Fraudulent Transfers and Juries: Was Granfinanciera Rightly Decided?

In 1989, the Supreme Court ruled that a third party recipient of a fraudulent conveyance had a Seventh Amendment right to a jury trial when a bankruptcy trustee brought suit for a money judgment under Bankruptcy Code section 550(a). This was because, in 1791, an English bankruptcy trustee would have brought fraudulent transfer litigation in a court of law (not a court of equity) and would have obtained a money judgment. I maintain that the Supreme Court committed the classical logical error of Quaternio Terminorum—a false analogy. The analogy was that American bankruptcy trustees are like 18th century English bankruptcy administrators. They are not. American bankruptcy trustees are hypothetical judicial lien creditors. The English administrator was not. The proper analogy was to an English judgment creditor in 1971. The English judgment creditor was limited to enforcing her rights against a third party in a creditor’s bill in equity, which required that the legal remedy for judgment (writ of execution) must have been inadequate.