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Merit Management Group v. FTI Consulting (Argument Nov. 6, 2017)

MeritManagementvFTIConsulting

This case has been decided!

Two racetracks. One racing license. The failed merger leads to a bankruptcy dispute in the Supreme Court.

Valley View Downs and Bedford Downs, both racetracks in Pennsylvania, decided to merge instead of fighting over the one remaining harness-racing license in the state. They both wanted to build a “racino” (a racetrack plus casino).

 

 

Valley View Downs won the battle but lost the war.

Valley View acquired Bedford, but then was unable to secure the gambling license. It filed for bankruptcy.

Bankruptcy law is suspicious of certain transfers of property close to the bankruptcy filing.

Bankruptcy is about fairly distributing assets among creditors. It can’t have insiders making shady transactions to avoid the legal distribution plan. So there’s a legal provision that allows the trust to “avoid” a suspicious transaction.

In this case, Merit Management is trying to qualify for an exception to that rule.

The exception allows for brokers of suspicious transactions still to get paid. The policy is: just because A and B made a tricky deal doesn’t mean that the person in the middle (the X of an A-X-B transaction) shouldn’t get the transactional fee.

The Court will evaluate whether the text of the exception actually describes a different policy.

Can Merit Management, not just the deal’s broker, take advantage of the exception?

More information:

See this article by Ralph Brubaker for an in-depth discussion of the case and the relevant provision of bankruptcy law.

See this SCOTUSblog Argument Preview for more information on the case.

About the Author

Mariam Morshedi

Mariam Morshedi

Mariam Morshedi is the Founder and Executive Director of Subscript Law. Before starting Subscript Law, she practiced civil rights law for AARP Foundation, where she litigated housing, consumer and disability rights issues.

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