William J.

Perlstein (WP 1073)

Craig Goldblatt (CG 6793)
Jonathan E. Paikin (JP 7599)
Caroline Rogus (CR 6931)
Wll..MER CUTIER PICKERING
HALE AND DORR LLP
2445 M Street, N.W.
Washington, DC 20037
Telephone: (202) 663-6000
Facsimile: (202) 663-6363

Attorneys for Amici Curiae

International Swaps and Derivatives Association, Inc.,
Securities Industry Association, and The Bond Market Association

~TEDSTATESBANKRUPTCYCOURT
SOUTHERN DISTRICT OF NEW YORK

------------------------------------------------------------- x
Inre Chapter 11
Case No. 01-16034 (AJG)
ENRON CORP., et aI.,
Jointly Administered
Debtors.
------------------------------------------------------------- x
ENRON CORP.,
Plaintiff, Adv. Pro. No. 03-93373 (AJG)

v.
UBSAG

and

UBS SECURITIES LLC, flkJa UBS

WARBURG LLC (alkla UBS WARBURG),

Defendants.
------------------------------------------------------------- x
MEMORANDUM OF LAW OF INTERNATIONAL SWAPS AND DERIVATIVES
ASSOCIATION, INC., SECURITIES INDUSTRY ASSOCIATION, AND THE BOND
MARKET ASSOCIATION AS AMICI CURIAE IN SUPPORT OF DEFENDANTS'
MOTION FOR SUM:MARY JUDGMENT
 TABLE OF CONTENTS

Page
TABLE OF AUTHORITIES ii

PRELIMINARY STATEMENT 1

STArnMENTOFIN'TEREST 2

STATUTORY, FACTUAL AND PROCEDURAL BACKGROUND 5

I. SECTION 546(e) PRornCTS PAYMENTS MADE UNDER OTC

EQUITY DERIVATIVES CONTRACTS FROM PREFERENCE AND
FRAUDULENT CONVEYANCE ACTIONS 12

A. The Tra.r;Isfers Are Protected "Settlement Payments" In The

Forward Contracts Trade 13

B. The Transfers Are Protected "Settlement Payments" In The

Securities Trade 15

ll. SECTION 546(g) PROTECTS PAYMENTS MADE IN CONNECTION

WITH OTC DERIVATIVES TRANSACTIONS FROM PREFERENCE
AND FRAUDULENT CONVEYANCE ACTIONS 17

m. STATE LAW CLAIMS THAT CIRCUMVENT THE PROTECTIONS

AFFORDED TO THE FINANCIAL MARKETS BY THE FEDERAL
BANKRUPTCY LAWS ARE PREEMPTED 23

CONCLUSION 27
, I

TABLE OF AUTHORITmS

CASES
Page(s)
Bessette v. Avco Financial Services, Inc., 230 F.3d 439 (lst Crr. 2000) 25

Bevill, Bresler & Schulman Asset Management Corp. v. Spencer Savings & Loan
Ass'n, 878 F.2d 742 (3d Cir. 1989) 7,8,16

CentulY Glove, Inc. v. Iselin (In re Century Glove), 151 B.R. 327 (Bankr. D. Del.
1993) 25

Cipollone v. Liggett Group, Inc., 505 U.S. 504 (1992) 25

Cox v. Zale Delaware. Inc., 239 F.3d 910 (7th Cir. 2001) 25

Curtoll v. Port Authority, 183 F. Supp. 2d 664 (S.D.N.Y. 2002) 24

Diamante v. Solomon & Solomon, P.C., No. 1:99CV1339 (FJSIDRH), 2001 WL

1217226 (N.D.N.Y. Sept. 18, 2001) 25

In re Comark, 971 F.2d 322 (9th Cir. 1992) 17

In re Hamilton Taft & Co., 176 B.R. 895 (Bankr. N.D. Cal.), ajfJd, 196 B.R. 532
(N.D. Cal. 1995), affd, 114 F.3d 991 (9th Cir. 1997) 15, 18

In re Hechinger Investment Co. ofDelaware, 274 B.R. 71 (D. Del. 2002) 16-17, 24,25,26

In re Interbulk, Ltd., 240 B.R. 195 (Bankr. S.D.N.Y. 1999) 9,20

III re Nation, 236 B.R. 150 (S.D.N.V. 1999) 24

In re Olympic Natural Gas Co., 294 F.3d 737 (5th Cir. 2002) 14

In re Resorts International. Inc., 181 F.3d 505 (3d Crr. 1999) 16

International Shoe Co. v. Pinkus, 278 U.S. 261 (1929) 23

Kaiser Steel Corp. v. Charles Schwab & Co., 913 F.2d 846 (lOth Cir. 1990) 6, 16, 17

Kaiser Steel Corp. v. Pearl Brewing Co., 952 F.2d 1230 (10th Cir. 1991) 16

MSR Exploration, Ltd. v. Meridian Oil, Inc., 74 F.3d 910 (9th Crr. 1996) 25

Penn Terra Ltd. v. Department ofEnvironmental Resources, 733 F.2d 267 (3d
Cir. 1984) 24

Pereira v. First North American National Bank, 223 B.R. 28 (N.D. Ga. 1998) 25

ii
Pertuso v. Ford Motor Credit Co., 233 F.3d 417 (6th Cir. 2000) 25

Thrifty Oil Co. v. Bank ofAmerica National Trust & Savings Ass tn, 322 F.3d
1039 (9th CiT. 2003) 9

SEC NO-ACTION LETTERS

Chicago Bd. Options Exchange, SEC No-Action Letter, Fed. Sec. L. Rep. CJI
79,665 (Feb. 22, 1991) 20

