JOHN J. PETR , Trustee for BWGS, LLC v. BMO HARRIS BANK N.A. and SUN CAPITAL PARTNERS VI, L.P.

In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 23-1931
JOHN J. PETR , Trustee for BWGS, LLC,
Plaintiff-Appellant,
v.
BMO HARRIS BANK N.A. and
SUN C APITAL P ARTNERS VI, L.P.,
Defendants-Appellees.
____________________
Appeal from the United States District Court for the
Southern District of Indiana, Indianapolis Division.
No. 1:22-cv-01742 — Jane Magnus-Stinson, Judge.
____________________
A RGUED J ANUARY 19, 2024 — DECIDED M ARCH 15, 2024
____________________
Before ST. EVE, K IRSCH , and LEE, Circuit Judges.
ST. EVE, Circuit Judge. Acquisition company Sun Capital,
through its subsidiary, acquired the financially floundering
BWGS, LLC. It financed the acquisition with a loan from BMO
Harris that BWGS repaid a month later. Now bankrupt,
BWGS asserts that this payment was a constructively fraudu-
lent transfer and seeks to avoid it and recover its value under
the United States Bankruptcy Code and Indiana Uniform

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2 No. 23-1931
Voidable Transactions Act. This appeal raises two issues of
first impression in this Circuit. First, whether § 546(e) of the
Bankruptcy Code, 11 U.S.C. § 546(e), which shields from
avoidance certain transactions made “in connection with a se-
curities contract,” extends to transactions involving private
securities that do not implicate the national securities clear-
ance market. And second, if so, whether § 546(e) also
preempts state law claims seeking similar relief such that a
bankruptcy trustee may not bring them under § 544(a) of the
Bankruptcy Code. We hold today that the answer to each of
these questions is “yes.”
I. Background
Because the district court dismissed this case at the plead-
ings stage, we recite the facts in the light most favorable to the
nonmovant Trustee, accepting as true all the well-pleaded
facts in the complaint. In re Jepson, 816 F.3d 942, 945 (7th Cir.
2016).
A. Factual History
Formed as Worm’s Way, Inc. in 1987, the debtor, BWGS,
LLC (“BWGS”)1 was a wholesale distributor of hydroponic
and organic garden products. Beginning in 2015, BWGS’s
gross profit margin dropped and it incurred net losses each
year. At that time, all BWGS’s outstanding stock was in an
Employee Stock Ownership Plan Trust (“ESOP Trust”).
BWGS was thus a privately held company whose stock was
never publicly traded.
1 While recognizing that the debtor’s name did not change from
Worm’s Way, Inc. to BWGS, LLC until 2016, for consistency, we refer to
the debtor uniformly as BWGS.

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No. 23-1931 3
In 2016, defendant Sun Capital Partners VI, L.P. (“Sun
Capital”) targeted BWGS for acquisition. Sun Capital negoti-
ated with the ESOP Trust, and they ultimately reached a stock
purchase agreement (“SPA”). Under the SPA, Sun Capital’s
subsidiary would acquire all stock in BWGS for $37,751,632.
Sun Capital then formed BWGS Intermediate Holding, LLC
(“Intermediate Holding”) to acquire BWGS’s stock. The ac-
quisition closed on December 30, 2016, and BWGS thus be-
came a direct, wholly owned subsidiary of Intermediate
Holding.
To finance the acquisition, Intermediate Holding entered
into a loan authorization agreement with defendant BMO
Harris Bank N.A. (“BMO”). Under this agreement, BMO ex-
tended Intermediate Holding a loan of about $25.8 million
(the “Bridge Loan”). Sun Capital guaranteed the agreement.
The day of the closing, BMO transferred these funds to Inter-
mediate Holding, which then transferred them to the ESOP
Trust in exchange for BWGS’s stock.
On January 27, 2017—less than one month after the acqui-
sition—Sun Capital caused BWGS and Intermediate Holding
to enter two credit agreements as joint borrowers. The first
was for a $20 million term loan with LBC Credit Agency Ser-
vices, LLC (“LBC”), under which LBC transferred $19,477,597
to BMO. The second provided for revolving loans of up to $20
million with JP Morgan Chase Bank, N.A. (“JP Morgan”), un-
der which JP Morgan transferred $5 million to BMO. That
same day, BWGS transferred an additional $409,706 from its
cash on hand to BMO.
BMO accepted these three transfers, totaling $24,887,303
(collectively, “the Transfer”), in full payment of the Bridge
Loan. The Transfer thus relieved Intermediate Holding and

