19-3049-cv; 19-449-cv

In re: Tribune Co. Fraudulent Conv. Litig.

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

August Term 2020

(Argued: August 24, 2020 Decided: August 20, 2021)

Docket Nos. 19-3049-cv; 19-449-cv

IN RE: TRIBUNE COMPANY FRAUDULENT CONVEYANCE LITIGATION 

MARC S. KIRSCHNER, AS LITIGATION TRUSTEE FOR THE TRIBUNE LITIGATION TRUST,

Plaintiff-Appellant,

- against -

LARGE SHAREHOLDERS, FINANCIAL ADVISORS, FINANCIAL INSTITUTION HOLDERS,

FINANCIAL INSTITUTION CONDUITS, PENSION FUNDS, INDIVIDUAL BENEFICIAL 

OWNERS, MUTUAL FUNDS,

Defendants-Appellees.
- 2 -

MARC S. KIRSCHNER, AS LITIGATION TRUSTEE FOR THE TRIBUNE LITIGATION TRUST,

Plaintiff-Appellant,

- against -

CITIGROUP GLOBAL MARKETS INC., MERRILL LYNCH, PIERCE, FENNER & SMITH 

INCORPORATED,

Defendants-Appellees.

ON APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF NEW YORK

Before:

RAGGI and CHIN, Circuit Judges.*

Appeals from a judgment and orders of the United States District 

Court for the Southern District of New York (Sullivan and Cote, JJ.) dismissing 

claims arising out of the leveraged buyout of the Tribune Company in 2007 and

its bankruptcy filing in 2008. The bankruptcy litigation trustee contends on 

* Our late colleague Judge Ralph K. Winter was originally assigned to this panel. 

The two remaining members of the panel, who are in agreement, have decided this case 

in accordance with Second Circuit Internal Operating Procedure E(b). See 28 U.S.C. 

§ 46(d); United States v. Desimone, 140 F.3d 457, 458–59 (2d Cir. 1998).
- 3 -

appeal that the district court erred in dismissing his claims against the Tribune 

Company's shareholders and financial advisors for fraudulent transfer, breach of 

fiduciary duty, and related causes of action. The bankruptcy litigation trustee 

also contends that the district court erred in denying leave to amend his

complaint. 

AFFIRMED IN PART, VACATED IN PART, AND REMANDED.

LAWRENCE S. ROBBINS (Roy T. Englert, Jr., on the brief),

Robbins, Russell, Englert, Orseck, Untereiner & 

Sauber LLP, Washington, DC; Robert J. Lack, 

Jeffrey R. Wang, Friedman Kaplan Seiler & 

Adelman LLP, New York, New York; David M. 

Zensky, Akin Gump Strauss Hauer & Feld LLP, 

New York, New York, for Plaintiff-Appellant.

DOUGLAS HALLWARD-DRIEMEIR, (Jonathan FerenceBurke on the brief), Ropes & Gray LLP, 

Washington, DC; Andrew Devore, Joshua Sturm, 

Ropes & Gray LLP, Boston, MA; Philip D. Anker, 

Alan E. Schoenfeld, Ryan Chabot, Wilmer Cutler 

Pickering Hale & Dorr LLP, New York, New 

York; Joel W. Millar, Wilmer Cutler Pickering 

Hale & Dorr LLP, Washington, DC; Matthew L. 

Fornshell, Ice Miller LLP, Columbus, Ohio; 

Andrew J. Entwistle, Entwistle & Cappucci LLP, 

New York, New York; Mark A. Neubauer, 

Carlton Fields, LLP, Los Angeles, California; P. 

Sabin Willett, Michael C. D'Agostino, Morgan, 

Lewis & Bockius LLP, Boston, Massachusetts; 
- 4 -

Michael S. Doluisio, Dechert LLP, Philadelphia, 

Pennyslvania, for Defendants-Appellees Pension

Funds, Financial Institution Holders, Individual 

Beneficial Owners, Mutual Funds, Certain Large 

Shareholders, and Financial Institution Conduits.

ERIN E. MURPHY, Kirkland & Ellis LLP, Washington, 

DC; Gabor Balassa, Brian Borchard, Kirkland & 

Ellis LLP, Chicago, Illinois; Oscar Garza, Douglas 

G. Levin, Gibson, Dunn & Crutcher LLP, Irvine, 

California; Matthew D. McGill, Gibson, Dunn & 

Crutcher LLP, Washington, D.C., for DefendantsAppellees Large Shareholders.

KANNON K. SHANMUGAM (Masha G. Hansford, Joel S. 

Johnson, on the brief), Paul, Weiss, Rifkind, 

Wharton & Garrison LLP, Washington, D.C.; 

Andrew G. Gordon, Kira A. Davis, Paul, Weiss, 

Rifkind, Wharton & Garrison LLP, New York, 

New York; Daniel L. Cantor, Daniel S. Shamah, 

O'Melveny & Myers LLP, New York, New York,

for Defendants-Appellees Citigroup Global Markets, 

Inc. and Merrill Lynch, Pierce, Fenner & Snith Inc.

JONATHAN D. POLKES (Gregory Silbert, Stacy Nettleton, 

on the brief), Weil, Gotshal & Manges LLP, New 

York, New York; George E. Mastoris, Winston & 

Strawn LLP, New York, New York, for 

Defendants-Appellees Financial Advisors.
- 5 -

CHIN, Circuit Judge:

In 2007, the Tribune Company ("Tribune"), then-publicly traded, 

executed a leveraged buyout (the "LBO") to go private. Less than a year later, 

Tribune filed for Chapter 11 bankruptcy. Plaintiff-appellant Marc Kirschner, the 

bankruptcy litigation trustee (the "Trustee"), brought fraudulent conveyance and 

other claims on behalf of creditors against shareholders who sold their stock in 

the LBO and against the financial advisors that helped Tribune navigate and 

complete the LBO. In several orders and decisions, the district court dismissed 

the Trustee's claims for failure to state a claim pursuant to Rule 12(b)(6) of the 

Federal Rules of Civil Procedure.

For the reasons set forth below, we AFFIRM in part, VACATE in 

part, and REMAND for further proceedings. 
- 6 -

BACKGROUND

I. The Facts

The facts alleged in the operative complaints are assumed to be true

for purposes of this appeal.2

Prior to its bankruptcy in 2008, Tribune was a media company that 

owned numerous radio and television stations and major national newspapers, 

including The Chicago Tribune, The Los Angeles Times, and The Baltimore Sun. In 

2005, the newspaper publishing industry faced severe decline and, by 2006, 

Tribune, which derived approximately 75% of its total revenues from such 

publishing, started faltering financially. In September 2006, Tribune's board of 

directors (the "Board") created a special committee (the "Special Committee") to 

consider ways to return value to Tribune's shareholders. The Special Committee 

was comprised of all seven of the Board's independent directors (the 

"Independent Directors"). 

2 In Appeal No. 19-3049, the operative complaint is the Fifth Amended Complaint 

in No. 12-CV-2652, referred to by the district court as the FitzSimons action. In Appeal 

No. 19-449, the operative complaint is the First Amended Complaint in No. 12-CV-6055, 

referred to by the district court as the Citigroup action.
- 7 -

A. Tribune Retains Advisors

Before the formation of the Special Committee, the Board hired two 

financial advisors, defendant-appellee Merrill, Lynch, Pierce, Fenner, and Smith, 

Inc. ("Merrill Lynch") on October 17, 2005 and defendant-appellee Citigroup 

Global Markets, Inc. ("Citigroup") on October 26, 2005, to conduct a strategic 

review and to recommend possible responses to the ongoing changes in the 

media industry. Both Merrill Lynch and Citigroup signed engagement letters, 

which promised each a "Success Fee" of $12.5 million if a "Strategic Transaction" 

was completed. The engagement letters also allowed each firm to play a role in 

helping to finance any such "Strategic Transaction," despite the potential conflict 

of interest inherent in the firms' distinct roles in any such deal. The engagement 

letters further specified that neither Merrill Lynch nor Citigroup was a fiduciary. 

On October 17, 2006, the Special Committee hired Morgan Stanley & 

Co. LLC f/k/a Morgan Stanley & Co. Inc. ("Morgan Stanley") to serve as its 

independent financial advisor. Morgan Stanley's engagement letter specified 

that the firm owed no fiduciary duty to Tribune. 
- 8 -

B. Proposed LBO

In early 2007, Sam Zell, an investor, proposed to take Tribune 

private. At this time, defendants-appellees Chandler Trust No. 1, Chandler Trust 

No. 2, and certain Chandler sub-trusts (collectively, the "Chandler Trusts") held 

approximately 20% of Tribune's publicly-held shares. The Robert R. McCormick 

Foundation and the Cantigny Foundation (collectively, the "Foundations") held 

another 13% of shares. The Special Committee sought the views of the Chandler 

Trusts and the Foundations (together, the "Large Shareholders") on Zell's 

proposal. Concerned that Tribune's stock price would fall before they could sell 

their shares, the Large Shareholders indicated that they would only vote for a

two-step LBO that allowed them to cash out during the first step. In response, 

Zell suggested a two-step LBO, in which, at Step One, Tribune would borrow 

money to buy back roughly half of its shares and, at Step Two, Tribune would 

borrow more money to purchase all remaining shares. Tribune would then 

merge with a specially created shell corporation. The new entity would become

an S Corporation, resulting in nearly $1 billion in anticipated tax savings. In 

considering whether to approve the LBO, the Board consulted Citigroup and 

Merrill Lynch. 
- 9 -

To secure financing for the LBO, Tribune needed an opinion stating 

that it would be solvent after each step of the proposed LBO. On February 13, 

2007, the Board hired Duff & Phelps to provide such a solvency opinion. Toward 

that end, Tribune gave Duff & Phelps financial projections predicting that 

Tribune would fare better in the second half of 2007 as compared to the same 

period from the year prior (the "February Projections"). These figures were 

created by Tribune's management team, which, according to the Trustee, had a 

conflict of interest because its members stood to cash out Tribune shares worth 

$36 million and reap other gains if an LBO were executed. 

