12-4270-bk
In re Quebecor World (USA), Inc.

                         U NITED S TATES C OURT OF A PPEALS
                              FOR THE S ECOND C IRCUIT



                                August Term 2012

      (Argued:       May 13, 2013             Decided: June 10, 2013)

                            Docket No. 12-4270-bk




                    IN   RE :   Q UEBECOR W ORLD (USA) I NC .,

                                              Debtor.



                 O FFICIAL C OMMITTEE OF U NSECURED C REDITORS
                        OF Q UEBECOR W ORLD (USA) I NC .


                                              Appellant,

                                         v.

      A MERICAN U NITED L IFE I NSURANCE C OMPANY , AUSA L IFE I NSURANCE
  C OMPANY , B ARCLAYS B ANK PLC, D EUTSCHE B ANK S ECURITIES I NC ., L IFE
     I NVESTORS I NSURANCE C OMPANY OF A MERICA , M IDLAND N ATIONAL L IFE
      I NSURANCE C OMPANY A NNUITY , M ODERN W OODMEN OF A MERICA , N ORTH
     A MERICAN C OMPANY FOR L IFE AND H EALTH I NSURANCE /A NNUITY , N ORTH
      A MERICAN C OMPANY FOR L IFE AND H EALTH I NSURANCE OF N EW Y ORK ,
   P ROVIDENT L IFE AND A CCIDENT I NSURANCE C OMPANY , T HE N ORTHWESTERN
    M UTUAL L IFE I NSURANCE C OMPANY , T HE P AUL R EVERE L IFE I NSURANCE
   C OMPANY , S YMETRA L IFE I NSURANCE C OMPANY , T RANSAMERICA F INANCIAL
     L IFE I NSURANCE C OMPANY , T RANSAMERICA L IFE I NSURANCE C OMPANY ,
 W ACHOVIA C APITAL M ARKETS , LLC, W ILTON R EASSURANCE L IFE C OMPANY OF
              N EW Y ORK , J OHN D OES , 1-50, D EUTSCHE B ANK AG,

                                              Appellees.
Before:
                  C HIN   AND    L OHIER , Circuit Judges,
                        AND   S WAIN , District Judge. *




          Appeal from a judgment of the United States

District Court for the Southern District of New York

(Furman, J.), affirming an order of the United States

Bankruptcy Court (Peck, J.) dismissing appellant's

adversary complaint.            Appellant sought to avoid and recover

certain payments made to appellees in exchange for private

placement notes that had been issued by one of debtor's

affiliates.    Both lower courts held that the payments were

exempt from avoidance under section 546(e) of the

Bankruptcy Code.

          A FFIRMED .




                          J OHN K. S HERWOOD (Jason E. Halper and
                                Natalie J. Kraner, on the brief),
                                Lowenstein Sandler LLP, Roseland,
                                New Jersey, for Appellant.



    *
          The Honorable Laura Taylor Swain, United States
District Judge for the Southern District of New York, sitting by
designation.
                              - 2 -
                    J OSHUA D ORCHAK (Dina Kaufman and Jonathan
                          B. Alter, on the brief), Bingham
                          McCutchen LLP, New York, New York,
                          for Appellees.


C HIN , Circuit Judge:

          In this case, appellant Official Committee of

Unsecured Creditors of Quebecor World (USA) Inc. (the

"Committee") sought to avoid and recover certain payments

made by debtor Quebecor World (USA) Inc. ("QWUSA") to the

appellee noteholders in exchange for private placement

notes that had been issued by one of QWUSA's affiliates . 1

The bankruptcy court granted appellees' motion for summary

judgment, holding that the payments were exempt from

avoidance because they were both "settlement payment[s]"

and "transfer[s] made . . . in connection with a securities

contract," within the meaning of section 546(e) of the

Bankruptcy Code.    11 U.S.C. § 546(e).   The district court

affirmed both holdings.    We need not decide whether the

payments fall within the "settlement payments" safe harbor

because we conclude that they clearly fall within the safe

     1
          The parties dispute whether the payments at issue in
this case were made to purchase, redeem, or extinguish these
notes. For the reasons set forth below, we conclude that, in
the circumstances of this case, QWUSA purchased the notes.
                              - 3 -
harbor for "transfers made . . . in connection with a

securities contract."    Accordingly, we affirm the district

court's judgment.

                          BACKGROUND

           The relevant facts are undisputed and may be

summarized as follows:

           QWUSA and Quebecor World Capital Corp. ("QWCC")

are subsidiaries of Quebecor World, Inc. ("QWI"), a

Canadian printing company.   In 2000, QWCC raised $ 371

million for the Quebecor entities by issuing private

placement notes (the "Notes") to the appellees pursuant to

two nearly identical Note Purchase Agreements (the "NPAs").

QWI and QWUSA guaranteed the Notes and the funds were

eventually transferred, at least in part, to QWUSA.