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4 No. 23-1931
Sun Capital of their obligations under the Bridge Loan. BWGS
received no value from the Transfer.
The Transfer left BWGS, already in poor financial condi-
tion, in dire financial straits. BWGS defaulted repeatedly be-
tween 2017 and 2019, and BWGS’s creditors ultimately filed
an involuntary bankruptcy petition against it under Chapter
7 of the United States Bankruptcy Code. The bankruptcy court
entered an order for relief under Chapter 7 on April 24, 2019.
B. Legal Background and Procedural History
The Bankruptcy Trustee for BWGS (the “Trustee”) filed
this action against BMO, Sun Capital, and other unidentified
entities in the United States Bankruptcy Court for the South-
ern District of Indiana. The Trustee’s amended complaint
seeks to avoid the Transfer and recover its value from either
BMO or Sun Capital under Chapter 5 of the United States
Bankruptcy Code.
Chapter 5 affords bankruptcy trustees the authority to
“se[t] aside certain types of transfers ... and ... recaptur[e] the
value of those avoided transfers for the benefit of the estate.”
Merit Mgmt. Grp., LP v. FTI Consulting, Inc., 583 U.S. 366, 370
(2018). Sections 544 through 553 of the Code outline the cir-
cumstances under which a trustee may pursue avoidance. Id.
Here, the Trustee invokes § 544(b)(1), which provides:
[T]he trustee may avoid any transfer of an interest of
the debtor in property or any obligation incurred by
the debtor that is voidable under applicable law by a
creditor holding an unsecured claim that is allowable
under section 502 of this title or that is not allowable
only under section 502(e) of this title.

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No. 23-1931 5
11 U.S.C. § 544(b)(1). Section 544(b) thus allows the Trustee to
“step into the shoes of a creditor” and “avoid any transfers
such a creditor could have avoided” under applicable law. In
re Tribune Co. Fraudulent Conv. Litig., 946 F.3d 66, 85 (2d Cir.
2019) (quoting Univ. Church v. Geltzer, 463 F.3d 218, 222 n.1 (2d
Cir. 2006)).
The applicable law the Trustee relies upon here is the In-
diana Uniform Voidable Transactions Act (“IUVTA”). Section
14(a)(2) of the IUVTA provides that a constructively fraudu-
lent transfer is “voidable as to a creditor.” Ind. Code § 32-18-
2-14(a)(2). Section 17(a) subsequently provides that, “[i]n an
action for relief against a transfer,” a creditor may obtain, inter
alia, “[a]voidance of the transfer.” Ind. Code § 32-18-2-
17(a)(1). Alleging that the Transfer was constructively fraud-
ulent under § 14(a)(2), the Trustee seeks to avoid the Transfer
by combining § 544(b) of the Bankruptcy Code with
§§ 14(a)(2) and 17(a) of the IUVTA.
The Trustee further seeks to recover the value of the Trans-
fer from either BMO or Sun Capital pursuant to § 550(a) of the
Bankruptcy Code and § 18(b)(1) of the IUVTA. Section 550(a)
provides, in relevant part:
[T]o the extent that a transfer is avoided under section
544 … of this title, the trustee may recover, for the ben-
efit of the estate, the property transferred, or, if the
court so orders, the value of such property, from … the
initial transferee of such transfer or the entity for
whose benefit such transfer was made ….
11 U.S.C. § 550(a)(1). Similarly, § 18(b)(1) of the IUVTA pro-
vides: “To the extent that a transfer is avoidable in an action
by a creditor under section 17(a)(1) … the creditor may