After conducting its analysis, Duff & Phelps concluded it could not 

provide a solvency opinion without considering the $1 billion in tax savings that 

Tribune expected at Step Two. Duff & Phelps, however, also determined that 

considering such tax savings in a solvency opinion was not appropriate. 

Accordingly, on April 1, 2007, Duff & Phelps instead provided a "viability 

opinion," which concluded that the fair market value of Tribune's assets would 

exceed its liabilities after the close of the LBO. 

The same day, Morgan Stanley and Merrill Lynch issued fairness 

opinions that the price to be paid for Tribune's stock was fair. These opinions 
- 10 -

were filed with the SEC as proxy statements. Also, on April 1, 2007, the Special 

Committee unanimously voted to recommend the two-step LBO, which the 

Board ultimately approved. 

C. Implementation of LBO

Still in need of a solvency opinion to secure financing for the 

approved LBO, Tribune approached Houlihan Lokey, which declined, on March 

29, 2007, to bid for the engagement. On April 11, 2007, Tribune retained 

Valuation Research Company ("VRC") to provide two solvency opinions, one for 

Step One and one for Step Two. To secure the engagement, VRC, "a virtually 

unknown firm," agreed to use a non-standard approach in formulating its 

solvency opinions. 3049 Appellant's Br. at 12–13.3 VRC charged Tribune $1.5 

million -- VRC's highest fee ever for such an engagement -- to issue the solvency 

opinions. 

On May 24, 2007, VRC issued an opinion that Tribune would be 

solvent after completing Step One. According to the Trustee, however, after 

3 References to "3049 Appellant's Br." and "449 Appellant's Br." refer to the 

Trustee's briefs in Appeal Nos. 19-3049 and 19-449, respectively.
- 11 -

VRC issued this solvency opinion, Tribune's management team realized that the 

February Projections, upon which VRC's opinion was based, were no longer an 

accurate forecast of Tribune's 2007 second half performance. No one alerted 

VRC that Tribune was unlikely to meet the February Projections. Indeed, the 

Trustee alleges that Citigroup and Merrill Lynch reviewed VRC's solvency 

analysis but "failed to fulfill their responsibilities as 'gatekeepers' retained to 

objectively analyze the LBO." 449 Appellant's Br. at 8. 

Despite the issue with VRC's solvency opinion, Tribune delivered it

to the financing banks on June 4, 2007. That same day, Step One closed. Tribune 

borrowed $7 billion to pay off its existing bank debt and to complete a tender 

offer, buying back just over half of its publicly held shares. The Large 

Shareholders sold all their shares, and the members of the Board appointed by 

those shareholders resigned. After Step One, Tribune issued a proxy statement, 

which explained that while the LBO was in the company's best interest, it was 

risky and might not create the anticipated value. 

In October 2007, management again updated its financial projections 

(the "October Projections") in preparation for Step Two. The October Projections 
- 12 -

still forecasted that Tribune's performance would improve, but not as quickly as 

the February Projections had predicted.

Even with the October Projections, VRC was reluctant to author a 

second solvency opinion because it did not appear that Tribune would be able to 

repay its debts without refinancing its existing debts. Tribune management 

represented to VRC that Morgan Stanley -- the Special Committee's financial 

advisor -- believed that Tribune would be able to refinance its debts, even though 

Morgan Stanley had not drawn that conclusion. On December 18, 2007, VRC 

issued a solvency opinion stating that Tribune would be solvent after Step Two. 

The Board's retained financial advisors did not agree with VRC's 

second solvency opinion. In fact, analyses from Citigroup and Merrill Lynch

showed that, at the close of Step Two, Tribune would be insolvent by more than 

$1.4 billion and $1.5 billion respectively, but neither advisor tried to stop the 

transaction. On December 20, 2007, Step Two closed, and Tribune borrowed an 

additional $3.7 billion, which it used to buy back its remaining publicly held 

shares.

After the close of Step Two, Tribune had roughly $13 billion in debt. 

Tribune's directors and officers received approximately $107 million from selling 
- 13 -

their stock and from bonuses. Citigroup and Merrill Lynch were each paid their 

$12.5 million success fee because they helped effectuate a "Strategic Transaction." 

A group of pension funds (the "Pension Funds"), who are defendants-appellees 

in this case, also received cash proceeds in connection with the LBO. 

II. Procedural History

On December 8, 2008 -- less than one year after Step Two closed --

Tribune filed for Chapter 11 bankruptcy in Delaware. Claims were eventually 

filed in the Delaware Bankruptcy Court on behalf of creditors, including for 

fraudulent conveyance. Tribune emerged from bankruptcy in 2012; pursuant to 

Tribune's plan of reorganization, the claims were transferred to the Tribune 

Litigation Trust, and the Trustee was appointed to pursue the claims on behalf of 

Tribune's creditors. 

In the meantime, some seventy-four federal and state lawsuits 

asserting fraudulent conveyance and related claims were filed around the 

country by Tribune's creditors. Eventually, the Judicial Panel on Multidistrict 

Litigation transferred the bankruptcy claims as well as the federal and state 

actions to the Southern District of New York, where they were consolidated on 

the basis that the claims all arose out of the LBO and Tribune's 2008 Chapter 11 
- 14 -

bankruptcy filing. See In re: Tribune Co. Fraudulent Conv. Litig., 831 F. Supp. 2d 

1371, 1372 (J.P.M.L. 2011). 

On September 23, 2013, the district court (Sullivan, J.) dismissed 

several state law constructive fraudulent conveyance claims that were brought 

against Tribune. The parties appealed, and on March 29, 2016, this Court 

affirmed the district court's dismissal of the state law fraudulent conveyance 

claims. See In re Tribune Co. Fraudulent Conv. Litig., 818 F.3d 98, 105 (2d Cir. 2016)

("Tribune I"). After further proceedings in this Court and the Supreme Court, we 

issued an amended opinion on December 19, 2019, affirming the district court's 

dismissal of the state law constructive fraudulent conveyance claims on the basis 

that these claims were preempted by section 546(e) of the Bankruptcy Code, 

which provides that a trustee may not avoid a transfer made by or to a "financial 

institution" in connection with "a securities contract." In re Tribune Co. Fraudulent 

Conv. Litig., 946 F.3d 66, 78, 96 (2d Cir. 2019) ("Tribune II").4

4 On July 22, 2016, this Court denied rehearing en banc, and our mandate issued on 

August 1, 2016. On September 9, 2016, the Trustee petitioned for certiorari to the 

Supreme Court. In April 2018, the Supreme Court advised the parties that their petition 
- 15 -

In the meantime, the district court proceeded to consider defendants' 

motions to dismiss the remaining claims. On January 6, 2017, the district court 

(Sullivan, J.) dismissed the Trustee's intentional fraudulent conveyance claims

with prejudice because it found that the complaint failed to allege that Tribune 

had the actual intent to defraud its creditors when it bought back shares from 

shareholders at both steps of the LBO. In particular, the district court concluded

that the intent of the Tribune officers who created the February and October 

Projections could not be attributed to the Special Committee, which approved the 

LBO. The district court also declined to grant the Trustee leave to amend its 

complaint in the FitzSimons action, "without prejudice to renewal in the event of 

an intervening change in the law." 3049 S. App'x at 28.

On November 30, 2018, the district court (Sullivan, J.) dismissed the 

Trustee's state law claims for breach of fiduciary duty asserted in the FitzSimons

for certiorari as to Tribune I would be deferred to allow this Court to consider whether 

to recall the mandate in light of the Supreme Court's decision in Merit Mgmt. Grp., LP v. 

FTI Consulting, Inc., 138 S. Ct. 883, 892 (2018), which held, inter alia, that Section 546(e) 

does not protect transfers in which financial institutions served as mere conduits. See 

Deutsche Bank Tr. Co. Americas v. Robert R. McCormick Found., 138 S. Ct. 1162, 1163 (2018) 

(statement of Justices Kennedy and Thomas). As a result, this Court recalled its 

mandate and eventually issued Tribune II. 
- 16 -

Complaint and certain "tag-along" actions. In particular, the district court 

declined to collapse the two-step LBO into a unitary transaction, thereby 

concluding that (1) Tribune was solvent at Step One, and (2) the Large 

Shareholders were not liable at Step Two because they had relinquished their 

board seats and Tribune stock by that point. 

On December 1, 2018, the case was reassigned to Judge Cote. On 

January 23, 2019, the district court (Cote, J.) granted Citigroup and Merrill 

Lynch's motions to dismiss certain claims in the FitzSimons and Citigroup actions. 

As relevant here, the district court dismissed the aiding-and-abetting and 

professional malpractice claims under the in pari delicto doctrine and it dismissed 

the fraudulent conveyance claims on the ground that the advisory fees received 

did not constitute actual or constructive fraudulent conveyances. On April 23, 

2019, the district court denied the Trustee's request to amend his complaint in the 

FitzSimons action, denying leave to file what would have been a Sixth Amended 

Complaint. 

These appeals followed.
- 17 -

DISCUSSION

Three categories of claims are at issue: (1) intentional fraudulent 

conveyance claims against the shareholders based on the buy-back of their 

shares;(2) breach of fiduciary duty and aiding and abetting breach of fiduciary 

claims against the allegedly controlling shareholders; and (3) aiding and abetting 

breach of fiduciary duty, professional malpractice, intentional fraudulent 

conveyance, and constructive fraudulent conveyance claims against Citigroup, 

Merrill Lynch, Morgan Stanley, and VRC (collectively, the "Financial Advisors"). 

We discuss these claims in turn, as well as the district court's denial of leave to 

amend. 

We review de novo a district court's grant of a motion to dismiss 

under Rule 12(b)(6) for failure to state a claim, "accepting the complaint's factual 

allegations as true and drawing all reasonable inferences in the plaintiff's favor." 

Carpenters Pension Tr. Fund of St. Louis v. Barclays PLC, 750 F.3d 227, 232 (2d Cir. 