Goldman, Sachs & Co., SEC No-Action Letter, 2003 WL 22358822 (Oct. 9,
2003) 4 ••••••••••••••••••••••••••••••••••••••••• 20

Goldman, Sachs & Co., SEC No-Action Letter, 1999 WL 1244018 (Dec. 20,
1999) 20

STATUTES

7 U.S.C. § la(4) 14

11 U.S.C. § 101(25) 14, 15

11 U.S.C. § 101(51A) 13

11 U.S.C. § lOl(53B) 18, 20, 21

11 U.S.C. § 546(e) passim

11 U.S.C. § 546(g) passim

11 U.S.C. § 547 5

11 U.S.C. § 548 5, 13

11 U.S.C. § 550 5

11 U.S.C. § 741(8) 16

11 U.S.C. § 761(8) 14

15 U.S.C. § 78 et seq 6,21

1982 Amendments to Bankruptcy Code, Pub. L. No. 97-222, 96 Stat. 235 7, 13

iii
William J. Perlstein (WP 1073)
Craig Goldblatt (CG 6793)
Jonathan E. Pallin (JP 7599)
Caroline Rogus (CR 6931)
WlLMER CUTLER PICKERING LLP
2445 M Stree~ N.W.
Washington, DC 20037
Telephone: (202) 663-6000
Facsimile: (202) 663-6363

Attorneys for Amici Curiae

International Swaps and Derivatives Association, Inc.,
Securities Industry Association, and The Bond Market Association

~TEDSTATESBANKRUPTCYCOURT
SOUTHERN DISTRICT OF NEW YORK

------------------------------------------------------------- l(

lore Chapter 11
Case No. 01-16034 (AJG)
ENRON CORP., et al.,
Jointly Administered
Debtors.

------------------------------------------------------------- ~
ENRON CORP., Adv. No. 03-93383 (AJG)

Plaintiff,

v.
LEHMAN BROTHERS FINANCE S.A., et aI.,

Defendants.

------------------------------------------------------------- x
MEMORANDUM OF LAW OF INTERNATIONAL SWAPS AND DERIVATIVES
ASSOCIATION, INC., SECURITIES INDUSTRY ASSOCIATION, AND THE BOND
MARKET ASSOCIATION AS Al\flCUS CURIAE IN SUPPORT OF DISMISSAL OF
ADVERSARY PROCEEDING
1982 Amendments to Bankruptcy Code, Pub. L. No. 97-222, 96 Stat. 235 7, 13

1984 Amendments to Bankruptcy Code, Pub. L. No. 98-353, 98 Stat. 2706 9

1990 Bankruptcy: Swap Agreements and Forward Contracts, Pub. L. No. 101-
311,104 Stat. 267 11

Commodity Futures Modernization Act of 2000, Pub. L. No. 106-554, 114 Stat.
2763 21-22

LEGISLATIVE MATERIALS

H.R. Rep. No. 97-420 (1982)~ available at 1982 WL 25042 7, 13, 16

H.R. Rep. No. 101-484 (1990), available at 1990 WL 92539 passim

S. Rep. No. 98-65 (1983) 8, 9

S. Rep. No. 101-285 (1990), available at 1990 WL 259288 passim

Bankruptcy Treatment of Swap Agreements and Fo1t1 Jard Contracts: Hearing on

H.R. 2057 and H.R. 1754 Before the Subcommittee on Economic and
Commercial Law of the House Committee on the Judiciary, 101st Congo 1
(1990) 6

Financial Contract Netting Improvement Act of2001 , H.R. 11, 107th Congo
(2001) ; 22

Interest Swap: Hearing on S. 396 Before the Subcommittee on Courts and

Administrative Practices ofthe Senate Committee on the Judiciary, 10Ist
Congo 1 (1989) 10, 11, 19

136 Congo Rec. S7535 (1990) 6, 12

136 Congo Rec. S7536 (1990) 11, 18

MISCELLANEOUS

2000 Enron Corp. 10-K, available at

http://www.sec.gov/Archives/edgar/datal1024401/000102440101500010/
OOOl024401-01-500010.txt 12

Collier on Bankruptcy «]I 560.02 (15th ed. 2003) 20

iv
Pertuso v. Ford Motor Credit Co., 233 F.3d 417 (6th Cir. 2000) 25-26

Thrifty Oil Co. v. Bank ofAmerica National Trust & Savings Ass'n, 322 F.3d
1039 (9th Crr. 2003) 9, 10

SEC NO-ACTION LETTERS

Chicago Bd. Options Exchange. SEC No-Action Letter, Fed. Sec. L. Rep. <][
79,665 (Feb. 22, 1991) 20, 21

Goldman, Sachs & Co., SEC No-Action Letter, 2003 WL 22358822 (Oct. 9,
2003) 20

Goldman, Sachs & Co., SEC No-Action Letter, 1999 WL 1244018 (Dec. 20,
1999) 20

STATUTES

7 U.S.C. § la(4) 15

11 U.S.C. § 101(25) 14, 15, 16

11 U.S.C. § 101(51A) 14

11 U.S.C. § lOI(53B) passil11

11 U.S.C. § 546(e) passim

11 U.S.C. § 546(g) passiln

11 U.S.C. § 547 5

11 U.S.C. § 548 ~ 5

11 U.S.C. § 548(a)(I)(A) 13

11 U.S.C. § 550 5

11 U.S.C. § 741(8) 17

11 U.S.C. § 761(8) 15

15 U.S.C. § 78 et seq 6, 22

iii