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6 No. 23-1931
recover a judgment for the value of the asset transferred”
from certain transferees. Ind. Code § 32-18-2-18(b)(1).
Alleging he can avoid the Transfer under § 544(b) via
§ 17(a), the Trustee contends that he may thereafter recover
its value under § 550(a) and § 18(b)(1) from either the original
transferee—BMO—or a beneficiary of the transfer—Sun Cap-
ital.
BMO and Sun Capital (together, the “Defendants”) moved
to dismiss the Trustee’s claims, arguing that the Transfer is
not avoidable because it falls within the safe harbor of
§ 546(e), which prevents a bankruptcy trustee from undoing
certain transfers. As relevant here, the safe harbor provides
that “the trustee may not avoid 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) … ex-
cept under section 548(a)(1)(A) of this title.” 11 U.S.C. § 546(e).
The bankruptcy court disagreed. Denying the Defendants’
motions, the court found that only the SPA was a “securities
contract” and the Transfer was not made “in connection with”
the SPA because it lacked a “sufficient material nexus” to it.
As an alternative basis for denying the Defendants’ motions,
the court also held sua sponte that the Trustee’s claim to re-
cover the value of the Transfer from Sun Capital under
§ 18(b)(1) of the IUVTA, brought via the “‘strong arm’ powers
of § 544,” did not implicate § 546(e)’s safe harbor. Because
§ 18(b)(1) provides that a creditor may recover the value of a
transfer “[t]o the extent that a transfer is avoidable in an action
by a creditor,” Ind. Code § 32-18-2-18(b)(1) (emphasis added),
the bankruptcy court found that it permits the Trustee to re-
cover the value of the Transfer from Sun Capital without ac-
tually avoiding the Transfer.

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No. 23-1931 7
After granting the Defendants leave to file an interlocutory
appeal, the United States District Court for the Southern Dis-
trict of Indiana reversed. The district court found that the SPA,
Bridge Loan Authorization Agreement, and Sun Capital
Guaranty all qualified as securities contracts under the safe
harbor and the Transfer was made “in connection with” these
securities contracts. Accordingly, the district court held that
§ 546(e)’s safe harbor barred the Trustee’s claims.
Turning to the bankruptcy court’s alternative ruling, the
district court first rejected as waived the Trustee’s newfound
argument that the safe harbor does not apply to an IUVTA
§ 18(b)(1) claim against Sun Capital brought pursuant to the
strong-arm power of § 544(a) of the Bankruptcy Code. The
Trustee had not brought a claim under § 544(a) in the bank-
ruptcy court and could not do so for the first time in the dis-
trict court on appeal. Finally, the district court found that,
even if the Trustee had asserted freestanding claims under
§ 18(b)(1), § 546(e)’s safe harbor nevertheless preempted
those claims.
Accordingly, the district court remanded the case to the
bankruptcy court with instructions to enter a dismissal with
prejudice. The Trustee appeals.
II. Analysis
“We review the judgment of the district court using the
same standard of review with which the district court re-
viewed the bankruptcy court’s ruling.” In re Sheehan, 48 F.4th
513, 520 (7th Cir. 2022). “Like the district court, we review a
bankruptcy court’s factual findings for clear error and its legal
conclusions de novo.” In re Miss. Valley Livestock, Inc., 745 F.3d
299, 302 (7th Cir. 2014).

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8 No. 23-1931
On appeal, the Trustee contends that the district court
erred in directing the dismissal of his complaint based on the
§ 546(e) safe harbor. The crux of the instant appeal thus cen-
ters on whether § 546(e)’s safe harbor precludes the Trustee’s
claims to avoid and recover the value of the Transfer. In re-
solving this dispute, we must consider two ancillary ques-
tions. First, does § 546(e) apply to the Trustee’s claims to
avoid the Transfer here? And second, if so, can the Trustee
nevertheless circumvent § 546(e) and proceed with claims to
recover the value of the Transfer under § 544(a) of the Bank-
ruptcy Code and § 18(b)(1) of the IUVTA? We address each
question in turn.
A. Section 546(e)’s Safe Harbor Applies to the Transfer
The § 546(e) safe harbor precludes a bankruptcy trustee
from avoiding a transfer “made by or to … [a] financial insti-
tution … in connection with a securities contract.” Relying on
legislative history, the Trustee contends that § 546(e) applies
only to transactions that implicate the national system for the
clearance and settlement of publicly held securities. He rea-
sons that Congress enacted § 546(e) to insulate the nation’s fi-
nancial markets from instability generated by the avoidance
of public securities transactions, and undoing private transac-
tions does not advance that purpose. Thus, he argues that
Congress did not intend to shield the Transfer here, which in-
volved the sale of only privately held stock, from avoidance
under § 546(e)’s safe harbor.
In determining whether § 546(e)’s prohibition on the
avoidance of transfers made “in connection with a securities
contract” applies to private securities transactions, we begin,
as we must, with the statutory text. Nielen-Thomas v. Concorde
Inv. Servs., LLC, 914 F.3d 524, 528 (7th Cir. 2019). We read the