           Section 8.2 of the NPAs gave QWCC the option to

prepay the Notes so long as QWCC paid the outstanding

principal, accrued interest, and a specified "Make -Whole

Amount."   Section 8.6 prohibited any Quebecor affiliate

from purchasing the Notes unless they, inter alia, complied

with the prepayment provisions in section 8.2.    Once the




                             - 4 -
Notes were paid in full, section 8.5 required that they be

surrendered to QWCC for cancellation.

         The NPAs also provided for the acceleration of the

Notes' maturity if QWI's debt-to-capitalization ratio fell

below a certain threshold.   Pursuant to the terms of QWI's

separate $1 billion revolving credit facility, any default

with respect to the Notes would have in turn triggered a

default under the credit facility agreement, with

calamitous results for Quebecor.     When QWI began having

financial difficulty in May 2007, it offered to purchase

just over half of the Notes in exchange for increasing the

debt-to-capitalization ratio, but the appellees rejected

this offer.   Instead, they entered a Noteholder Cooperation

Agreement and Right of First Refusal Agreement (the

"Cooperation Agreement"), in which they agreed not to sell

their Notes to anyone but an existing noteholder.

         In September 2007, QWI approved the prepayment of

all the Notes and QWCC issued a notice of its intent to

redeem the Notes early.   After realizing redemption would

have severe tax implications under Canadian law, however,

QWI restructured the prepayment so that first QWUSA would

                             - 5 -
purchase the notes from the appellees for cash and then

QWCC would redeem the notes from QWUSA in exchange for

forgiveness of debt QWUSA owed to QWCC.    QWUSA issued a new

notice to appellees indicating that it -- not QWCC -- would

pay the "Redemption Price" set out in the NPAs, and that

the payment would "result in the purchase of the Notes by

Quebecor World (USA) Inc."

         On October 29, 2007, QWUSA transferred

approximately $376 million to the appellees' trustee, CIBC

Mellon Trust Co. ("CIBC Mellon").    CIBC Mellon distributed

the funds to appellees and the appellees eventually

surrendered the Notes directly to QWI in Canada.     QWUSA

filed for bankruptcy in the Southern District of New York

on January 21, 2008, less than ninety days after making the

payment for the Notes.

         The Committee then commenced this adversary

action, seeking to avoid and recover the October 29

transfer pursuant to section 547 of the Code.     Appellees

moved for summary judgment, arguing that the transfer was

exempt from avoidance under section 546(e).     Before that

motion was resolved, this Court decided Enron Creditors

                             - 6 -
Recovery Corp. v. Alfa, S.A.B. de C.V. (In re Enron

Creditors Recovery Corp.), 

 (2d Cir. 2011), in

which we held that payments made to redeem commercial paper

before its maturity date were "settlement payments," within

the meaning of section 546(e), because they were

"transfer[s] of cash made to complete a securities

transaction."    Id. at 339 (quotation and alteration

omitted).

            After additional briefing, the bankruptcy court

granted appellees' motion, holding primarily that QWUSA's

payment fit the definition of "settlement payment"

announced in Enron.    Furthermore, because Enron had applied

section 546(e) to redemptions of commercial paper, the

bankruptcy court held that the payment also qualified as a

"transfer made . . . in connection with a securities

contract" regardless of whether QWUSA "redeemed" or

"purchased" the Notes.    The district court affirmed,

agreeing that QWUSA's payment was a "settlement payment"

under Enron.    The court did not agree that a transfer to

"redeem" securities could qualify as a "transfer made . . .

in connection with a securities contract" because the Code

                              - 7 -
defines a "securities contract" as one "for the purchase,

sale, or loan of a security."   11 U.S.C. § 741(7)(A)(i).

Nevertheless, the district court affirmed the bankruptcy

court's alternative holding on the basis that the

transaction was in fact a "purchase," not a "redemption."

           The Committee appeals.

                          DISCUSSION

A.   Applicable Law

           "We exercise plenary review over a district

court's rulings in its capacity as an appellate court in

bankruptcy," independently reviewing the bankruptcy court's

factual findings for clear error and its lega l conclusions

de novo.   Super Nova 330 LLC v. Gazes, 

, 141

(2d Cir. 2012) (quotation omitted).

           Under section 547 of the Code, the bankruptcy

trustee may avoid any transfer of a debtor's property

interest that is:

               (1) to or for the benefit of a
               creditor;
               (2) for or on account of an
               antecedent debt owed by the debtor
               before such transfer was made;
               (3) made while the debtor was
               insolvent;

                             - 8 -
                (4) made . . . [inter alia] on or
                within 90 days before the date of
                the filing of the petition . . . .