2014) (internal quotation marks omitted). "We review the district court's denial 

of leave to amend for abuse of discretion." Broidy Cap. Mgmt. LLC v. Benomar, 944 

F.3d 436, 447 (2d Cir. 2019) (internal quotation marks omitted). If, however, "the 

denial was based on futility, . . . we review that legal conclusion de novo." City of 
- 18 -

Pontiac Policemen's & Firemen's Ret. Sys. v. UBS AG, 752 F.3d 173, 188 (2d Cir. 

2014).

I. Intentional Fraudulent Conveyance Claims

We first consider whether the district court erred in dismissing the 

Trustee's intentional fraudulent transfer claims against the shareholders based on 

the buy-back of their shares. 

A. Applicable Law

The Bankruptcy Code allows a bankruptcy trustee to recover 

fraudulent transfers where a transfer has been made with "actual intent to 

hinder, delay, or defraud" creditors. 11 U.S.C. § 548(a)(1)(A). An intentional 

fraudulent conveyance claim must be pled with specificity, as required by Fed. R. 

Civ. P. 9(b). See In re Sharp Int'l Corp., 403 F.3d 43, 56 (2d Cir. 2005). The alleged 

fraud must relate to the specific payment or transfer the plaintiff is seeking to 

avoid, rather than to the overall course of business. See id. (differentiating 

between alleged fraud in obtaining funding from noteholders and subsequent 

payment of some proceeds to defendant). And by "actual intent," the statute 

contemplates intent "existing in fact or reality" and not merely the imputed intent 

that would suffice for a constructive fraudulent conveyance claim. Intel Corp. 
- 19 -

Inv. Pol'y Comm. v. Sulyma, 140 S. Ct. 768, 776 (2020) (holding, in context of 

ERISA, that "actual" means "existing in fact or reality," more than "potential, 

possible, virtual, conceivable, theoretical, hypothetical, or nominal") (citations 

and internal quotation marks omitted); compare 11 U.S.C. § 548(a)(1)(A) 

(intentional fraudulent conveyance) with id. § 548(a)(1)(B) (constructive 

fraudulent conveyance); see also United States v. Finkelstein, 229 F.3d 90, 95 (2d Cir. 

2000) ("[T]he should-have-known alternative connotes a concept more akin to 

negligence than to knowledge."). 

Because of the difficulties in proving intent to defraud, a pleader 

may rely on "badges of fraud," i.e., circumstances so commonly associated with 

fraudulent transfers that their presence gives rise to an inference of intent. In re

Kaiser, 722 F.2d 1574, 1582 (2d Cir. 1983). Courts have inferred intent to defraud 

from the "concealment of facts and false pretenses by the transferor," "reservation 

by [the transferor] of rights in the transferred property," the transferor's

"absconding with or secreting the proceeds of the transfer immediately after their 

receipt," "the existence of an unconscionable discrepancy between the value of 

property transferred and the consideration received therefor," the oppressed 

debtor's creation "of a closely-held corporation to receive the transfer of his 
- 20 -

property," as well as the oppressed debtor's transfer of property while insolvent. 

Id. (citation omitted); see also Sharp, 403 F.3d at 56.

A corporation can only act through its directors and officers, and we 

look to state law to determine who has the authority to act on behalf of a 

corporation (and therefore whose actions to review to see whether there was 

fraudulent intent or badges of fraud). See Burks v. Lasker, 441 U.S. 471, 478 (1979) 

("[T]he first place one must look to determine the powers of corporate directors is 

in the relevant State's corporation law."). Under Delaware law -- Tribune's state 

of incorporation -- only the board of directors (or a committee to which the board 

has delegated its authority) has the power to approve an extraordinary 

transaction such as a merger or consolidation. See Del. Gen. Corp. Law §§ 141(a),

(c), 160(a), 251(b). Here, the Board delegated its authority to approve a merger 

and redemption of Tribune's stock to the Special Committee, and thus the 

Trustee was required to plead allegations that gave rise to a strong inference that 

the Special Committee had the "actual intent to hinder, delay, or defraud" 

Tribune's creditors, as required by 11 U.S.C. § 548(a)(1)(A). 

The Trustee does not argue that the members of the Special 

Committee had "actual intent" to harm Tribune's creditors but instead contends
- 21 -

that Tribune's senior management had the necessary fraudulent intent, and that 

this intent must be imputed to the Special Committee. The issue of whether a 

company's officers' intent to defraud creditors can be imputed to an independent 

special committee for purposes of a fraudulent conveyance claim under the 

Bankruptcy Code is a question of first impression in this Circuit. The First 

Circuit has addressed the issue and applied a "control" test -- a court "may 

impute any fraudulent intent of [an actor] to the transferor . . . [if the actor] was 

in a position to control the disposition of [the transferor's] property." In re Roco 

Corp., 701 F.2d 978, 984 (1st Cir. 1983). The district court here applied the control 

test, holding that "this test appropriately accounts for the distinct roles played by 

directors and officers under corporate law, while also factoring in the power 

certain officers and other actors may exercise over the corporation's decision to 

consummate a transaction." 3049 S. App'x at 9. 

The Trustee argues that the district court erred in applying the 

control test, and that the correct standard is either a scope-of-employment 

agency standard or a "proximate cause" standard. We are not persuaded. In the 

circumstances here, we affirm the district court's use of a "control" test for 

imputation. We agree that for an intentional fraudulent transfer claim, which
- 22 -

requires "actual intent," a company's intent may be established only through the 

"actual intent" of the individuals "in a position to control the disposition of [the 

transferor's] property." Roco, 701 F.2d at 984; see also In re Lehman Bros. Holdings, 

Inc., 541 B.R. 551, 576 (S.D.N.Y. 2015) ("[T]he Court's analysis regarding 

imputation must turn on actual control of [the debtor].").5 

B. Application

The Trustee makes two arguments in support of his intentional 

fraudulent transfer claims. First, he argues that Tribune's senior management 

possessed actual intent to defraud, and that intent should be imputed to the 

Special Committee. Second, even assuming the imputation argument fails, the 

Trustee maintains that Independent Directors on the Special Committee had the 

required intent as demonstrated by "badges of fraud." 

5 In arguing for a lesser imputation standard, the Trustee relies heavily on Staub v. 

Proctor Hospital, 562 U.S. 411 (2011). That case, however, applied a "motivating factor" 

standard under the Uniformed Services Employment and Reemployment Rights Act, id.

at 417–18, and we are not persuaded that it carries much weight in a case requiring 

"actual intent" under the Bankruptcy Code.
- 23 -

1. Imputation of Intent

We conclude that the Trustee failed to plausibly allege that the intent 

of Tribune's senior management should be imputed to the Special Committee

because the Trustee failed to allege that Tribune's senior management controlled 

the transfer of the property in question. 

As discussed above, the Board created an independent Special 

Committee to evaluate the LBO. The Special Committee, in turn, hired Morgan 

Stanley to serve as its independent financial advisor. As the district court 

observed, the Trustee failed to allege that senior management inappropriately 

pressured the Independent Directors -- who included former senior officers of 

major corporations -- to approve the transactions or that senior management 

dominated the Special Committee.

The Trustee failed to allege any financial or personal ties between 

senior management and the Independent Directors that could have affected the 

impartiality of the Special Committee. And to the extent that the officers misled 

the Special Committee by presenting it with the February Projections and a 

flawed viability and solvency opinions, Morgan Stanley and the Special 

Committee itself checked these figures. Therefore, to impute the officers' intent 
- 24 -

onto the Special Committee, which was working independently with an outside 

financial advisor and independently reviewed opinions provided by Duff & 

Phelps and VRC, would stretch the "actual intent" requirement as set forth in

§ 548(a)(1)(A) to include the merely possible or conceivable or hypothetical as 

opposed to existing in fact and reality. 

2. The Badges of Fraud

On appeal, the Trustee contends that five of the traditional "badges 

of fraud" weigh in favor of finding actual intent -- (1) lack of consideration for the 

shareholder transfers; (2) Tribune's financial condition; (3) the relationship 

among the parties; (4) the "pattern of transactions"; and (5) the "general 

chronology" of the events. 3049 Appellant's Br. at 37–38. While some of these 

factors arguably weigh in favor of the Trustee, in the end we conclude that the 

district court correctly held that the Trustee failed to plead "badges of fraud" 

sufficient to raise a strong inference of actual fraudulent intent on the part of the 

Special Committee. See Kaiser, 722 F.2d at 1582–83. 

The Trustee's assertion that Independent Directors stood to earn 

$6 million for selling their shares if they approved the LBO is insufficient to 

satisfy the stringent pleading standard of Rule 9(b). First, it would be 
- 25 -

unreasonable to assume actual fraudulent intent whenever the members of a 

board of directors (or a committee created by that board) stood to profit from a

transaction they recommended or approved. See, e.g., Kalnit v. Eichler, 264 F.3d 

131, 139 (2d Cir. 2001) ("Motives that are generally possessed by most corporate 

directors and officers do not suffice [to demonstrate fraud]. . . . Insufficient 

motives, we have held, can include (1) the desire for the corporation to appear 

profitable and (2) the desire to keep stock prices high to increase officer 

compensation."). Second, the Independent Directors owned only a small fraction 

(0.08%) of Tribune's shares, and the Independent Directors' shares were sold at a 

price only slightly above the price at which Tribune stock had been trading. 

These assertions, even assuming they are true, do not give rise to a strong 

inference of actual fraudulent intent.

The Trustee's arguments that the Independent Directors "knew that 

Tribune was falling far short of projections and thus was unlikely to generate 

enough cash to service its debt" and the risky nature of the proposed LBO were 

indications of fraud are also unpersuasive. 3049 Appellant's Br. at 38. Even 

assuming the Independent Directors were wrong in believing that Tribune's 

financial condition would improve, their approval of a risky transaction when 
- 26 -

Tribune and other newspaper companies were struggling would arguably 

support a negligence or constructive fraud claim but not, in the circumstances 

here, an intentional fraudulent transfer claim. See, e.g., In re Lehman Bros. 