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No. 23-1931 9
statute as a whole and give words “‘their ordinary and natu-
ral meaning’ in the absence of a specific statutory definition.”
Id. (quoting CFTC v. Worth Bullion Grp., Inc., 717 F.3d 545, 550
(7th Cir. 2013)). If the statutory text is clear and unambiguous,
our inquiry ends. Id.
Section 546(e) provides:
Notwithstanding sections 544, 545, 547, 548(a)(1)(B),
and 548(b) of this title, the trustee may not avoid a
transfer that is a margin payment, as defined in section
101, 741, or 761 of this title, or settlement payment, as
defined in section 101 or 741 of this title … or that is a
transfer made by or to (or for the benefit of) a … finan-
cial institution … in connection with a securities con-
tract, as defined in section 741(7) ….
The Trustee insists that this court has already held § 546(e)
ambiguous and found it necessary to consult legislative his-
tory in construing the provision. See FTI Consulting, Inc. v.
Merit Mgmt. Grp., 830 F.3d 690 (7th Cir. 2016).2 In FTI Consult-
ing, we held no such thing. Instead, in FTI Consulting, we con-
sidered the discrete question of “whether the section 546(e)
safe harbor protects transfers that are simply conducted
through financial institutions (or the other entities named in
section 546(e)), where the entity is neither the debtor nor the
transferee but only the conduit.” Id. at 691. In resolving that
question, we noted at the outset that there was “no question
that the transfer at issue [was] either a ‘settlement payment’
or a payment made ‘in connection with a securities contract’”
2 At oral argument, counsel for the Trustee walked back this argu-
ment.

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10 No. 23-1931
for purposes of the safe harbor. Id. at 692. Thus, far from hold-
ing that § 546(e) as a whole is ambiguous, we were untroubled
by the meaning of the portion of that provision at issue here:
“in connection with a securities contract.”
Indeed, it was only after we held the phrases “by or to” and
“for the benefit of” in § 546(e) were ambiguous that we
“turn[ed] to the statute’s purpose and context for further
guidance.” Id. at 693. And even then, we did not come close to
holding that § 546(e), or any portion thereof, applies only to
securities transactions implicating the national securities
clearance system. See id. at 697 (holding narrowly that “sec-
tion 546(e) does not provide a safe harbor against avoidance
of transfers between non-named entities where a named en-
tity acts as a conduit”). Moreover, in affirming our FTI Con-
sulting decision, the Supreme Court in Merit Management sug-
gested that these disputed provisions are unambiguous and
thus resort to legislative history is unnecessary. See 583 U.S. at
385–86 (“Even if this were the type of case in which the Court
would consider statutory purpose, here Merit fails to support
its purposivist arguments. In fact, its perceived purpose is ac-
tually contradicted by the plain language of the safe harbor….
For these reasons, we need not deviate from the plain mean-
ing of the language used in § 546(e).” (citation omitted)).
Turning to the relevant portion of § 546(e) here, the parties
do not dispute that the Transfer to BMO was “made to a fi-
nancial institution.” (ellipses omitted). We must determine
whether the Transfer was made “in connection with a securi-
ties contract” within the meaning of § 546(e). In making this
determination, we turn to legislative history and other canons
of statutory interpretation only if this language is ambiguous.
See Nielen-Thomas, 914 F.3d at 528.

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No. 23-1931 11
1. “Securities Contract”
We first consider the term “securities contract” as used in
§ 546(e). This court has twice cited the definition of “securities
contract” as it applies to § 546(e) with approval. Peterson v.
Somers Dublin Ltd., 729 F.3d 741, 750 (7th Cir. 2013); Grede v.
FCStone, LLC, 746 F.3d 244, 252 (7th Cir. 2014). Indeed, the
Trustee identifies no ambiguities in the plain text of the term
or its definitions, and we can conceive of none. “Securities
contract” as used in § 546(e) is unambiguous.
Moreover, nothing in the plain language of § 546(e) ex-
cludes private contracts not implicating the national securities
clearance system from the definition of “securities contract.”
Section 546(e) defines “securities contract” by reference to 11
U.S.C. § 741(7) of the Bankruptcy Code. As we have recog-
nized, § 741(7) defines the term “very broadly,” Grede, 746
F.3d at 252, containing eleven sub-definitions. And not one of
these eleven sub-definitions contains any indication that it is
limited to contracts implicating only publicly held securities.
Indeed, the first sub-definition “provides that a ‘securities
contract’ is a contract for the purchase or sale of a security,
and § 101(49)(A)(ii) says that security includes stock.” Peter-
son, 729 F.3d at 750. As commonly understood, “stock” is a
broad term, covering shares in private and public companies.
See STOCK, Black’s Law Dictionary (11th ed. 2019) (defining
“stock” as “[t]he capital or principal fund raised by a corpo-
ration through subscribers’ contributions or the sale of
shares” and “[a] proportional part of a corporation’s capital
represented by the number of equal units (or shares) owned,
and granting the holder the right to participate in the com-
pany’s general management and to share in its net profits or
earnings”).

