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Kaiser Steel Corp. v. Charles Schwab & Co.

913 F.2d 846 (1990)

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Kaiser Steel Corp. v. Charles Schwab & Co.

United States Court of Appeals for the Tenth Circuit

913 F.2d 846 (1990)

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 for $450,000 from Charles Schwab & Co. (Schwab) (defendant), a securities broker that held shares of Kaiser for its customers. In 1987 Kaiser filed for bankruptcy and sought to avoid the leveraged buyout, arguing that it was a fraudulent conveyance. Kaiser attempted to avoid and recover the payment it made to Schwab for its purchase of stock. Schwab filed a motion for summary judgment, arguing that the payment was exempt from avoidance under 11 U.S.C. § 546(e), a provision of the United States Bankruptcy Code that provided that a debtor may not avoid transfers that were settlement payments made to or by a securities broker in relation to a securities trade. The bankruptcy court denied Schwab’s motion. Schwab appealed. The district court granted summary judgment for Schwab, holding that the payment Kaiser made to Schwab in exchange for Kaiser stock was a settlement payment under § 546(e). Kaiser appealed.

Rule of Law

Issue

Holding and Reasoning (Anderson, J.)

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