Holdings, Inc., 541 B.R. at 577 ("Indeed, there is nothing unlawful about a 

company transacting business during unusually difficult financial times in an 

attempt to prevent its own collapse. To find otherwise would place in question 

any contract executed during a financial downturn and invite upheaval in the 

financial markets."). Moreover, Tribune's contemporaneous public filings 

warned that its projections could fall short, and the Independent Directors had 

an obligation to try to achieve the highest price for Tribune's shareholders. See, 

e.g., Revlon, Inc. v. MacAndrews & Forbes Holdings, Inc., 506 A.2d 173, 182 (Del. 

1986) (directors have duty to obtain highest price for shareholders). 

Again, the Trustee was required to plausibly allege actual fraudulent 

intent on the part of the members of the Special Committee. We agree with the 

district court that the Trustee failed to do so.

II. State Law Fiduciary Duty Claims

We next consider the Trustee's claims that the Large Shareholders 

breached their fiduciary duties under Delaware law by pushing for the LBO 
- 27 -

based on projections they knew to be false and by causing Tribune to incur debt 

they knew would leave the company insolvent. The Trustee also alleges that 

through this conduct the Large Shareholders aided and abetted senior 

management's own breach of fiduciary duty and were unjustly enriched. The 

Trustee argues that Steps One and Two of the LBO should be collapsed so that

the LBO is viewed as a single unitary transaction. The Trustee contends that, if 

the LBO is so viewed and Tribune's Step Two obligations taken into account at 

the start, Tribune was insolvent as of April 1, 2007, the day that Tribune's Board 

originally voted to approve the LBO. The Trustee alleges that the Large 

Shareholders were controlling shareholders with attendant fiduciary duties

before Step One and that these fiduciary duties were breached by advocating for 

and executing the LBO. 

The district court dismissed Trustee's claims, holding that Steps One 

and Two could not be collapsed into a unitary transaction and that Tribune's 

purported insolvency had to be analyzed separately at each of the LBO's two 

steps. The district court concluded that the Trustee's allegations failed at Step 

One because he could not plausibly allege that Tribune was insolvent at that 

point. While the district court concluded that the Trustee had adequately 
- 28 -

pleaded Tribune's insolvency at Step Two, it held that the fiduciary duty claims 

nevertheless failed because, after Step One, the Large Shareholders no longer 

owned any Tribune stock and their appointed directors had resigned from the 

Board. 

The principal issue with respect to these claims is thus whether the 

Trustee's pleadings support collapsing Step One and Step Two into one event. 

A. Applicable Law

Under Delaware law, a shareholder owes the company a fiduciary 

duty "only if it owns a majority interest in or exercises control over the business 

affairs of the corporation." Ivanhoe Partners v. Newmont Mining Corp., 535 A.2d 

1334, 1344 (Del. 1987). If such a fiduciary duty exists, a shareholder breaches that 

duty if, for its own benefit, it approves a transaction that renders the corporation 

insolvent. See, e.g., In re Tropicana Entm't, LLC, 520 B.R. 455, 471 (Bankr. D. Del. 

2014) (holding that creditor must allege either that corporation was or became 

insolvent as result of fiduciary's misconduct to bring suit for breach of fiduciary 

duty); see also Crawford v. Franklin Credit Mgmt. Corp., 758 F.3d 473, 482 (2d Cir. 
- 29 -

2014) (noting this Court may "affirm the judgment on any basis that is supported 

by the record").6

To determine whether the two steps should be viewed as a single 

transaction, the district court applied the Sabine factors, which consider 

(i) "[w]hether all of the parties involved had knowledge of the multiple 

transactions"; (ii) "[w]hether each transaction would have occurred on its own"; 

and (iii) "[w]hether each transaction was dependent or conditioned on other 

transactions." In re Sabine Oil & Gas Corp., 547 B.R. 503, 541 (Bankr. S.D.N.Y.), 

aff'd, 562 B.R. 211 (S.D.N.Y. 2016). 

In performing this analysis, Delaware courts have sometimes 

applied a "step-transaction doctrine," under which collapse is warranted if a 

party can satisfy any one of three tests: (1) the "end result test," which authorizes 

collapse "if it appears that a series of separate transactions were prearranged

6 We assume, without deciding, that the Large Shareholders had a fiduciary duty 

to Tribune. We note, however, that together the Chandler Trusts and the Foundations

owned only 33% of Tribune's publicly held shares. See Kahn v. Lynch Commc’n Sys., Inc., 

638 A.2d 1110, 1114 (Del. 1994) ("[A] shareholder who owns less than 50% of a 

corporation’s outstanding stocks does not, without more, become a controlling 

shareholder of that corporation, with a concomitant fiduciary status." (quoting Citron v. 

Fairchild Camera & Instrument Corp., 569 A.2d 53, 70 (Del. 1989)).
- 30 -

parts of what was a single transaction, cast from the outset to achieve the 

ultimate result"; (2) the "interdependence test," which authorizes collapse if "the 

steps are so interdependent that the legal relations created by one transaction 

would have been fruitless without a completion of the series"; and (3) the 

"binding-commitment test," which allows collapse "only if, at the time the first 

step is entered into, there was a binding commitment to undertake the later 

steps." Bank of N.Y. Mellon Tr. Co. v. Liberty Media Corp., 29 A.3d 225, 240 (Del. 

2011) (internal quotation marks omitted).

Delaware courts have also noted that, regardless of the test to be 

applied, the substance of the transaction is what matters, not the form. See Gatz 

v. Ponsoldt, 925 A.2d 1265, 1280 (Del. 2007). Further, they have noted that "courts 

have found that a set of transactions may be viewed as one integrated transaction 

if the transactions reasonably collapse into a single integrated plan and either 

defraud creditors or leave the debtor with less than equivalent value postexchange." In re Hechinger Inv. Co. of Del., 274 B.R. 71, 91 (D. Del. 2002) (internal 

quotation marks omitted). In Hechinger, the court denied a motion to dismiss 

and noted that it was "reluctant to conclude that because the defendants 

structured the set of transactions in a certain manner, they [were] immune from a 
- 31 -

claim of breach of fiduciary duty, especially where the [complaint] allege[d] that 

the harms it complain[ed] of were foreseeable results of the acts of the 

defendants." Id.

B. Application

1. Was the LBO a Unitary Transaction?

Although we must accept as true all plausible allegations set forth in 

the complaint, we need not accept "threadbare recitals of a cause of action's 

elements" that are "supported by mere conclusory statements." Ashcroft v. Iqbal, 

556 U.S. 662, 663 (2009). Here, the Trustee failed to sufficiently allege that the 

two steps should be collapsed into one. 

First, it is undisputed that there were several obstacles that Tribune 

needed to clear after Step One and before completing Step Two. At Step One, 

Tribune borrowed approximately $7 billion and executed a tender offer, by

which the company repurchased half of Tribune's outstanding common stock 

and refinanced its existing debt. Even if Step Two were never consummated, 
- 32 -

Step One would have amounted to a standalone recapitalization plan -- similar to 

transactions Tribune had engaged in prior to the LBO.7 

Additionally, the "knowledge and intent of the parties" weigh 

heavily against the Trustee's collapse argument as neither Tribune nor the Large 

Shareholders knew for certain whether both steps would be completed. Step 

Two required shareholder approval, which was not received until months after 

Step One closed, and the Trustee does not allege that the Large Shareholders had 

anything to do with the "pie-in-the-sky" February Projections. 3049 J. App'x 

at 146–47. Similarly, Tribune never knew that Step Two was a foregone 

conclusion, as its merger would need government approval. 

Further, the complaint acknowledges that there were several 

additional hurdles Tribune had to clear to effectuate Step Two, including 

receiving a solvency opinion, and that the Large Shareholders were concerned 

that the deal would not actually close. Indeed, Tribune's July 13, 2007 proxy 

statement warned that there was a "risk that the conditions to the [Step Two] 

7 In May 2006, Tribune engaged in a leveraged recapitalization by which it 

purchased 55 million shares of outstanding stock for $1.8 billion in May 2006. In March 

2007, Tribune again considered a "more modest recapitalization plan." 3049 J. App'x at 

198.
- 33 -

Merger will not be met, including the conditions requiring receipt of FCC 

approval, the receipt of financing and receipt of a solvency opinion." 3049 J. 

App'x at 1740. Finally, as the Large Shareholders point out, the two-step 

transaction was designed to guard against the possibility that the second step 

might not close if conditions precedent were not satisfied. The Trustee even 

acknowledges that the LBO was structured in two steps because the Board

"express[ed] concerns regarding the delays and completion risk associated with 

Zell's [initial single-step] proposal." 3049 J. App'x at 191. Therefore, the Board

decided instead on the two-step LBO to "provide an upfront distribution to 

Tribune's stockholders," even if Step Two were never consummated. Id.

The parties do not dispute that Sabine applies federally, though 

ultimately we conclude that, regardless of whether Sabine or Delaware's "steptransaction doctrine" applies, the two steps of this LBO should not be collapsed. 

As the facts alleged in the complaint make clear, the third Sabine factor weighs 

against collapse. Further, collapse is inappropriate under all three of the steptransaction tests, because the parties intended to structure the two steps as 

independent transactions, Step One was able to stand alone, and there was no 
- 34 -

binding commitment to undertake Step Two. Accordingly, we affirm the district 

court's conclusion that the two steps must be considered independently. 

2. Was Tribune Insolvent at Step One?

The Trustee argues that even if the two steps are not treated as a 

unitary transaction, he sufficiently alleged Tribune's insolvency at Step One, to 

support a claim that the Large Shareholders breached their fiduciary duties when 

approving of a transaction that resulted in insolvency. The district court held 

that the Trustee failed to sufficiently allege that Tribune was insolvent at Step 

One of the LBO under either the "balance sheet" or the "inability to pay debt 

when due" tests. We agree.