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12 No. 23-1931
Nor are we persuaded that the location of the definition of
“securities contract” within the section of the Bankruptcy
Code governing stockbroker liquidations somehow grafts a
public-securities requirement onto the otherwise-clear mean-
ing of the term. To the contrary, the “General Provisions” sub-
chapter of the Code provides that “a definition, contained in
a section of this title that refers to another section of this title,
does not, for the purpose of such reference, affect the meaning
of a term used in such other section.” 11 U.S.C. § 102(8). Con-
gress thus made it clear that it did not intend cross-references
between sections of the Code to impact the meaning of terms
used in those sections.
The decisions of our sister circuits support our conclusion
that nothing in the definition of “securities contract” or the
text of § 546(e) restricts the term to public securities. See, e.g.,
In re Plassein Int’l Corp., 590 F.3d 252, 258 (3d Cir. 2009) (reject-
ing the notion that “settlement payments” as contemplated by
§ 546(e) “must travel through the settlement system”); Con-
temp. Indus. Corp. v. Frost, 564 F.3d 981, 986 (8th Cir. 2009)
(“Nothing in the relevant statutory language suggests Con-
gress intended to exclude these payments from the statutory
definition of ‘settlement payment’ simply because the stock at
issue was privately held.”), abrogated in part by Merit Mgmt.
Grp., 583 U.S. 366; In re QSI Holdings, Inc., 571 F.3d 545, 547
(6th Cir. 2009) (“[Section] 546(e) is not limited to publicly
traded securities but also extends to transactions, such as the
leveraged buyout at issue here, involving privately held secu-
rities.”), abrogated in part by Merit Mgmt. Grp., 583 U.S. 366; In
re Olympic Nat. Gas Co., 294 F.3d 737, 742 n.5 (5th Cir. 2002)
(“By including references to both the commodities and the se-
curities markets, it seems clear that Congress meant to

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No. 23-1931 13
exclude from the stay and [§ 546(e)] avoidance provisions
both on-market, and the corresponding off-market, transac-
tions.”).
Accordingly, we hold that the term “securities contract” as
used in § 546(e) unambiguously includes contracts involving
privately held securities. Applying the term’s unambiguous
definition here, we have little trouble agreeing with the dis-
trict court that the SPA, Bridge Loan Authorization Agree-
ment, and Sun Capital Guaranty are “securities contract[s]”
as defined in § 741(7).3
Turning first to the SPA. We agree with both the bank-
ruptcy court and district court that the SPA falls squarely
within § 741(7)’s definition of a “securities contract” as “a con-
tract for the purchase … of a security.” § 741(7)(A)(i). The
amended complaint alleges that the SPA was “the transaction
by which Intermediate Holding acquired the stock of BWGS.”
Because a “security” includes “stock,” the Trustee’s own alle-
gations establish that the SPA was a contract for the purchase
of a security, and therefore a securities contract. See 11 U.S.C.
§ 101(49)(A)(ii); Peterson, 729 F.3d at 750.
The Bridge Loan Authorization Agreement also comforta-
bly falls within the definition of “securities contract.” The
Trustee alleges that “[t]o provide a portion of the $37,751,632
due [to] the ESOP Trust at closing, [BMO] agreed, pursuant to
3 The Defendants also argue that the two loan agreements BWGS en-
tered into with LBC and JP Morgan constitute securities contracts for pur-
poses of § 546(e). Because we find that the other three agreements were
securities contracts and the Transfer was made in connection with those
agreements, we need not consider whether the remaining loan agreements
were also securities contracts for purposes of § 546(e).

