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Secured creditors can learn a great deal from a few recent bankruptcy cases involving the Uniform Commercial Code that remind us that the “devil is in the details.” These cases show that it is unrealistic to expect forgiveness by a court after a misstep involving Article 9 of the Uniform Commercial Code (UCC). Once a debtor files bankruptcy, Bankruptcy Code Section 544(a), also known as the “strong arm clause,” provides the trustee or the debtor the rights of a creditor with a judicial lien on the property of the debtor as of the date of the bankruptcy petition. See, Legislative History, Section 544(a).
Reports of the Demise of ‘Gifting’ Chapter 11 Plans Are An Exaggeration
By Timothy W. Hoffmann and Mark G. Douglas
In Nuverra Environmental Solutions,, the U.S. District Court for the District of Delaware affirmed a bankruptcy court order confirming a non-consensual Chapter 11 plan that included “gifted” consideration from a senior secured creditor to fund unequal distributions to two separate classes of unsecured creditors.
Eighth Circuit Rejects Ponzi Scheme Presumption to Protect Legitimate Loan Repayments
By Michael L. Cook
The Eighth Circuit affirmed the lower courts’ dismissal of a bankruptcy trustee’s $250 million fraudulent transfer suit against two banks (the Banks), rejecting the so called “Ponzi scheme presumption” that “allows a creditor to by-pass the proof requirements of a fraudulent-transfer claim by showing that the debtor operated a Ponzi scheme and transferred assets ‘in furtherance of the scheme.’”
Fifth Circuit Holds Asset Purchaser Unable to Acquire Rejected License Agreement
By Michael L. Cook
A license agreement “deemed rejected by operation of law” could not be acquired under a court-approved asset purchase agreement, held the U.S. Court of Appeals for the Fifth Circuit
By Barry A. Chatz and Kevin H. Morse
On Oct. 3, 2018, the Chapter 11 Liquidating Plan of Eclipse Berry Farms, LLC was confirmed, concluding a two-year journey from one of the largest strawberry growers in the country to the cessation of operations and eventual liquidation.
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