In Delaware, "[u]nder the balance sheet test, an entity is insolvent if 

it has liabilities in excess of a reasonable market value of assets held." Quadrant 

Structured Prods. Co. v. Vertin, 102 A.3d 155, 176 (Del. Ch. 2014) (internal 

quotation marks omitted). We are not persuaded by the Trustee's argument that

the district court erred in failing to take into account "the commitments Tribune 

had already made -- notably to borrow an additional $3.7 billion of debt and to 

make an additional $4 billion distribution to its shareholders -- for which 

performance was due at Step Two." 3049 Appellant's Br. at 65. This argument 
- 35 -

rests on the same logic undergirding the Trustee's argument in favor of 

collapsing the two steps, which we have rejected for the reasons outlined above. 

Moreover, the Trustee himself admits that he "did not allege that the $8 billion 

borrowed at Step One, standing alone, rendered Tribune insolvent." Id. at 62. 

As to the "inability to pay debts when due" test, the Trustee's 

argument again hinges upon his assertion that the district court should have 

considered whether Tribune was able to pay upcoming debts or raise additional 

capital in the future -- i.e., by taking "Step Two into account, along with Tribune's 

ability to access additional funds." Id. at 70. In other words, the Trustee argues 

that courts should not limit their consideration to past debt payments and 

instead also consider whether companies will be able to pay upcoming debts or 

raise additional capital in the future. 

There appears to be no consensus in Delaware courts, however, as to 

whether this test is forward-looking. See, e.g., Robert J. Stearn, Jr. & Cory D. 

Kandestin, Delaware's Solvency Test: What Is It and Does It Make Sense? A 

Comparison of Solvency Tests Under the Bankruptcy Code and Delaware Law, 36 Del. J. 

Corp. L. 165, 182 (2011) ("The [inability to pay debts when due] test is not entirely 

clear: the unanswered question is whether the test is present or forward-looking. 
- 36 -

. . . The case law does not answer this question definitively."). The Trustee cites 

several Delaware cases, see 3049 Appellant's Br. at 69, but they are inapposite as 

none definitively establishes that courts must consider future debts to be incurred

as part of its insolvency analysis. Moreover, as the district court observed, this 

Court offered a definitive answer in Pereira v. Farace, 413 F.3d 330 (2d Cir. 2005). 

There, we rejected a forward-looking approach, noting that such a test would 

"project[] into the future to determine whether capital will remain adequate over 

time while the Delaware [inability to pay debts when due] test looks solely at 

whether the corporation has been paying bills on a timely basis." Id. at 343. We 

see no reason to overturn that holding here.

Accordingly, we conclude that the district court did not err in 

dismissing the Trustee's state law claims against the Large Shareholders. We 

additionally conclude that the district court did not abuse its discretion in 

dismissing these claims with prejudice, as the Trustee has not explained what 

specific facts he would plead to salvage these claims.

III. Claims Against Financial Advisors

We next consider whether the district court erred in dismissing the 

following claims against the Financial Advisors: (1) aiding and abetting breaches 
- 37 -

of fiduciary duty and professional malpractice8; (2) intentional fraudulent 

conveyance; and (3) constructive fraudulent conveyance. For the reasons set 

forth below, we affirm the district court's dismissal of the aiding and abetting

and professional malpractice claims as to all Financial Advisors; we affirm the 

district court's dismissal of the intentional fraudulent conveyance claims as to 

Morgan Stanley, Citigroup, and Merrill Lynch, and vacate the dismissal of these 

claims as to VRC; and we affirm the dismissal of the constructive fraudulent 

conveyance claims as to Morgan Stanley and VRC and vacate the dismissal of 

these claims as to Citigroup and Merrill Lynch.

A. Aiding and Abetting Breach of Fiduciary Duty and Professional 

Malpractice Claims

1. Applicable Law

Under Delaware law,9 a third party may be liable for aiding and 

abetting a breach of fiduciary duty if there is "(i) the existence of a fiduciary 

8 Additionally, the Trustee asserted a breach of fiduciary claim, but against only 

Morgan Stanley. The district court did not explicitly address this claim in its January 

23, 2019 opinion. In a February 13, 2019 order, however, the district court stated that 

this claim was "barred for the same reasons discussed in the January 23 Opinion with 

respect to the other common law claims asserted against Morgan Stanley . . . namely, 

the doctrine of in pari delicto." 3049 S. App'x at 180.

9 The parties agree that Delaware law governs the Trustee's aiding and abetting 

claim. 
- 38 -

relationship, (ii) a breach of the fiduciary's duty, (iii) knowing participation in

that breach by the defendants, and (iv) damages proximately caused by the 

breach." RBC Cap. Mkts., LLC v. Jervis, 129 A.3d 816, 861 (Del. 2015). 

The in pari delicto doctrine acts as an affirmative defense to an aiding 

and abetting claim by barring a plaintiff "from recovering damages if his losses 

are substantially caused by activities the law forbade him to engage in." Stewart

v. Wilmington Tr. SP Servs., Inc., 112 A.3d 271, 301–02 (Del. Ch.), aff'd, 126 A.3d 

1115 (Del. 2015) (internal quotation marks omitted). In other words, a plaintiff 

can generally only sue for aiding and abetting a breach of fiduciary duty if the 

plaintiff's hands are clean. As applied to corporations, the illegal actions of a 

corporation's officers and directors are imputed to the corporation itself. Id. 

at 303. There are, however, exceptions that render the in pari delicto doctrine 

inapplicable and therefore permit a plaintiff to sue, even if its hands are not 

clean.

First, under the adverse interest exception, a corporation is 

permitted to sue those alleged to have aided an agent's wrongdoing when "the 

corporate agent responsible for the wrongdoing was acting solely to advance his 

own personal financial interest, rather than that of the corporation itself." In re
- 39 -

Am. Int'l Grp., Inc., Consol. Derivative Litig., 976 A.2d 872, 891 (Del. Ch. 2009) 

("AIG II"), aff'd sub nom. Teachers' Ret. Sys. of La. v. Gen. Re Corp., 11 A.3d 228 (Del. 

2010) (emphasis added). The adverse interest exception, however, does not 

enable a plaintiff to recover if the wrongdoing benefits the corporation. Stewart, 

112 A.3d at 309. 

Further, the exception does "not apply even when the 'benefit' 

enjoyed by the corporation is ultimately outweighed by the long-term damage 

that is done when the agent's mischief comes to light"; instead, it only covers the 

"unusual" case where allegations support a reasonable inference of "total 

abandonment of the corporation's interests." Id. at 303, 309 (describing 

"siphoning corporate funds or other outright theft" as such "unusual" cases); see 

also In re Am. Int'l Grp., Inc., 965 A.2d 763, 827 (Del. Ch. 2009) ("AIG I") (holding 

that the adverse interest test is directed at insiders who are "essentially stealing 

from the corporation as opposed to engaging in improper acts that, even if also 

self-interested, have the effect of benefiting the corporation financially"), aff'd sub

nom. Teachers' Ret. Sys. of La. v. PricewaterhouseCoopers LLP, 11 A.3d 228 (Del. 

2011).
- 40 -

Second, the fiduciary/insider exception to the in pari delicto doctrine 

allows a suit to be brought against corporate fiduciaries who "knowingly caused 

the corporation to commit illegal acts and, as a result, caused the corporation to 

suffer harm." AIG II, 976 A.2d at 889. The AIG II court appeared, on public 

policy grounds, to limit the application of the fiduciary exception to 

"gatekeepers," third parties employed by a corporation to help ensure the lawful 

operation of the corporation. Id. at 890 n.49, 892–93; see also RBC Cap. Mkts., 129 

A.3d at 865 n.191 (rejecting the proposition that financial advisors are inherently 

"gatekeepers," explaining that "the role of a financial advisor is primarily 

contractual in nature" and defined by its engagement letter). Similarly, the 

fiduciary exception precludes application of the in pari delicto doctrine to aiding 

and abetting claims against "non-fiduciaries . . . who occupy a position of trust 

and materially participate in the traditional insiders' discharge of their fiduciary 

duties." Stewart, 112 A.3d at 320 (holding that the auditor defendants played a 

"gatekeeper" role). 
- 41 -

The in pari delicto doctrine also applies to the Trustee's professional 

malpractice claims. Under both New York law and Illinois law,10 professional 

malpractice claims are viewed as a species of negligence. See Hydro Invs., 

Inc. v. Trafalgar Power Inc., 227 F.3d 8, 15 (2d Cir. 2000); Hassebrock v. Bernhoft, 815 

F.3d 334, 341 (7th Cir. 2016).

It is settled in both New York and Illinois that the in pari delicto

doctrine bars claims against co-conspirators for negligence. See, e.g., Kirschner v.

KPMG LLP, 15 N.Y.3d 446, 464 (2010) ("The justice of the in pari delicto rule is 

most obvious where a willful wrongdoer is suing someone who is alleged to be 

merely negligent."); Peterson v. McGladrey & Pullen, LLP, No. 10 C 274, 2010 WL 

4435543, at *4 (N.D. Ill. Nov. 3, 2010) ("[T]he in pari delicto principles that

preclude plaintiff from seeking redress for [the trustee's] alleged negligence . . . 

apply equally to plaintiff's claims against [the defendant auditor.]"), vacated on 

other grounds, 676 F.3d 594 (7th Cir. 2012). Thus, the in pari delicto doctrine 

10 In the district court, the parties disputed whether New York (where Citigroup 

and Merrill Lynch are headquartered) or Illinois (where Tribune was headquartered) 

law governed the Trustee's professional malpractice claim. This argument has been 

largely abandoned, likely because, as the district court explained, the states' laws are 

nearly the same.
- 42 -

precludes a corporation engaged in wrongdoing from suing its co-conspirators 

on the grounds of negligence.

