Enron Brief Citing In Re Hamilton Taft

William J. Perlstein (WP 1073) Craig Goldblatt (CG 6793) Jonathan E. Paikin (JP 7599) Caroline Rogus (CR 6931) Wll..MER CUTIER PICKERING HALE AND DORR LLP 2445 M Street, N.W. Washington, DC 20037 Telephone: (202) 663-6000 Facsimile: (202) 663-6363 Attorneys for Amici Curiae International Swaps and Derivatives Association, Inc., Securities Industry Association, and The Bond Market Association ~TEDSTATESBANKRUPTCYCOURT

SOUTHERN DISTRICT OF NEW YORK

------------------------------------------------------------- x Chapter 11 Case No. 01-16034 (AJG)

Inre ENRON CORP., et aI.,

Jointly Administered

Debtors.

------------------------------------------------------------- x

ENRON CORP.,

Plaintiff,

Adv. Pro. No. 03-93373 (AJG)

v. UBSAG and

UBS SECURITIES LLC, flkJa UBS WARBURG LLC (alkla UBS WARBURG), Defendants.

------------------------------------------------------------- x MEMORANDUM OF LAW OF INTERNATIONAL SWAPS AND DERIVATIVES ASSOCIATION, INC., SECURITIES INDUSTRY ASSOCIATION, AND THE BOND MARKET ASSOCIATION AS AMICI CURIAE IN SUPPORT OF DEFENDANTS' MOTION FOR SUM:MARY JUDGMENT

TABLE OF CONTENTS

Page TABLE OF AUTHORITIES

ii

PRELIMINARY STATEMENT

1

STArnMENTOFIN'TEREST

2

STATUTORY, FACTUAL AND PROCEDURAL BACKGROUND

5

I.

SECTION 546(e) PRornCTS PAYMENTS MADE UNDER OTC EQUITY DERIVATIVES CONTRACTS FROM PREFERENCE AND FRAUDULENT CONVEYANCE ACTIONS

The Tra.r;Isfers Are Protected "Settlement Payments" In The Forward Contracts Trade

13

The Transfers Are Protected "Settlement Payments" In The Securities Trade

15

SECTION 546(g) PROTECTS PAYMENTS MADE IN CONNECTION WITH OTC DERIVATIVES TRANSACTIONS FROM PREFERENCE AND FRAUDULENT CONVEYANCE ACTIONS

17

STATE LAW CLAIMS THAT CIRCUMVENT THE PROTECTIONS AFFORDED TO THE FINANCIAL MARKETS BY THE FEDERAL BANKRUPTCY LAWS ARE PREEMPTED

23

A. B. ll.

m.

12

CONCLUSION

27

,

I

TABLE OF AUTHORITmS CASES Page(s)

Bessette v. Avco Financial Services, Inc., 230 F.3d 439 (lst Crr. 2000)

25

Bevill, Bresler & Schulman Asset Management Corp. v. Spencer Savings & Loan Ass'n, 878 F.2d 742 (3d Cir. 1989)

7,8,16

CentulY Glove, Inc. v. Iselin (In re Century Glove), 151 B.R. 327 (Bankr. D. Del. 1993)

25

Cipollone v. Liggett Group, Inc., 505 U.S. 504 (1992)

25

Cox v. Zale Delaware. Inc., 239 F.3d 910 (7th Cir. 2001)

25

Curtoll v. Port Authority, 183 F. Supp. 2d 664 (S.D.N.Y. 2002)

24

Diamante v. Solomon & Solomon, P.C., No. 1:99CV1339 (FJSIDRH), 2001 WL 1217226 (N.D.N.Y. Sept. 18, 2001)

25

In re Comark, 971 F.2d 322 (9th Cir. 1992)

17

In re Hamilton Taft & Co., 176 B.R. 895 (Bankr. N.D. Cal.), ajfJd, 196 B.R. 532 (N.D. Cal. 1995), affd, 114 F.3d 991 (9th Cir. 1997) In re Hechinger Investment Co. ofDelaware, 274 B.R. 71 (D. Del. 2002) In re Interbulk, Ltd., 240 B.R. 195 (Bankr. S.D.N.Y. 1999)

15, 18 16-17, 24,25,26 9,20

III re Nation, 236 B.R. 150 (S.D.N.V. 1999)

24

In re Olympic Natural Gas Co., 294 F.3d 737 (5th Cir. 2002)

14

In re Resorts International. Inc., 181 F.3d 505 (3d Crr. 1999)

16

International Shoe Co. v. Pinkus, 278 U.S. 261 (1929)

23

Kaiser Steel Corp. v. Charles Schwab & Co., 913 F.2d 846 (lOth Cir. 1990)

6, 16, 17

Kaiser Steel Corp. v. Pearl Brewing Co., 952 F.2d 1230 (10th Cir. 1991)

16

MSR Exploration, Ltd. v. Meridian Oil, Inc., 74 F.3d 910 (9th Crr. 1996)

25

Penn Terra Ltd. v. Department ofEnvironmental Resources, 733 F.2d 267 (3d Cir. 1984)

24

Pereira v. First North American National Bank, 223 B.R. 28 (N.D. Ga. 1998)

25

ii

Pertuso v. Ford Motor Credit Co., 233 F.3d 417 (6th Cir. 2000)

25

Thrifty Oil Co. v. Bank ofAmerica National Trust & Savings Ass tn, 322 F.3d 1039 (9th CiT. 2003)

9

SEC NO-ACTION LETTERS Chicago Bd. Options Exchange, SEC No-Action Letter, Fed. Sec. L. Rep. CJI 79,665 (Feb. 22, 1991)