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14 No. 23-1931
a [Bridge] Loan Authorization Agreement … between Inter-
mediate Holding and BMO … to make a bridge loan to Inter-
mediate Holding of $25.8 million.” By his own words, the
Trustee concedes that BMO extended credit for the clearance
of a securities transaction—i.e., the sale of all stock in BWGS.
This places the Agreement within the definition of “securities
contract” set out in § 741(7)(A)(v): “any extension of credit for
the clearance or settlement of securities transactions.”
Finally, the Trustee alleges that the Guaranty was a “credit
enhancement in some manner to [BMO] with respect to the
Bridge Loan.” This allegation closely mirrors the definition of
“securities contract” under § 741(7)(A)(xi) as “any … credit
enhancement related to any agreement or transaction referred
to in this subparagraph, including any guarantee … to a …
financial institution … in connection with any agreement or
transaction referred to in this subparagraph.” As the Sun Cap-
ital Guaranty was a credit enhancement for the Bridge Loan
Authorization Agreement—a securities contract—it was a se-
curities contract itself.
Consistent with its “extraordinary breadth,” In re Bernard
L. Madoff Inv. Sec. LLC, 773 F.3d 411, 417 (2d Cir. 2014), sec-
tion 741(7) contains a catch-all sub-definition of “securities
contract.” That definition provides that “any other agreement
or transaction that is similar to an agreement or transaction
referred to in this subparagraph” is a securities contract.
§ 741(7)(A)(vii). Even if the SPA, Bridge Loan Authorization
Agreement, and Sun Capital Guaranty did not fall within the
narrower sub-definitions we just described, they are, at mini-
mum, agreements that are similar to those defined in those
sub-definitions. And that is enough.

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No. 23-1931 15
2. “In connection with”
That brings us to the “in connection with” requirement of
§ 546(e). We have previously rejected a bankruptcy trustee’s
invitation to consult legislative history in construing the
phrase “in connection with.” See Peterson, 729 F.3d at 749
(“Ambiguity sometimes justifies resort to legislative history,
but it is used to decipher the ambiguous language, not to re-
place it.”). Instead, we looked to decisions such as Merrill
Lynch, Pierce, Fenner & Smith Inc. v. Dabit, 547 U.S. 71 (2006),
and United States v. O’Hagan, 521 U.S. 642 (1997), which dis-
cuss the “in connection with” requirement of a different secu-
rities fraud statute. See Peterson, 729 F.3d at 749. Finding that
these decisions establish that § 546(e)’s “in connection with”
requirement “is more than comprehensive enough to cover”
the transaction at issue there, we did not adopt a precise def-
inition of the requirement.
Just as in Peterson, we find it unnecessary to define the
outer limits of the “in connection with” requirement here. The
broad construction of the phrase, as recognized in Peterson,
Dabit, and O’Hagan, makes clear that the Transfer here was
made “in connection with” the relevant securities contracts.
Indeed, it is difficult to imagine how the Transfer was not
made “in connection with” the securities contracts here. The
Transfer fully satisfied the Bridge Loan—a securities con-
tract—and extinguished Sun Capital’s obligations under the
Guaranty—another securities contract. And these two securi-
ties contracts effectuated the fulfillment of the SPA—yet an-
other securities contract.
That the Transfer occurred a little less than a month after
the SPA’s execution does not change our view. Section 546(e)

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16 No. 23-1931
contains no temporal requirement, and we see no reason to
impose one. Of course, a more temporally attenuated transac-
tion is less likely to have been “made in connection with” a
given securities contract. But the passage of time, however
long, does not categorically eliminate any connection. And
here, nearly $25 million—an amount that undoubtedly takes
time to plan and arrange—changed hands in under a month.
That gap does not break the connection between the Transfer
and the SPA.
* * *
In sum, we hold that the SPA, Bridge Loan Authorization
Agreement, and Sun Capital Guaranty are securities con-
tracts, the Transfer was made in connection with these securi-
ties contracts, and thus § 546(e)’s safe harbor applies and pre-
cludes the Trustee from avoiding the Transfer under § 544(b)
of the Bankruptcy Code.
B. The Trustee Cannot Advance Successful Claims Under
§ 544(a) of the Bankruptcy Code
The Trustee next seeks to amend his complaint to add a
claim under § 544(a) of the Bankruptcy Code to recover the
value of the Transfer from Sun Capital. Relying on the bank-
ruptcy court’s alternative holding, the Trustee now argues for
the first time that even if § 546(e)’s safe harbor precludes his
claims to avoid the Transfer, a claim under § 544(a) would al-
low him to recover the value of the avoidable Transfer without
actually avoiding it.
Section 544(a) provides: “The trustee shall have … the
rights and powers of, or may avoid any transfer of property of
the debtor or any obligation incurred by the debtor that is
voidable by” certain creditors. 11 U.S.C. § 544(a) (emphasis