2. Application

As an initial matter, accepting the Trustee's factual assertions to be 

true, he plausibly alleges that the Financial Advisors aided and abetted Tribune's

directors and officers in breaching their fiduciary duties when they hid Tribune's 

true financial state to complete the LBO. In particular, the Trustee's complaint 

alleges that Citigroup and Merrill Lynch reviewed VRC's solvency analysis and 

failed to alert anyone that the February Projections, which formed the bedrock of 

VRC's first solvency opinion, were no longer accurate. Instead, they allowed 

VRC's analysis to be delivered to the financing banks at Step One of the LBO. 

Likewise, the Trustee contends that Citigroup's analysis showed that Tribune 

was insolvent by more than $1.4 billion before the close of Step Two, and Merrill 

Lynch's analysis showed that Tribune was insolvent by more than $1.5 billion. 

Still, neither tried to stop the LBO. 

Indeed, for purposes of these appeals, Citigroup and Merrill Lynch 

do not challenge the allegations of wrongdoing or negligence. Instead, they 

contend that any aiding and abetting breach of fiduciary duty and malpractice 
- 43 -

claims must be dismissed based on the in pari delicto doctrine. And for his part, 

the Trustee does not argue on appeal that the in pari delicto doctrine is 

inapplicable; instead, he argues that two exceptions to that doctrine should apply 

to allow the claims to go forward -- the adverse interest exception, which it 

argued below to the district court, and the fiduciary/insider exception, which it 

argues for the first time on appeal. This Court has discretion to consider 

arguments waived below where necessary to avoid a manifest injustice. In re

Nortel Networks Corp. Sec. Litig., 539 F.3d 129, 133 (2d Cir. 2008). In circumstances 

where those arguments were available to the party below and no reason is 

proffered for their failure to raise them, such an exercise of discretion is not 

favored. Id.

a. Adverse Interest Exception

Here, the adverse interest exception does not apply because the LBO 

conferred at least some "benefit" on Tribune. AIG II, 976 A.2d at 891. Tribune 

received over $300 million in additional capital from Zell's investment, and there 

was also the potential for $1 billion in tax savings. Even putting aside the tax 

savings -- which Moody's called a "key assumption" for the LBO, 449 J. App'x at 

112, but which were ultimately never realized -- the transaction still infused 
- 44 -

hundreds of millions of dollars of capital into the business at a time when 

Tribune was struggling, provided value to many shareholders by helping cash 

them out, and gave Tribune a chance to continue as a going concern by allowing 

it to pay off at least some existing debt. Indeed, Tribune itself explained in a 

proxy statement that the LBO was in its best interest. 

The Trustee also makes no specific allegations that support an 

inference that Tribune received no benefit from the LBO; instead, it contends that 

the net effect of the LBO was negative. But the net effect is not relevant when 

considering whether the adverse interest exception will apply. Stewart, 112 A.3d 

at 303. Therefore, despite any "long-term damage," id., the adverse interest 

exception to the in pari doctrine does not apply in this case.11

b. Fiduciary/Insider Exception

The Delaware Chancery Court has explained that for the 

fiduciary/insider exception to apply, the party must "occupy a position of trust 

11 Notwithstanding the Trustee's argument to the contrary, the district court did 

not resolve any issues of fact by holding that the adverse interest exception did not 

apply here. Instead, it simply observed that the infusion of $300 million in capital 

stated in the Complaint conferred some benefit on Tribune, and therefore, the 

defendants had not acted "solely to advance [their] own personal financial interest." 

AIG, 976 A.2d at 891 (emphasis added). 
- 45 -

and materially participate in the traditional insiders' discharge of their fiduciary 

duties," thereby playing a "'gatekeeper' role vis-à-vis the [corporation]." Stewart, 

112 A.3d at 319. Here, the Trustee has failed to sufficiently allege that any of the 

Financial Advisors played such a role.

While a corporation's auditors "assume[] a public responsibility 

transcending any employment relationship," United States v. Arthur Young & Co., 

465 U.S. 805, 817–18 (1984) (emphasis omitted), and act as the gatekeepers of 

standards designed to avoid damage to corporations, the Delaware Supreme 

Court has emphasized that "the role of a financial advisor is primarily 

contractual in nature" and that a financial advisor's "engagement letter typically 

defines the parameters of the financial advisor's relationship and responsibilities 

with its client," RBC Cap. Mkts., 129 A.3d at 865 n.191. Here, the engagement 

letters between Tribune and Citigroup and between Tribune and Merrill Lynch 

expressly provide that they did not create fiduciary relationships and that 

Citigroup and Merrill Lynch were not acting as Tribune's agents. The letters 

instead made clear that Tribune would "make an independent analysis and 

decision regarding any Transaction based on [their] advice." 449 J. App'x at 366. 

Citigroup and Merrill Lynch were financial advisors, not "gatekeepers," AIG II, 
- 46 -

976 A.2d at 890 n.49, and, further, neither Citigroup nor Merrill Lynch 

"materially participate[d]" in the discharge of fiduciary duties, Stewart, 112 A.3d 

at 320.

Moreover, the Delaware Supreme Court has cautioned against 

"inappropriately . . . suggest[ing] that any failure by a financial advisor to 

prevent directors from breaching their duty of care gives rise to an aiding and 

abetting claim against the advisor." RBC Cap. Mkts., 129 A.3d at 865 n.191. 

Instead, such a claim may arise where "the [financial advisor] knows that the 

board is breaching its duty of care and participates in the breach by misleading 

the board or creating [an] informational vacuum." Id. at 862. 

Here, although the Trustee lodges numerous allegations of 

misconduct on the Financial Advisors' part, there is little to suggest that their

conduct created an "'informational gap[]' . . . l[eading] to the Board's breaches of 

fiduciary duties," as occurred in Stewart, 112 A.3d at 322, much less the "fraud on 

the Board" and "intentional[] dup[ing]" of directors that warranted liability of the

financial advisor in RBC Cap. Mkts., 129 A.3d at 865. Rather, the Trustee alleges

that Tribune's officers and advisors conspired with their financial advisors 

(among others) to carry out the LBO.
- 47 -

Accordingly, the district court did not err in dismissing the Trustee's 

aiding and abetting breach of fiduciary duty and professional malpractice claims 

against the Financial Advisors.

B. Intentional Fraudulent Conveyance Claims

As discussed above, the Bankruptcy Code allows a bankruptcy 

trustee to recover transfers made with "actual intent to hinder, delay, or defraud" 

creditors. 11 U.S.C. § 548(a)(1)(A). The complaint does not sufficiently allege 

that the transfers to Citigroup, Merrill Lynch, and Morgan Stanley as financial 

advisors were made with an "actual intent to hinder, delay, or defraud" creditors. 

Id. It does, however, sufficiently plead such an actual intent as to VRC. 

As to Morgan Stanley, the complaint alleges that Tribune paid the

firm $10 million for a fairness opinion, but the complaint then barely mentions 

the fairness opinion again, much less suggest that payment for the opinion was 

motivated by fraudulent intent. Without additional allegations, the Trustee 

cannot satisfy Rule 9(b)'s heightened pleading standard as to Morgan Stanley. 

As to Citigroup and Merrill Lynch, the Trustee's allegations -- that 

these firms "were incentivized to promote the LBO over other proposals being 

considered by [Tribune]," 3049 J. App'x at 59, and that they "purported to rely on 
- 48 -

the unrealistic February 2007 Projections even as each month's below-projection 

performance showed conclusively that they could not be achieved," 3049 J. App'x 

at 118 -- are insufficient to support an inference of intent to defraud as to the 

payment of their financial advisory fees. Kaiser, 722 F.2d at 1582. 

Specifically, the Trustee maintains that "multiple badges of fraud" 

support the requisite strong inference of fraudulent intent against Citigroup and 

Merrill Lynch, including that (1) the advisory fees were paid to these firms in 

December 2007, following the close of Step Two when Tribune was insolvent; 

(2) Tribune received less than reasonably equivalent value for the fees paid; 

(3) the fees were not paid in the ordinary course of Tribune's business; and 

(4) Tribune's management engaged in deceptive conduct by concealing the 

February and October Projections from certain others in management, and 

induced Citigroup and Merrill Lynch to use those projections to bring the LBO to 

a close. 449 Appellant's Br. at 53. 

Regarding this first alleged badge of fraud, payments to Citigroup 

and Merrill Lynch when Tribune was insolvent weigh in favor of finding actual 

fraudulent intent. As to the second badge of fraud, whether Tribune received 
- 49 -

reasonably equivalent value for these payments is a disputed factual question,

which also weighs in the Trustee's favor at this stage. 

As to third badge of fraud, nothing in the pleadings supports the 

notion that fees paid to Citigroup and Merrill Lynch pursuant to their respective 

engagement letters were outside the ordinary course of Tribune's business. 

Rather, the pleadings on these payments relate to the tortious performance of 

financial advisory services and the alleged fraudulent nature of the LBO 

transaction as a whole. They do not admit an inference of fraudulent intent as to 

Tribune's specific payment of the advisory fees, see Sharp, 403 F.3d at 56, which 

occurred pursuant to engagement letters entered into with Citigroup and Merrill 

Lynch in October 2005, long before the LBO was proposed. 

As to the fourth badge of fraud, the Trustee's allegations of 

deceptive conduct by Tribune's management are too attenuated from the 

advisory fee payments to Citigroup or Merrill Lynch to indicate Tribune's intent 

as to those payments. At most, the Trustee's allegations indicate that Citigroup 

and Merrill Lynch did not report Tribune's management's concealment of facts. 

But other checks on such behavior existed as Morgan Stanley and the Special 

Committee independently reviewed the relevant figures. 
- 50 -

In sum, the Trustee's highlighted badges of fraud fail to raise a 

strong inference of fraudulent intent. In the absence of other common badges of 

fraud -- reserving rights in the property, hiding funds, and paying an 

unconscionable price, Kaiser, 722 F.2d at 1582 -- the Trustee has not satisfied the 

heightened pleading standard for demonstrating an actual fraudulent 

conveyance as to Citigroup and Merrill Lynch. 

