Source: http://www.voidabletransactions.com/uvta-10-conflict-of-laws.html
Timestamp: 2017-03-30 00:47:28
Document Index: 711163329

Matched Legal Cases: ['§ 10', '§ 10', '§ 9', '§ 9', '§ 9', '§ 9', '§ 9', '§ 1516', '§ 10', '§ 10', '§ 10', '§ 15', '§ 10', '§ 10', '§ 10']

UVTA 10 Conflict-of-Laws
UVTA § 10. GOVERNING LAW.
Reporter's Comment: 1 ¶ 1. Section 10, added in 2014, is a simple and predictable choice of law rule applicable to claims for relief of the nature governed by the Act. It provides that a claim for relief in the nature of a claim for relief under the Act is governed by the local law of the jurisdiction in which the debtor is “located” at the time the challenged transfer is made or the challenged obligation is incurred. “Local” law means the substantive law of the referenced jurisdiction, and not its choice of law rules. Section 6 determines the time at which a transfer is made or obligation is incurred for purposes of the Act, including this section. Section 10 applies equally to a candidate jurisdiction that is a sister state and to a candidate jurisdiction that is a foreign nation.
Prefatory Note (UVTA 2014): Choice of Law. The amendments add a new § 10, which sets forth a choice of law rule applicable to claims for relief of the nature governed by the Act.
Reporter's Comment: 1 ¶ 2. Basing choice of law on the location of the debtor is analogous to the rule set forth in U.C.C. § 9-301 (2014), which provides that the priority of a security interest in intangible property is generally governed by the local law of the jurisdiction in which the debtor is located. The analogy is apt, because the substantive rules of this Act are a species of priority rule, in that they determine the circumstances in which a debtor’s creditors, rather than the debtor’s transferee, have superior rights in property transferred by the debtor. In keeping with that analogy, the definition of the debtor’s “location” in subsection (a) is identical to the baseline definition of that term in U.C.C. § 9 307(b) (2014). Subsection (a) does not include any of the exceptions to the baseline definition that are set forth in Article 9 of the Uniform Commercial Code, such as U.C.C. § 9 307(e) (2014) (providing that the location of a domestic corporation or other “registered organization” is its jurisdiction of organization), and U.C.C. § 9 307(c) (2014) (providing in effect that if the baseline definition would locate a debtor in a jurisdiction that lacks an Article 9-style filing system, then the debtor is instead located in the District of Columbia). Those exceptions are not included in subsection (a) because their primary purpose relates to the operation of Article 9’s perfection rules, which have no analogue in this Act.
3. As used in subsection (a), the terms “principal residence,” “place of business,” and “chief executive office” are to be evaluated on the basis of authentic and sustained activity, not on the basis of manipulations employed to establish a location artificially (e.g., by such means as establishing a notional “chief executive office” by use of straw-man officers or directors in a jurisdiction in which creditors’ rights are substantially debased, or establishing a notional “principal residence” for a short term in such a jurisdiction for the purpose of making an asset transfer while there). Notwithstanding the adaptation of subsection (a) from U.C.C. § 9-307(b) (2014), the foregoing terms need not necessarily have the same meanings in both statutes. Debtors are likely to have greater incentive and ability to employ “asset tourism” for the purpose of seeking to evade the substantive rules of this Act than for the purpose of seeking to manipulate the perfection and priority rules of secured transactions law. Interpretation and application of this Act should so recognize.
4. “Location” under this Act is completely independent from the concept of “center of main interests” (“COMI”), as that term is used in Chapter 15 of the Bankruptcy Code. Chapter 15, which applies to transnational insolvency proceedings, requires United States courts to defer in various ways to a foreign proceeding in the jurisdiction of the debtor’s COMI. Those consequences are quite different from the consequences of “location” under this Act. Furthermore, if the debtor is an organization, the debtor’s jurisdiction of organization has no bearing on the debtor’s “location” under subsection (a), by contrast to the presumption in Bankruptcy Code § 1516(c) (2014) that the jurisdiction in which the debtor has its registered office (i.e., its jurisdiction of organization) is its COMI.
JayNote: For purposes of determining which state's avoidable transactions laws will apply in a conflict-of-laws analysis, a debtor is said to be located at his place of residence, and an organization is said to be located either at its place of business or, if in various states, at its headquarters location.
(b) A claim for relief in the nature of a claim for relief under this [Act] is governed by the local law of the jurisdiction in which the debtor is located when the transfer is made or the obligation is incurred.
Reporter's Comment: 2. The choice of law rule set forth in § 10(b) applies to any claim for relief in the nature of a claim for relief under this Act—in other words, any claim for relief sufficiently similar to a claim for relief under this Act as to warrant the application of this Act’s choice of law rule. “This Act” of course refers to the enactment of this Act that is in force in the jurisdiction whose enactment of § 10(b) is being applied. Section 10(b) could not properly have been written to apply merely to “a claim for relief under this Act,” for such a formulation would presuppose the applicability of the substantive provisions of this Act as in force in that jurisdiction. If a question should arise as to whether a given claim for relief is sufficiently similar to a claim for relief under this Act that § 10(b) should apply to it, the answer is left to judicial determination.
5. Section 10(b) determines the governing law only for a claim for relief in the nature of a claim for relief under this Act. Furthermore, this Act, like the earlier Uniform Fraudulent Conveyance Act, has never purported to be an exclusive law on the subject of voidable transfers and obligations. See Comment 2 to § 15. Accordingly, the choice of law rule set forth in this § 10 is by no means applicable to all assertions that a transfer was made or an obligation incurred in contravention of law.
For example, suppose that the principal residence of Spouse X is State A and the principal residence of Spouse Y is State B. Spouse Y, anticipating a future divorce, transfers assets to Transferee for the purpose of thwarting X’s economic interests in the divorce. Later a divorce action between X and Y is properly brought in the courts of State A, which has enacted this Act. Law other than this Act (presumably the family law of State A) will govern such matters as the classification of the transferred property as marital or separate and the remedies available against Y for wrongful dissipation of assets, such as awarding a larger share of marital property to X or imposing a lien on the separate property of Y. The choice of law rule set forth in § 10 does not apply to those matters, for they do not involve a claim for relief in the nature of a claim for relief under this Act. However, if Transferee is subject to personal jurisdiction in State A and X brings an action in State A against Transferee seeking avoidance of the transfer, or a money judgment against Transferee in lieu of avoidance, on the ground that the transfer had been made by Y with intent to hinder, delay, or defraud X, the choice of law rule set forth in § 10 would apply to that action, and as a result that action would be governed by the voidable transfer law of State B.
JayNote: In the event of a conflict of laws, the applicable law is that of the debtor's location when the transfer was made.
Step 1: Has A Voidable Transaction Occurred?Has A Voidable Transaction Occurred? (Main Page)Insolvency TestInsider TestCapitalization TestIntent TestBadges of Fraud
(a)(1) {Intent Test} -- (a)(2) {Capitalization Test} -- (b) {Badges of Fraud}
(a) {Insolvency Test} -- (b) {Insider Test}
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