As we previously reported, in April 2015 Judge Jacqueline P. Cox (U.S. bankruptcy judge for the Northern District of Illinois) issued an opinion that broadly interpreted the safe harbor provisions of Bankruptcy Code Section 546(e) in the context of payments on loans securitized using real estate mortgage investment conduit (REMIC) trusts.

In short, Judge Cox held that payments by the debtor to a bank that was the master servicer of a REMIC trust (which included a loan on which a debtor-affiliate was obligated) were protected by the Section 546(e) safe harbor because all elements of the statute were satisfied: (1) the payments were made to a financial institution; and (2) the payments were made in connection with a securities contract. The court held that full satisfaction of Section 546(e) warranted dismissing Count VI of the trustee’s complaint (the count for avoidance and turnover of the payments). Much of the April 2015 opinion’s analysis focused on whether the payments satisfied the second element: if the payments were made in connection with a securities contract.

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