Opinion ID: 219830
Heading Depth: 2
Heading Rank: 4

Heading: Involvement of a Financial Intermediary

Text: Enron also argues that the redemption of debt does not constitute a protected settlement payment because it did not involve a financial intermediary that took a beneficial interest in the securities during the course of the transaction. Enron argues that the redemption thus did not implicate the systemic risks that motivated Congress's enactment of the safe harbor. Although the role of the broker-dealers that participated in Enron's redemption is a disputed issue of fact, see Enron IV, 422 B.R. at 426, Enron is correct that the DTC acted as a conduit and recordkeeper rather than a clearing agency that takes title to the securities during the course of the transaction. Nevertheless, we do not think the absence of a financial intermediary that takes title to the transacted securities during the course of the transaction is a proper basis on which to deny safe-harbor protection. The Third, Sixth, and Eighth Circuits rejected similar arguments in affirming application of the safe harbor to leveraged buyouts of private companies that involved financial intermediaries who served only as conduits. See In re Plassein Int'l Corp., 590 F.3d at 257-59; In re QSI Holdings, Inc., 571 F.3d at 549-50; Contemporary Indus. Corp., 564 F.3d at 986. In reasoning that provides an analog for us, these courts explained that undoing long-settled leveraged buyouts would have a substantial impact on the stability of the financial markets, even though only private securities were involved and no financial intermediary took a beneficial interest in the exchanged securities during the course of the transaction. [3] See In re Plassein Int'l Corp., 590 F.3d at 258; In re QSI Holdings, Inc., 571 F.3d at 550; Contemporary Indus. Corp., 564 F.3d at 987. We see no reason to think that undoing Enron's redemption payments, which involved over a billion dollars and approximately two hundred noteholders, would not also have a substantial and similarly negative effect on the financial markets. Moreover, § 546(e) applies to settlement payments made by or to (or for the benefit of) a number of participants in the financial markets. It would appear inconsistent with this language for courts to limit the safe harbor circuitously by interpreting the definition of settlement payment to exclude payments that do not involve a financial intermediary that takes title to the securities during the course of the transaction. In sum, we decline to adopt Enron's proposed exclusions from the definition of settlement payment and the safe harbor. The payments at issue were made to redeem commercial paper, which the Bankruptcy Code defines as a security. 11 U.S.C. § 101(49)(A)(i). [4] They thus constitute the transfer of cash ... made to complete [a] securities transaction and are settlement payments within the meaning of § 741(8). See Contemporary Indus. Corp., 564 F.3d at 985 (quoting In re Resorts Int'l, Inc., 181 F.3d at 515 (3rd Cir. 1999)). Because we reach this conclusion by looking to the statute's plain language, we decline to address Enron's arguments regarding legislative history, which, in any event, would not lead to a different result. See Lamie v. U.S. Trustee, 540 U.S. 526, 534, 124 S.Ct. 1023, 157 L.Ed.2d 1024 (2004) (It is well established that when the statute's language is plain, the sole function of the courts-at least where the disposition required by the text is not absurd-is to enforce it according to its terms. (internal quotation marks omitted)).