Bankruptcy
Author | International Law Group |
Pages | 42-43 |
Page 42
In 1976, Betty Irene French (the debtor), a resident of Maryland, bought a house in the Bahamas. At a Christmas party in 1981 in Maryland, she gave a deed to the property to her children, Randy Lee French and Donna Marie Shaka (the transferees). To avoid high local transfer taxes, however, the transferees did not immediately record the deed in the Bahamas. In the late 1990s, however, the debtor and her husband were running into financial problems; accordingly, in mid-2000, the transferees decided to record the deed in the Bahamas. In October 2000, Mrs. French's creditors filed an involuntary Chapter 7 bankruptcy petition against her inPage 43 Maryland. The bankruptcy court entered an Order for Relief in January 2001.
In August 2002, the bankruptcy trustee filed a proceeding against the transferees to avoid the transfer of the Bahamian property and to recover the property or its fair market value for the benefit of the estate. The trustee alleged that the debtor and the transferees had engaged in a constructively fraudulent transfer in breach of the Bankruptcy Code since the debtor had been insolvent at transfer time and had not received a reasonably equivalent value in return. See 11 U.S.C. ß 548(a)(1)(B)(2000).
The transferees moved to dismiss. Relying on the presumption against extraterritoriality, they argued that the court should not apply ß 548 to transfers of foreign property. The bankruptcy court denied the motion. The trustee then moved for summary judgment. The bankruptcy court granted it, and the district court confirmed. On the transferees' appeal, the U. S. Court of Appeals for the Fourth Circuit affirms.
The Court explains. "It is a longstanding principle of American law 'that legislation of Congress, unless a contrary intent appears, is meant to apply only within the territorial jurisdiction of the United States.'" [Slip op. 3 (quoting EEOC v. Arabian Am. Oil Co., 499 U.S. 244, 248 (1991))]. This presumption applies only when a party seeks to apply a U. S. statute to conduct that took place...
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