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'Bad Boy' Guaranties: Does the Punishment Fit the Crime?
At one time in the not-too-distant past, “bad boy” guaranties provided additional protection to lenders in the event of serious malfeasance by borrowers or guarantors, such as fraud or misappropriation of funds. But with the explosive growth of non-recourse finance transactions in the past decade, particularly in the real estate area, lenders began to expand the scope of those guaranties to include as “bad acts,” among other actions, voluntary bankruptcy filings by borrowers. Once the economy soured, therefore, distressed borrowers and guarantors found themselves with a dilemma: forego using bankruptcy to effect an orderly restructuring or reorganization of borrower indebtedness or find yourself liable for hundreds of millions of dollars of formerly non-recourse debt. This sounds like a quandary that would make even a bad boy cry.
Not surprisingly, these previously non-contentious guaranties have emerged as a fertile source of conflict between lenders and borrowers and have become the subject of several judicial challenges. Here, we discuss two recent New York decisions: UBS Commercial Mortg. Trust 2007-FL1 v. Garrison Special Opportunities Fund L.P., No. 652412/10, 2011 N.Y. Misc. LEXIS 4490 (N.Y. Sup. Ct. March 8, 2011) and Bank of Am. v. Lightstone Holdings, LLC, No. 601853/09, 2011 N.Y. Misc. LEXIS 4412 (N.Y. Sup. Ct. July 14, 2011), both of which enforce the “bad boy” guaranties at issue.
Bankruptcy Sales: Finding a Diamond In the Rough
There is no efficient market for the sale of bankruptcy assets. Inefficient markets yield a transactional drag, potentially dampening the ability of debtors and trustees to maximize value for creditors. This article identifies ways in which investors may more easily discover bankruptcy asset sales.
Judge Rules Shaquille O'Neal Will Face Securities Lawsuit for Promotion, Sale of NFTs
A federal district court in Miami, FL, has ruled that former National Basketball Association star Shaquille O'Neal will have to face a lawsuit over his promotion of unregistered securities in the form of cryptocurrency tokens and that he was a "seller" of these unregistered securities.
Why So Many Great Lawyers Stink at Business Development and What Law Firms Are Doing About It
Why is it that those who are best skilled at advocating for others are ill-equipped at advocating for their own skills and what to do about it?
Blockchain Domains: New Developments for Brand Owners
Blockchain domain names offer decentralized alternatives to traditional DNS-based domain names, promising enhanced security, privacy and censorship resistance. However, these benefits come with significant challenges, particularly for brand owners seeking to protect their trademarks in these new digital spaces.
Coverage Issues Stemming from Dry Cleaner Contamination Suits
In recent years, there has been a growing number of dry cleaners claiming to be "organic," "green," or "eco-friendly." While that may be true with respect to some, many dry cleaners continue to use a cleaning method involving the use of a solvent called perchloroethylene, commonly known as perc. And, there seems to be an increasing number of lawsuits stemming from environmental problems associated with historic dry cleaning operations utilizing this chemical.