser purchased shares of its stock from several securities brokers that held shares of Kaiser for the brokers’ customers. The customers were beneficial shareholders of Kaiser stock, meaning that they had ownership interest in the stock even though the stock was held in the name of the brokers. When Kaiser purchased its stock from the securities brokers, it paid the brokers directly, and the brokers paid the beneficial shareholders. In 1987 Kaiser filed for bankruptcy and sought to avoid the leveraged buyout, arguing that it and the related payments were fraudulent conveyances. Kaiser attempted to avoid and recover the payments that were made to the beneficial shareholders in connection with the leveraged buyout. A group of beneficial shareholders (the defendant shareholders) (defendants) filed a motion for summary judgment, arguing that the payments were settlement payments that were exempt from avoidance under 11 U.S.C. § 546(e). Section 546(e) provided that settlement payments made to or by a securities broker in connection with a securities trade were exempt from avoidance. Kaiser opposed the motion, arguing that the payments to the defendant shareholders were not settlement payments under § 546(e), because the payments were not made to the brokers in direct connection with a securities trade. The district court granted the motion for summary judgment, holding that the payments were exempt under § 546(e). Kaiser appealed.

Rule of Law

Issue

Holding and Reasoning (Anderson, J.)

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