The Trustee contends that these same "multiple badges of fraud" 

also support the requisite strong inference of fraudulent intent as to VRC. The 

first alleged badge of fraud weighs against finding actual fraudulent intent

because VRC received the majority of its payment before Step Two closed and, 

therefore, prior to Tribune's insolvency. 

As to the second alleged badge of fraud, whether Tribune received 

reasonably equivalent value for these payments is again a disputed factual 

question, weighing in the Trustee's favor at this stage. 

The third alleged badge of fraud favors a finding of actual 

fraudulent intent for the payments made to VRC. Specifically, the Trustee 

alleges that: Tribune hastily hired VRC after Duff & Phelps, the company initially 

hired to perform a solvency analysis, informed Tribune that it could not provide 
- 51 -

a favorable solvency opinion, and after another "prominent" valuation firm 

rebuffed Tribune, 3049 J. App'x at 211; VRC charged Tribune the highest fee it 

had ever charged for a solvency opinion; and VRC agreed, among other things,

to define "fair value," id. at 212, inconsistently with the industry standard upon 

which VRC had relied for its previous solvency opinions. These allegations are 

sufficient to admit an inference that the VRC payments were outside the 

ordinary course of Tribune's business. See In re Lehman Bros. Holdings Inc., 469 

B.R. 415, 447–49 (Bankr. S.D.N.Y. 2012) (concluding that actual intent was 

sufficiently pled where allegations included, inter alia, that "each transaction . . . 

was unprecedented in the prior course of business between the parties, and the 

industry generally"). 

As to the fourth badge of fraud, the Trustee persuasively argues that 

Tribune's management's manipulation of the definition of "fair value" in its 

engagement letter with VRC was deceptive conduct that was (1) necessary for 

the LBO to proceed and (2) directly tied to Tribune's payments to VRC, in that 

VRC was retained precisely because it was willing to employ such a definition in 

formulating a solvency opinion. Further, the questionable nature of the "fair 
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value" definition is highlighted by VRC's charge of an unprecedented fee to take 

the assignment. 

In sum, as to Morgan Stanley, Citigroup, and Merrill Lynch, we 

agree with the district court that the pleaded badges of fraud are insufficient to 

create a strong inference of actual fraudulent intent. As to VRC, however, we

conclude that the Trustee has sufficiently pleaded actual fraudulent intent.

C. Constructive Fraudulent Conveyance Claims

A trustee may recover "constructive" fraudulent transfers where "the 

debtor . . . received less than a reasonably equivalent value in exchange for such 

transfer or obligation" and: (1) "was insolvent on the date that such transfer was 

made or such obligation was incurred, or became insolvent as a result of such 

transfer or obligation"; (2) "was engaged in business or a transaction, or was 

about to engage in business or a transaction, for which any property remaining 

with the debtor was an unreasonably small capital"; (3) "intended to incur, or 

believed that the debtor would incur, debts that would be beyond the debtor's 

ability to pay as such debts matured"; or (4) "made such transfer to or for the 

benefit of an insider, or incurred such obligation to or for the benefit of an 
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insider, under an employment contract and not in the ordinary course of 

business." See 11 U.S.C. § 548(a)(1)(B).

The Bankruptcy Code does not define "reasonably equivalent value," 

only defining "value" as the "satisfaction . . . of a present or antecedent debt of the 

debtor." Id. § 548(d)(2)(A). This court, however, has stated that "reasonably

equivalent value is determined by the value of the consideration exchanged 

between the parties at the time of the conveyance or incurrence of debt which is 

challenged." In re NextWave Pers. Commc'ns, Inc., 200 F.3d 43, 56 (2d Cir. 1999)

(internal quotation marks omitted). Hence, in determining whether the debtor 

received "reasonably equivalent value," the court "need not strive for 

mathematical precision" but "must keep the equitable purposes of the statute 

firmly in mind, recognizing that any significant disparity between the value 

received and the obligation assumed . . . will have significantly harmed the 

innocent creditors." Rubin v. Mfrs. Hanover Tr. Co., 661 F.2d 979, 994 (2d Cir. 

1981) (discussing § 67(d) of the Bankruptcy Act of 1898, predecessor to § 548 of 

the Bankruptcy Code); see also United States v. McCombs, 30 F.3d. 310, 326 (2d Cir. 

1994) ("[T]he concept [of fair consideration] can be an elusive one that defies any 

one precise formula." (discussing N.Y. Debt. & Cred. Law § 272)). 
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To determine whether reasonably equivalent value was provided, 

"the Court must ultimately examine the totality of the circumstances, including 

the arms-length nature of the transaction; and . . . the good faith of the 

transferee." In re Bernard L. Madoff Inv. Sec. LLC, 454 B.R. 317, 334 (Bankr. 

S.D.N.Y. 2011) (internal quotation marks omitted). 

Where the reasonably equivalent value analysis requires "more than 

a simple math calculation," such a computation usually should not be made at 

the motion to dismiss stage. Id.; see also In re Agape World, Inc., 467 B.R. 556, 571 

(Bankr. E.D.N.Y. 2012). Still, while the determination of whether reasonably 

equivalent value was exchanged is "largely a question of fact," Am. Tissue Inc. v. 

Donaldson, Lufkin & Jenrette Secs. Corp., 351 F. Supp. 2d 79, 105 (S.D.N.Y. 2004)

(internal quotation marks omitted); accord In re Jesup & Lamont, Inc., 507 B.R. 452, 

470 (Bankr. S.D.N.Y. 2014), courts have dismissed constructive fraudulent 

transfer claims where the complaint does not plausibly allege that the debtor 

received less than reasonably equivalent value, see, e.g., In re Trinsum Grp., Inc., 

460 B.R. 379, 388–89 (Bankr. S.D.N.Y. 2011) (dismissing constructive fraudulent 

transfer claims due to the trustee's failure to sufficiently plead the less than 

reasonably equivalent value requirement); In re Bernard L. Madoff Inv. Sec. LLC, 
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458 B.R. 87, 113–15 (Bankr. S.D.N.Y. 2011) (dismissing certain of Trustee's claims 

that failed to meet the particularity requirement and relied on transfers outside 

the applicable time period).

Here, the various Financial Advisors are differently situated. Upon 

de novo review, we conclude that the constructive fraudulent conveyance claims 

against Citigroup and Merrill Lynch cannot be dismissed on the pleadings, but

those against Morgan Stanley and VRC were properly dismissed. 

As to Citigroup and Merrill Lynch, the Trustee alleges that the 

$12.5 million success fee paid to each firm upon consummation of the LBO was a 

constructive fraudulent conveyance. We first consider "the time of the 

conveyance or incurrence of debt" to determine whether there was reasonably 

equivalent value. NextWave, 200 F.3d at 56 (emphasis and citation omitted). The 

district court found that the debt was incurred when Citigroup's and Merrill 

Lynch's engagement letters were signed, years before the LBO's completion, thus 

rendering the success fees that the Trustee seeks to claw back unavoidable 

antecedent debt. We conclude otherwise. 

The pleadings record indicates that Citigroup's and Merrill Lynch's

success fees were not debts incurred or owed until December 2007 when the LBO 
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closed at Step Two, at which point a triggering "Strategic Transaction" took place. 

Indeed, under their engagement letters, Citigroup and Merrill Lynch were 

entitled to payment of their success fees only "upon consummation of a 

Transaction involving" Tribune. 449 J. App'x at 368. Accordingly, the financial 

firms were only paid their success fees after the completion of Step Two and the 

closure of the LBO. Further, the engagement letters required Tribune to 

reimburse Citigroup and Merrill Lynch for all reasonable expenses incurred in 

providing financial advisory services prior to the consummation of the LBO,

"[r]egardless of whether any [t]ransaction [was] proposed or consummated." 449

J. App'x at 368; see also id. at 376. This suggests that Tribune's obligations to pay 

the two $12.5 million success fees were separate, additional debts that were only 

payable in the event of a successful transaction. Accordingly, because the 

success fees were only incurred upon consummation of the LBO, they were not 

antecedent debt constituting categorically reasonably equivalent value. 

Because the Trustee has adequately pleaded Tribune's insolvency 

upon the completion of Step Two, it is plausible that Tribune: (1) was "insolvent

on the date" that the success fees were paid; (2) was engaged in the transaction of 

paying the success fees while it retained "unreasonably small capital"; and/or (3) 
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"incurred" the success fees, which may have been "beyond [its] ability to pay." 

Therefore, the issue of whether Citigroup's and Merrill Lynch's success fees 

constitute a constructive fraudulent transfer hinges on whether the services that 

Tribune received in exchange were of "reasonably equivalent value." 11 U.S.C. § 

548(a)(1)(B).

Turning then to the question of "reasonably equivalent value," we 

note that according to Citigroup and Merrill Lynch's engagement letters, Tribune 

owed success fees only if the advisors performed satisfactorily. Specifically, 

Citigroup's engagement letter states that it will "perform such financial advisory 

and investment banking services for [Tribune] in connection with the proposed 

Transaction as are customary and appropriate in transactions of this type." 

Merrill Lynch's engagement similarly states that it "will perform such financial 

advisory and investment banking services for [Tribune] as are customary and 

appropriate in transactions of this type." The Trustee alleges that Citigroup and 

Merrill Lynch fell short of "customary and appropriate" industry standards, were

grossly negligent in carrying out their responsibilities, and rendered their 

services in bad faith. Thus, according to the Trustee, because these firms 
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provided "no value" to Tribune, consummation of the LBO would not trigger the 

contractual obligation to pay fees and the success fees should be clawed back. 

On a motion to dismiss, we must accept factual allegations as true as 

long as they are not "threadbare recitals of the elements of a cause of action, 

supported by mere conclusory statements." Nielsen v. Rabin, 746 F.3d 58, 62 (2d 

Cir. 2014) (alteration and internal quotation marks omitted).

The complaint alleges plausible facts that Citigroup and Merrill 

Lynch knew or should have known the February Projections would not be met 

and that each firm thought Tribune was insolvent by over $1 billion, and that 

they yet failed to act.