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No. 23-1931 17
added). The Trustee thus argues that a claim under § 544(a)
would empower him to exercise the “rights and powers” af-
forded a creditor—specifically, those set out in §§ 14(a)(2),
17(a), and 18(b)(1) of the IUVTA.
Recall that § 14(a)(2) provides that a constructively fraud-
ulent transfer “is voidable as to a creditor.” Section 17(a)(1)
provides that a creditor may seek “avoidance” of such a trans-
fer “to the extent necessary to satisfy the creditor’s claim.” Fi-
nally, § 18(b)(1) provides that, “[t]o the extent that a transfer
is avoidable in an action by a creditor under section 17(a)(1) …
the creditor may recover judgment for the value of the asset
transferred” against certain creditors including, as relevant
here, “the person for whose benefit the transfer was made.”
(emphasis added).
In advancing a claim under § 544(a), the Trustee would al-
lege that the Transfer was constructively fraudulent under
§ 14(a)(2) and therefore avoidable under § 17(a)(1). Exercising
the “rights and powers” afforded a creditor by this statutory
scheme via § 544(a), the Trustee would thus seek to pursue a
judgment for the value of this avoidable Transfer against Sun
Capital4—the alleged beneficiary of the Transfer—under
§ 18(b)(1). The Trustee contends that § 546(e)’s prohibition on
the avoidance of a transfer would not prohibit him from seek-
ing such a judgment because he need not actually avoid the
avoidable Transfer.
The parties spill much ink over whether the Trustee
waived his right to advance such a claim under § 544(a) by
4 The parties agree that the Trustee could not proceed with a claim
under this theory against BMO, which was not a beneficiary of the Trans-
fer.

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18 No. 23-1931
failing to raise it before the bankruptcy and district courts. We
need not address this issue here. Even if the Trustee did not
waive his § 544(a) claim, amending the complaint to add it
would be futile. Through this claim, the Trustee is attempting
to invoke state-law IUVTA provisions to obtain the same re-
lief that § 546(e) otherwise precludes. Section 546(e) accord-
ingly preempts the claim.
Under the Supremacy Clause of the Constitution, federal
law prevails over state law. U.S. Const. art. VI, cl. 2. “Under
this principle, Congress has the power to preempt state law.”
Arizona v. United States, 567 U.S. 387, 399 (2012). This “pre-
clude[es] courts from ‘giv[ing] effect to state laws that conflict
with federal laws.’” Nationwide Freight Sys., Inc. v. Ill. Com.
Comm’n, 784 F.3d 367, 372 (7th Cir. 2015) (quoting Armstrong
v. Exceptional Child Ctr., Inc., 575 U.S. 320, 324 (2015)).
“Preemption can take on three different forms: express
preemption, field preemption, and conflict preemption.”
Wigod v. Wells Fargo Bank, N.A., 673 F.3d 547, 576 (7th Cir.
2012) (quoting Aux Sable Liquid Prods. v. Murphy, 526 F.3d
1028, 1033 (7th Cir. 2008)).
The Defendants concede that neither § 546(e) nor any
other statute expressly preempts the Trustee’s proposed IU-
VTA (via § 544(a)) claim. But they argue the doctrine of “con-
flict” or “obstacle” preemption nevertheless bars it. Conflict
preemption applies to “cases where compliance with both
federal and state regulations is a physical impossibility and
those instances where the challenged state law stands as an
obstacle to the accomplishment and execution of the full pur-
poses and objectives of Congress.” McHenry Cnty. v. Kwame
Raoul, 44 F.4th 581, 591 (7th Cir. 2022) (quotation omitted). The
Defendants do not assert any physical impossibility, so we

