May 11, 2015
Authored by: Mark Duedall
In what appears to be a case of first impression, the United States Bankruptcy Court for the Northern District of Illinois has concluded that payments to a master servicer of a commercial mortgage backed securitization (a “CMBS”) could not be avoided as either allegedly constructively fraudulent transfers or as allegedly preferential transfers because the securities contract “safe harbor” under section 546(e) of the Bankruptcy Code precluded such claims. Krol v. Key Bank Nat’l Ass’n. (In re MCK Millenium Centre Parking, LLC), 2015 Bankr. LEXIS 1432 (Bankr. N.D. Ill. Apr. 24, 2015). A Bryan Cave team, led by New York partner Larry Gottesman, represented the defendants.
The background of the decision is straightforward. The chapter 7 trustee of the debtor brought an adversary proceeding against Key Bank (“Key”), as master servicer, and the related CMBS trust, alleging that the debtor had made loan payments on a loan owed by the debtor’s