Back inÂ May, this blog featured a post on some preliminary research addressing the idea of “probability-based” fraudulent transfer analysis.Â PBGC lawyer (and Cadwalader alum) John GinsburgÂ has argued that rather than merely asking whether insolvency is â€śreasonably foreseeable,â€ť courts ought to clarify â€śreasonable foreseeabilityâ€ť in probabalistic terms.Â The basic idea underlying this argument is that it should be easier to attack (or to defend) a fraudulent transfer if it can be shown, for example, that the â€śprobabilityâ€ť of insolvency at the time of an LBO was 50% â€“ or 60%, or 75%.
Mr. Ginsberg argues further that courts ought to articulate what, for them, constitutes an acceptable margin of error (say, 40% risk of insolvency with a margin of error of +/- 15%).
Following comments offered here and elsewhere, Mr. Ginsberg – and colleaguesÂ Zachary Caldwell, Daniel Czerwonka, and Mary Burgess – have gone through a number of revisionsÂ and have aÂ final draft version of the articleÂ available for review prior to going to publication with ABI Law Review in March.
A discussion is hosted at http://www.bulletinboards.com/view.cfm?comcode=LBO_FT, where anyone can critique and debate the paper, upload a rebuttal from a word-processor, or upload a handwritten mark-up in PDF.Â In written comments to South Bay Law Firm, Mr. Ginsberg notes that the authors are particularlyÂ “interested in hearing from private equity fund managers, from the investment bankers who finance their deals, and from the lawyers, financial analysts and others who earn fees helping put those deals together.Â The paper has significant implications for them.”
- Fraudulent Transfer Claims on the Rise, New Navigant Consulting Data Shows (eon.businesswire.com)