Supreme Court Won’t Settle Circuit Split on Transfer to a Debtor’s Own Account

October 10, 2017

This morning, the Supreme Court declined to resolve a circuit split and rule on whether a transfer into someone’s own bank account qualifies as a “transfer” to lay the foundation for a fraudulent transfer suit.

In Ivey v. First Citizens Bank & Trust Co. (In re Whitley), 848 F.3d 205 (4th Cir. Jan. 31, 2017), the Fourth Circuit held that a deposit into one’s own bank account is not a “transfer” within the meaning of Section 101(54) and therefore provides no basis for a fraudulent transfer with actual intent to hinder or delay creditors under Section 548(a)(1)(A).

In issuing its ruling, the Fourth Circuit acknowledged the split of circuits by rejecting contrary holdings from the Ninth and Tenth Circuits. Soon after Ivey, the Ninth Circuit addressed the same issue in Schoenmann v. Bank of the West (In re Tenderloin Health), 849 F.3d 1231 (9th Cir. March 7, 2017), rejected the Fourth Circuit’s analysis, and adhered to its own prior authority.

In Ivey, the trustee filed a petition for certiorari in early May. The bank responded in August, contending there is no circuit split and submitting that the Fourth Circuit correctly decided the case. Granting certiorari and reversing the Fourth Circuit would have put the Supreme Court in the uncomfortable position of exposing a bank to liability for a Ponzi scheme perpetrated by one of its depositors.

Without giving reasons, as is the practice, the Supreme Court denied thecertiorari petition, along with hundreds of others, on Oct. 10.

To reads the Fourth Circuit opinion, click here.

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