Client Alert
Eleventh Circuit in TOUSA Reinstates Bankruptcy Court Ruling
May 21, 2012
BY RICHARD E. FARLEY, JESSE H. AUSTIN, III & JOHN F. HILSON
On May 15, 2012, the Court of Appeals for the Eleventh Circuit in In re TOUSA, Inc., Case No. 11-11071 (11th Cir. May 15, 2012), reversed the order of the United States District Court for the Southern District of Florida and reinstated the decision of the United States Bankruptcy Court for the Southern District of Florida. Specifically, the Eleventh Circuit held that: (i) the Bankruptcy Court did not clearly err in finding that certain subsidiaries of TOUSA did not receive reasonably equivalent value in exchange for granting liens to secure a new loan, the proceeds of which were used to repay obligations of their parent TOUSA Inc.; and (ii) the Bankruptcy Court correctly concluded that the lenders that were repaid with the proceeds of a new loan secured with the liens were entities for whose benefit the liens were granted such that the repayment could be recovered from the lenders under section 550 of the Bankruptcy Code.