11 U.S.C. § 547(b).     Section 546(e) exempts some transfers,

however, if they fall within certain safe harbors:

                Notwithstanding section[] . . . 547
                . . . of this title, the trustee may
                not avoid a transfer [1] that is a
                margin payment . . . or settlement
                payment . . . made by or to (or for
                the benefit of) a . . . financial
                institution, . . . or [2] that is a
                transfer made by or to (or for the
                benefit of) a . . . financial
                institution . . . in connection with
                a securities contract, as defined in
                section 741(7), commodity contract,
                . . . or forward contract . . . that
                is made before the commencement of
                the case . . . .

Id. § 546(e).    In Enron, we defined a "settlement payment"

as a "transfer of cash made to complete a securities

transaction."    In re Enron, 651 F.3d at 339 (quotation and

alterations omitted).     Section 741(7) of the Code defines a

"securities contract" as "a contract for the purchase,

sale, or loan of a security . . . including any repurchase

or reverse repurchase transaction on any such security."

11 U.S.C. § 741(7)(A)(i).




                              - 9 -
         There is a split of authority regarding what role

a financial institution must play in the transaction for it

to qualify for the section 546(e) safe harbor.     Three

circuit courts have concluded that the plain language

includes any transfer to a financial institution, even if

it is only serving as a conduit or intermediary.     See QSI

Holdings, Inc. v. Alford (In re QSI Holdings, Inc.), 

, 550-51 (6th Cir. 2009); Contemporary Indus. Corp.

v. Frost, 

, 987 (8th Cir. 2009); Lowenschuss v.

Resorts Int'l, Inc. (In re Resorts Int'l, Inc.), 

, 516 (3d Cir. 1999).   Only the Eleventh Circuit has

held that the financial institution must acquire a

beneficial interest in the transferred funds or securities

for the safe harbor to apply.    See Munford v. Valuation

Research Corp. (In re Munford, Inc.), 

, 610

(11th Cir. 1996) (per curiam).    In Enron, we cited the

Third, Sixth, and Eighth Circuits' decisions with approval

and concluded that "the absence of a financial intermediary

that takes title to the transacted securities during the

course of the transaction is [not] a proper basis on which




                            - 10 -
to deny safe-harbor protection."     In re Enron, 651 F.3d at

338.

B.     Application

           We need not reach the "settlement payments" issue

because, based on the undisputed facts, QWUSA's payment on

October 29 fits squarely within the plain wording of the

securities contract exemption, as it was a "transfer made

by or to (or for the benefit of) a . . . financial

institution . . . in connection with a securities

contract." 2   11 U.S.C. § 546(e).

           QWUSA transferred funds to appellee's trustee CIBC

Mellon, in the amount and manner prescribed by the NPAs for

purchasing the Notes.    The parties agree that CIBC Mellon

is a financial institution.    The NPAs wer e clearly

"securities contracts" because they provided for both the

original purchase and the "repurchase" of the Notes.     Id.



       2
          We note that the Court in Enron had no occasion to
consider the "securities contract" safe harbor, which was added
after Enron filed for bankruptcy and after the adversary
proceeding commenced. See Financial Netting Improvements Act of
2006 § 5(b)(1)(B), Pub. L. No. 109-390, 120 Stat. 2692; Enron
Creditors Recovery Corp. v. Alfa, S.A.B. de C.V. (In re Enron
Creditors Recovery Corp.), 

, 331-32 (2d Cir. 2011)
(noting that Enron filed for bankruptcy in 2001 and adversary
proceeding commenced in 2003).
                             - 11 -
§ 741(7).    Accordingly, this was a transfer made to a

financial institution in connection with a securities

contract that is exempt from avoidance.

            We need not decide whether the transfer would

still be exempt if QWUSA had "redeemed" its own securities

because we agree with the district court that QWUSA made

the transfer to "purchase" the Notes.       Generally, "[t]o

redeem is defined as to purchase back; to regain possession

by payment of a stipulated price; to repurchase; to regain,

as mortgage property, by paying what is due; to receive

back by paying the obligation."       In re United Educ. Co.,

, 171 (2d Cir. 1907) (quotation omitted).       Here,

QWUSA was not "regaining" its own Notes; it was acquiring

for the first time the securities of another corporation,

QWCC.   In fact, under the terms of the NPAs, only QWCC had

the right to "pre-pay" or redeem the Notes; its affiliates

could only "purchase" the Notes if they complied with the

pre-payment provisions.    Therefore, QWUSA was not

"redeeming" its affiliate's Notes, but "purchasing" them.

            The Committee contends that QWUSA could not have

"purchased" the Notes for two reasons.      First, it points to

                             - 12 -
evidence in the record showing that some of the appellees

believed the transaction was a redemption, not a purchase.

But it made no difference to appellees at the time of the

transfer whether QWUSA was "redeeming" or "purchasing" the

Notes because, from their perspective, the NPAs treated

both the same way and appellees received the same "pre-

payment" price.   Thus, their subjective understanding of

the transaction at the time is not dispositive.

