Adam Wolk, left, and Barbara Goodstein, right, of Mayer Brown. Courtesy photos
In February, this column discussed a new state law proposed by the Uniform Law Commission, namely the Uniform Special Deposits Act (the “USDA” or the “act”). The act seeks to eliminate inconsistent treatment across states of structures, such as trusts and escrows, intended to insulate deposit account assets from the risk of the depositor’s bankruptcy.
A recent New York case, In re Odonata Ltd., 658 B.R. 62 (Bankr. S.D.N.Y. 2024), held that funds deposited in a purported escrow account were in fact not exempt from being considered “property of the estate.” This decision articulates better than most the requirements, at least under New York law, for escrow accounts (see the discussion in our column “Trusts, Escrows and Property of the Estate (or Not),” 269 N.Y.L.J. 109 (June 2023)). It also emphasizes the need for a uniform solution for these and similar structures that is workable across state lines. Today, we discuss the Odonata case and the benefits of a uniform statute on these issues.