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No. 23-1931 19
consider whether allowing the Trustee to proceed with his
proposed IUVTA claim under § 544(a) obstructs congres-
sional purposes. Id. “That inquiry ‘is a matter of judgment, to
be informed by examining the federal statute as a whole and
identifying its purpose and intended effects.’” Id. (quoting
Crosby v. Nat’l Foreign Trade Council, 530 U.S. 363, 373 (2000)).
Two other circuits have considered the preemptive effect
of § 546(e) on state law claims. Both held that § 546(e)
preempts state law claims seeking to recover the value of
transfers that the safe harbor shields. In re Tribune Co., 946
F.3d at 83, 90–92; Contemp. Indus. Corp., 564 F.3d at 988. While
we have yet to directly consider the preemptive effect of
§ 546(e) on state law claims, we have suggested that we would
fall in line with our sister circuits on this issue. See Grede, 746
F.3d at 259. In Grede, we found a trustee’s state law unjust en-
richment claim preempted because “[t]o allow an unjust en-
richment claim in this context would allow the trustee or a
creditor to make an end run around the bankruptcy code’s al-
location of assets and losses, frustrating the administration of
the bankruptcy estate.” Id. And although we did not indicate
which provision of the Bankruptcy Code preempted the un-
just enrichment claim, we cited the Eighth Circuit’s decision
in Contemporary Industries as support for this proposition. See
id. Grede thus implies that § 546(e) preempts state law claims
seeking the same relief that its safe harbor otherwise prohib-
its.
The decisions of our sister circuits persuade us that
§ 546(e) preempts state law claims to recover the value of
transfers shielded by the safe harbor. Indeed, to allow a bank-
ruptcy trustee to recover the otherwise-unavoidable pay-
ments “would render the § 546(e) exemption meaningless,

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20 No. 23-1931
and would wholly frustrate the purpose behind that section.”
Contemp. Indus. Corp., 564 F.3d at 988.
While the Trustee claims that he seeks different relief un-
der the IUVTA and § 544(a)—namely, recovery of the value of
the Transfer from Sun Capital—we are not persuaded. The re-
lief the Trustee seeks, while different in name, is functionally
the same as the avoidance remedy the safe harbor prohibits.
The Trustee seeks the prohibited relief provided by §§ 544(b)
and 550(a)—to recover the value of the safe-harbored Transfer
from transfer-beneficiary Sun Capital.
As the Supreme Court described the “general avoiding
powers of a bankruptcy trustee” in Merit Management:
Chapter 5 of the Bankruptcy Code affords bankruptcy
trustees the authority to set aside certain types of trans-
fers and recapture the value of those avoided transfers
for the benefit of the estate. These avoiding powers
help implement the core principles of bankruptcy. For
example, some deter the race of diligence of creditors
to dismember the debtor before bankruptcy and pro-
mote equality of distribution. Others set aside transfers
that unfairly or improperly deplete assets or dilute the
claims against those assets.
583 U.S. at 370 (cleaned up). Thus, the avoidance power rec-
ognized under the Bankruptcy Code is part and parcel of the
power to recover the value of the property for the bankruptcy
estate. Without the recovery of transferred property, the
avoidance power is essentially meaningless. Allowing the
Trustee to obtain the part and not the parcel by dressing up
his claim as an IUVTA claim brought under § 544(a) poses an

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No. 23-1931 21
insurmountable obstacle to the safe harbor—an obstacle that
the doctrine of conflict preemption does not permit.
Moreover, the Trustee’s argument ignores the Bankruptcy
Code’s framework and the interplay among §§ 546(e), 544,
and 550(a). Although § 544(a) allows the Trustee to exercise
the “rights and powers” of a hypothetical creditor under state
law, it is § 550(a) that provides the trustee with the recovery
remedy. Section 550(a) provides, “to the extent that a transfer
is avoided under section 544 … the trustee may recover, for the
benefit of the estate, the property transferred, or … the value
of such property” from either “the initial transferee of such
transfer or the entity for whose benefit such transfer was
made.” § 550(a)(1) (emphasis added). Thus, to enjoy § 550’s
recovery remedy, a trustee must first avoid the transfer under
§ 544. And where, as here, § 546(e) renders a particular trans-
fer unavoidable under § 544, then it also precludes recovery
for that transfer’s value under § 550(a).
Accordingly, we hold that § 546(e) preempts the Trustee’s
proffered IUVTA claim to the extent that he could otherwise
bring it under § 544(a). To hold differently would render
§ 546(e) meaningless. As such, leave to amend would be fu-
tile, and the district court did not err in directing the bank-
ruptcy court to dismiss the Trustee’s complaint with preju-
dice.
III. Conclusion
The judgment of the district court is
AFFIRMED.

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