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The U.S. District Court for the Northern District of California recently issued two blistering opinions on appeals by the Internal Revenue Service (IRS) California Franchise Tax Board (FTB) (collectively, Tax Agencies) from a bankruptcy court’s Chapter 11 plan confirmation order and a tax determination order. In the first decision, the court held the appeals were neither constitutionally nor equitably moot. In re Levandowski, 2023 WL 2503305 (N.D. Cal. Mar. 14, 2023), (Levandowski I). In the second opinion, the court reversed and remanded the bankruptcy court’s order erroneously determining the debtor’s tax liability (Tax Order) and the bankruptcy court’s separate confirmation order on feasibility grounds “due to legal error [in] the Tax Order.” In re Levandowski, 2023 WL 2495763 (N.D. Cal. Mar. 14, 2023) (Levandowski II). The court also remanded to the bankruptcy court for a reconsideration of its “setoff rights” finding in the confirmation order’s discharge provision.
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Delaware District Court Could Guide Supreme Court Purdue Pharma Decision
By Michael L. Cook
A bankruptcy court properly held that derivative claims based on “piercing the corporate veil theory of liability [were] released under” a confirmed reorganization plan, but that direct “claims for negligent undertaking” were not released and “could be asserted” in state court against the debtors’ equity sponsors.
Court Caps Landlord's Bankruptcy Claim Against Lease Guarantor
By Andrew C. Kassner and Joseph N. Argentina Jr.
A big issue in real estate and retail bankruptcies, among others, involves the disposition of commercial real estate leases, given the potential magnitude of landlord damage claims under state law resulting from a tenant’s default under a long-term lease.
Delaware Bankruptcy Court Rejects Equity Holder's Challenge to Revoke Confirmation Order
By Lawrence J. Kotler
The equity owner asserted that the confirmation order previously entered by the court should be revoked based on the equity owner’s claim that value was lost due to improper sale and marketing efforts by the debtors and its professionals both pre- and post-bankruptcy and, as such, they should have been “in the money” and entitled to a distribution under the confirmed plan.
By George Williams
One of the major catalysts of the “Crypto Winter” that began in 2022 was the collapse of Terraform Labs’s native token LUNA in May 2022. Now two years and a dozen crypto-related bankruptcies later, Terraform Labs has filed for Chapter 11 protection.