20

Goldman, Sachs & Co., SEC No-Action Letter, 2003 WL 22358822 (Oct. 9, 2003)

20

Goldman, Sachs & Co., SEC No-Action Letter, 1999 WL 1244018 (Dec. 20, 1999)

20

4

•••••••••••••••••••••••••••••••••••••••••

STATUTES 7 U.S.C. § la(4)

14

11 U.S.C. § 101(25)

14, 15

11 U.S.C. § 101(51A)

13

11 U.S.C. § lOl(53B)

18, 20, 21

11 U.S.C. § 546(e)

passim

11 U.S.C. § 546(g)

passim

11 U.S.C. § 547

5

11 U.S.C. § 548

5, 13

11 U.S.C. § 550

5

11 U.S.C. § 741(8)

16

11 U.S.C. § 761(8)

14

15 U.S.C. § 78 et seq

6,21

1982 Amendments to Bankruptcy Code, Pub. L. No. 97-222, 96 Stat. 235

7, 13

iii

William J. Perlstein (WP 1073) Craig Goldblatt (CG 6793) Jonathan E. Pallin (JP 7599) Caroline Rogus (CR 6931) WlLMER CUTLER PICKERING LLP 2445 M Stree~ N.W. Washington, DC 20037 Telephone: (202) 663-6000 Facsimile: (202) 663-6363 Attorneys for Amici Curiae International Swaps and Derivatives Association, Inc., Securities Industry Association, and The Bond Market Association ~TEDSTATESBANKRUPTCYCOURT

SOUTHERN DISTRICT OF NEW YORK -------------------------------------------------------------

l(

Chapter 11 Case No. 01-16034 (AJG)

lore

ENRON CORP., et al., Jointly Administered

Debtors.

------------------------------------------------------------- ~ ENRON CORP.,

Adv. No. 03-93383 (AJG) Plaintiff,

v. LEHMAN BROTHERS FINANCE S.A., et aI., Defendants.

------------------------------------------------------------- x MEMORANDUM OF LAW OF INTERNATIONAL SWAPS AND DERIVATIVES ASSOCIATION, INC., SECURITIES INDUSTRY ASSOCIATION, AND THE BOND MARKET ASSOCIATION AS Al\flCUS CURIAE IN SUPPORT OF DISMISSAL OF ADVERSARY PROCEEDING

1982 Amendments to Bankruptcy Code, Pub. L. No. 97-222, 96 Stat. 235 1984 Amendments to Bankruptcy Code, Pub. L. No. 98-353, 98 Stat. 2706

7, 13

9

1990 Bankruptcy: Swap Agreements and Forward Contracts, Pub. L. No. 101311,104 Stat. 267

11

Commodity Futures Modernization Act of 2000, Pub. L. No. 106-554, 114 Stat. 2763

21-22

LEGISLATIVE MATERIALS H.R. Rep. No. 97-420

(1982)~

available at 1982 WL 25042

H.R. Rep. No. 101-484 (1990), available at 1990 WL 92539 S. Rep. No. 98-65 (1983)

7, 13, 16

passim 8, 9

S. Rep. No. 101-285 (1990), available at 1990 WL 259288 Bankruptcy Treatment of Swap Agreements and Fo1t1 Jard Contracts: Hearing on H.R. 2057 and H.R. 1754 Before the Subcommittee on Economic and Commercial Law of the House Committee on the Judiciary, 101st Congo 1 (1990) Financial Contract Netting Improvement Act of2001 , H.R. 11, 107th Congo (2001) ; Interest Swap: Hearing on S. 396 Before the Subcommittee on Courts and Administrative Practices ofthe Senate Committee on the Judiciary, 10Ist Congo 1 (1989)

passim

6 22

10, 11, 19

136 Congo Rec. S7535 (1990)

6, 12

136 Congo Rec. S7536 (1990)

11, 18

MISCELLANEOUS 2000 Enron Corp. 10-K, available at http://www.sec.gov/Archives/edgar/datal1024401/000102440101500010/ OOOl024401-01-500010.txt

12

Collier on Bankruptcy «]I 560.02 (15th ed. 2003)

20

iv

Pertuso v. Ford Motor Credit Co., 233 F.3d 417 (6th Cir. 2000) Thrifty Oil Co. v. Bank ofAmerica National Trust & Savings Ass'n, 322 F.3d 1039 (9th Crr. 2003)

25-26

9, 10

SEC NO-ACTION LETTERS Chicago Bd. Options Exchange. SEC No-Action Letter, Fed. Sec. L. Rep. <][ 79,665 (Feb. 22, 1991)

20, 21

Goldman, Sachs & Co., SEC No-Action Letter, 2003 WL 22358822 (Oct. 9, 2003)

20

Goldman, Sachs & Co., SEC No-Action Letter, 1999 WL 1244018 (Dec. 20, 1999)

20

STATUTES 7 U.S.C. § la(4)

15

11 U.S.C. § 101(25)

14, 15, 16

11 U.S.C. § 101(51A)

14

11 U.S.C. § lOI(53B)

passil11

11 U.S.C. § 546(e)

passim

11 U.S.C. § 546(g)

passiln

11 U.S.C. § 547

5 ~

11 U.S.C. § 548 11 U.S.C. § 548(a)(I)(A)

5 13

11 U.S.C. § 550

5

11 U.S.C. § 741(8)

17

11 U.S.C. § 761(8)

15

15 U.S.C. § 78 et seq

6, 22

iii