To determine whether the Financial Advisors' guidance met the 

standard of reasonably equivalent value, courts evaluate the totality of the 

circumstances, considering, inter alia, the number of hours worked, industry 

standards, fees paid compared to the overall size of the transaction, when the 

engagement letters were signed, and opportunity costs. Here, the determination 

of whether the Citigroup and Merrill Lynch provided reasonably equivalent 

value likely requires more than "a simple math calculation." Madoff, 454 B.R. at 

334. Unlike in In re Old Carco LLC, where the trustee's allegations simply 
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"appl[ied] implausible values" or "omit[ted] other key assets," 509 F. App'x 77, 79 

(2d Cir. 2013) (summary order), the Trustee in this case alleges, amongst other 

failings, that Citigroup and Merrill Lynch failed to advise Tribune about the 

flaws in VRC's Step One solvency analysis, which stemmed from the February 

Projections that the firms knew would not be met. The Trustees also alleges that 

both Citigroup's and Merrill Lynch's analyses showed Tribune was insolvent by 

more than $1 billion before the close of Step Two. How much, if at all, this ought 

to detract from the fees they were paid should not have been decided on a 

motion to dismiss. See In re Actrade Fin. Techs. Ltd., 337 B.R. 791, 804 (Bankr. 

S.D.N.Y. 2005) ("[T]he question of 'reasonably equivalent value' and 'fair 

equivalent' is fact intensive, and usually cannot be determined on the 

pleadings."); see also In re Andrew Velez Const., Inc., 373 B.R. 262, 271 (Bankr. 

S.D.N.Y. 2007) (declining to dismiss constructive fraudulent transfer claim given 

the complexities of the factual background giving rise to the issue of "reasonably 

equivalent value"). 

While it is a close call, because we are required to accept the 

allegations in the Trustee's complaint as true, we conclude the factual question of 

whether Citigroup and Merrill Lynch provided reasonably equivalent value for 
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their success fees cannot be decided without first assessing whether the banks 

satisfactorily performed their duties. Thus, dismissal of the constructive 

fraudulent conveyance claims against these parties was premature. 

In contrast, we find no error in the dismissal of these claims against

Morgan Stanley and VRC. While these firms adopt the arguments set forth by 

Citigroup and Merrill Lynch, their actions differ in several important respects. 

First, Morgan Stanley was hired as advisor for and was responsive to a different 

part of Tribune -- the Special Committee. Second, Morgan Stanley and VRC did 

not have the same incentives as Citigroup and Merrill Lynch. Because both 

Morgan Stanley and VRC earned their respective fees upon delivery of their 

contracted-for opinions, they had no financial stake in the LBO's consummation. 

Finally, and most important, the Morgan Stanley and VRC payments were in 

large part due before Step One closed. Because there is hardly an allegation that 

Tribune was insolvent before the first step, the constructive fraudulent transfer 

claims against Morgan Stanley and VRC must fail.

VI. Leave to Amend

The Trustee sought leave to amend his complaint as to the 

shareholders in two respects: first, to provide additional allegations in support of 
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his intentional fraudulent conveyance claims and, second, to add a constructive 

fraudulent conveyance claim. The district court denied both requests.

"[L]eave [to amend] shall be freely given when justice so requires." 

Ronzani v. Sanofi S.A., 899 F.2d 195, 198 (2d Cir. 1990) (citing Fed. R. Civ. 

P. 15(a)(2)). A court may deny leave to amend, however, for a "valid ground," id., 

such as futility or undue prejudice, see Foman v. Davis, 371 U.S. 178, 182 (1962). 

"Futility is a determination, as a matter of law, that proposed amendments 

would fail to cure prior deficiencies or to state a claim under Rule 12(b)(6) of the 

Federal Rules of Civil Procedure." Empire Merchs., LLC v. Reliable Churchill LLLP, 

902 F.3d 132, 139 (2d Cir. 2018). To determine whether granting leave to amend 

would be futile, we consider the proposed amendments and the original 

complaint. See Pyskaty v. Wide World of Cars, LLC, 856 F.3d 216, 225–26 (2d Cir. 

2017). 

A. Intentional Fraudulent Conveyance Claims

In denying the Trustee leave to amend his intentional fraudulent 

conveyance claims, the district court noted that the Trustee gave "no clue as to 

how the complaint's defects would be cured." 3049 S. App'x at 26 (alteration 

omitted). On appeal, the Trustee argues that if given the opportunity to amend, 
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he would have been able to satisfy the imputation standard applied by the 

district court. 

We are not persuaded. The Trustee had ample opportunity to plead 

a viable claim in the district court -- indeed, the operative pleading was the Fifth

Amended Complaint -- but he failed to propose any amendments that would 

cure the pleading defects. Nor has he identified on appeal any additional factual 

allegations that would give rise to a strong inference of fraudulent intent on the 

part of the Special Committee. Accordingly, we find no abuse of discretion in the 

district court's denial of leave to amend the Trustee's intentional fraudulent 

transfer claims.

B. Constructive Fraudulent Conveyance Claims

The Trustee did not initially assert a constructive fraudulent transfer 

claim against the shareholders but sought leave to file a Sixth Amended 

Complaint to add such a claim. On April 23, 2019, the district court (Cote, J.) 

denied the request, on two independent grounds: (1) the shareholders would 

suffer substantial prejudice; and (2) the proposed amendments to the 

constructive fraudulent transfer claim would be futile. 
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Under the Bankruptcy Code, certain transactions fall within a safe 

harbor and the payments that are part of those transactions cannot be clawed 

back via a federal constructive fraudulent transfer claim. See 11 U.S.C. §§ 544, 

546(e). These include a payment made "in connection with a securities contract" 

if that payment was made by "a financial institution." Id. at § 546(e). As we held 

in Tribune II, however, Tribune's payments to its shareholders fell within this safe 

harbor. See 946 F.3d at 77–81, 90–97 (holding that Tribune was a "financial 

institution" within meaning of safe harbor provision and that payments to 

shareholders were payments "in connection with a securities contract"). On 

appeal, the Trustee argues that the district court and the Tribune II panel 

improperly concluded that Tribune was a financial institution, first by incorrectly 

taking judicial notice of certain documents and second by misinterpreting those 

documents. We are not persuaded.

As an initial matter, we are bound by the Tribune II panel's decision 

that Computershare Trust Company ("CTC"), a financial institution for purposes 

of § 546(e), was Tribune's agent when it served as a depository to help effectuate 

the LBO, which was a securities contract. Tribune II, 946 F.3d at 78-81; see also 

4 Pillar Dynasty LLC v. New York & Co., Inc., 933 F.3d 202, 211 n.8 (2d Cir. 2019) 
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("We are bound by the decision of prior panels until such time as they are 

overruled either by an en banc panel of our Court or by the Supreme Court."

(internal quotation marks omitted)).

The Trustee takes issue with how the district court took judicial 

notice of certain documents to conclude that CTC was Tribune's agent. That 

argument is without merit, as "[w]e have recognized . . . that in some cases, a 

document not expressly incorporated by reference in the complaint is 

nevertheless 'integral' to the complaint and, accordingly, a fair object of 

consideration on a motion to dismiss." Goel v. Bunge, Ltd., 820 F.3d 554, 559 (2d 

Cir. 2016). "A document is integral to the complaint where the complaint relies 

heavily upon its terms and effect." Id. (internal quotation marks omitted). Here, 

the documents the district court relied on were the contracts that set forth the 

relationship between Tribune and CTC, and they were therefore integral to the 

complaint.

Similarly, the Trustee's argument that CTC was not Tribune's agent 

because it was given no discretion and was not a fiduciary lacks merit. Here, 

Tribune entered into an agreement with CTC whereby CTC was hired to be a 

steward of Tribune's money and its shareholders' stock. It was clearly acting on 
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behalf of Tribune, which is enough to satisfy § 546(e). Accordingly, even on de 

novo review, the district court did not err when it denied the Trustee leave to 

amend its complaint as futile.

Separately, the district court did not abuse its discretion when it 

alternatively refused to grant leave to amend because doing so would be unduly 

prejudicial. There are thousands of shareholders who have been impacted by 

this ongoing litigation, all of whom relinquished control of their stock more than 

twelve years ago. As both this Court and the district court pointed out, allowing 

another amended complaint would prevent "certainty, speed, finality, and 

stability" in the market. 3049 S. App'x at 27 (citing Tribune II); see also Trs. of 

Upstate N.Y. Eng'rs Pension Fund v. Ivy Asset Mgmt., 843 F.3d 561, 568 (2d Cir. 

2016) (discussing the importance of finality).

Accordingly, we conclude that the district court did not abuse its 

discretion in denying the Trustee leave to amend his complaint to add a 

constructive fraudulent claim under federal law.

CONCLUSION

For the foregoing reasons, the judgment and orders of the district 

court are AFFIRMED in part and VACATED in part as follows:
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1. the district court's dismissal of the intentional fraudulent 

conveyance claims against the shareholders based on the buy-back of their shares 

is AFFIRMED;

2. the district court's dismissal of the breach of fiduciary duty 

and aiding and abetting breach of fiduciary claims against the allegedly 

controlling shareholders is AFFIRMED; 

3. (a) the district court's dismissal of the aiding and abetting 

breach of fiduciary duty and professional malpractice claims against the 

Financial Advisors is AFFIRMED;

(b) the district court's dismissal of the actual fraudulent 

conveyance claims is AFFIRMED as to Morgan Stanley, Citigroup, and Merrill 

Lynch and VACATED as to VRC; and

(c) the district court's dismissal of the constructive fraudulent 

conveyance claims is AFFIRMED as to Morgan Stanley and VRC and 

VACATED as to Citigroup and Merrill Lynch; and 

4. the district court's denial of the Trustee's motion for leave to 

amend to amplify his intentional fraudulent conveyance claim against the 
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shareholders and to add a constructive fraudulent conveyance claim against the 

shareholders is AFFIRMED.

The case is hereby REMANDED for further proceedings in 

accordance with the above.