         Second, the Committee argues that the Cooperation

Agreement prohibited appellees from selling the Notes, and

therefore QWUSA could not have "purchased" the Notes.     But

the Cooperation Agreement explicitly allowed for the sale

of the Notes to a "Constituent Company Guarantor" like

QWUSA pursuant to an amended offer to purchase the Notes.

Moreover, neither QWUSA nor any other Quebecor entity was a

party to the Cooperation Agreement.   Thus, nothing

prohibited the noteholders as a group from selling -- and

QWUSA from purchasing -- all of the Notes in a single

transaction.   Even if appellees had breached the

Cooperation Agreement by selling to QWUSA, that would only

mean that appellees are liable to each other; the breach

                            - 13 -
would have no effect on the validity of the transaction

with QWUSA.

            Finally, the Committee argues that even if QWUSA

"purchased" the Notes, not all of the transfers are exempt

because CIBC Mellon was merely a conduit and some of the

appellees are not financial institutions.     Enron rejected a

similar argument, holding that the financial intermediary

need not have a beneficial interest in the trans fer.     See

In re Enron, 651 F.3d at 338-39.    To the extent Enron left

any ambiguity in this regard, we expressly follow the

Third, Sixth, and Eighth Circuits in holding that a

transfer may qualify for the section 546(e) safe harbor

even if the financial intermediary is merely a conduit.

See In re QSI Holdings, Inc., 571 F.3d at 551; Frost, 564

F.3d at 987; In re Resorts Int'l, Inc., 181 F.3d at 516.

            The plain language of the statute refers to

transfers made "by or to (or for the benefit of)" a

financial institution.    11 U.S.C. § 546(e) (emphasis

added). 3   Because we generally prefer a construction that


     3
          The phrase "(or for the benefit of)" was added by the
2006 amendments to section 546(e). See Financial Netting
Improvements Act of 2006 § 5(b)(1), Pub. L. No. 109-390, 120
                             - 14 -
does not render parts of a statute superfluous, see Marx v.

Gen. Revenue Corp., 

, 1177-78 (2013), we

conclude that a transfer may be either "for the benefit of"

a financial institution or "to" a financial institution,

but need not be both.

         Finally, we note that this construction furthers

the purpose behind the exemption.    As we explained in

Enron, in the context of the "settlement payment" prong of

section 546(e):

              Congress enacted § 546(e)'s safe
              harbor in 1982 as a means of
              'minimiz[ing] the displacement
              caused in the commodities and
              securities markets in the event of a
              major bankruptcy affecting those
              industries.' If a firm is required
              to repay amounts received in settled
              securities transactions, it could
              have insufficient capital or
              liquidity to meet its current
              securities trading obligations,
              placing other market participants



Stat. 2692. Because this change was made after the circuit
split arose, it is arguable that Congress intended to resolve
the split with the 2006 Amendments. See, e.g., United States v.
Mele, 

, 75 (2d Cir. 1997). But the legislative
history does not mention, let alone explain the reasoning
behind, this change. See H.R. Rep. No. 109-648 (Part I) at 8
(2006), reprinted in 2006 U.S.C.C.A.N. 1585, 1593. We need not,
however, rely on this legislative history, as the words of the
statute are unambiguous.
                             - 15 -
              and the securities markets
              themselves at risk.

In re Enron, 651 F.3d at 334 (quoting Kaiser Steel Corp. v.

Charles Schwab & Co., 

, 849 (10th Cir. 1990)).

A transaction involving one of these financial

intermediaries, even as a conduit, necessarily touches upon

these at-risk markets.    Moreover, the enumerated

intermediaries are typically facilitators of, rather than

participants with a beneficial interest in, the underlying

transfers.   A clear safe harbor for transactions made

through these financial intermediaries promotes stability

in their respective markets and ensures that otherwise

avoidable transfers are made out in the open, reducing the

risk that they were made to defraud creditors. 4

Accordingly, it was sufficient that QWUSA's transfer was

made to CIBC Mellon as appellees' trustee, even though CIBC

Mellon did not take title to the transferred funds.




    4
          Of course, the "securities contract" safe harbor is
not without limitation, and, for example, mere structuring of a
transfer as a "securities transaction" may not be sufficient to
preclude avoidance. See, e.g., 11 U.S.C. § 546(e) (providing
safe harbor relief from avoidance under section 548(a)(1)(B)
but not from avoidance under section 548(a)(1)(A)).
                             - 16 -
                        CONCLUSION

         For the foregoing reasons, we conclude QWUSA's

payment was a "transfer made . . . in connection with a

securities contract" and is exempt from avoidance pursuant

to section 546(e) of the Bankruptcy Code.    Accordingly, we

AFFIRM the judgment of the district court.




                           - 17 -