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March 2017 Archives

Ninth Circuit Holds Courts May Entertain Hypothetical Preference Actions Within Section 547(b)(5)'s Hypothetical Liquidation Analysis

In Schoenmann v. Bank of the West (In re Tenderloin Health), No. 14-17090, D.C. No. 4:13-cv-03992-JSW, the Ninth Circuit Court of Appeals reversed the district court's order affirming the bankruptcy court's summary judgment in favor of Bank of the West ("BOTW") in an adversary proceeding for avoidance of a preferential transfer brought by a Chapter 7 trustee ("Trustee"). Specifically, the Ninth Circuit held "that courts may entertain hypothetical preference actions within section 547(b)(5)'s hypothetical liquidation when such an inquiry is factually warranted, supported by appropriate evidence, and so long as the hypothetical preference action would not result in a direct conflict with another section of the Bankruptcy Code."

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