Seventh Circuit Holds Securitization Trustee May Be Liable as "Initial Transferee" in Fraudulent Conveyance Action

On August 27, 2010, the United States Court of Appeals for the Seventh Circuit ruled that a bank acting as trustee for holders of asset securitization corporation commercial mortgage pass-through certificates was an “initial transferee” of certain repayments on the certificates and therefore the appropriate subject of an avoidance action to recover those sums. This was an issue of first impression for the federal appellate courts, but the decision has potential implications for entities serving in trustee roles.