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One of the most important, if not the most important Chapter 11 benefit for a reorganized debtor is the discharge of claims under Section 1141 of the Bankruptcy Code. The discharge provides the debtor with the proverbial fresh start free of legacy liabilities which caused the financial distress in the first place. In cases involving retailers, single asset real estate and other non-manufacturing debtors, the class of claims impacted by the discharge provisions is relatively straight forward and easy to identify. However, situations where a debtor places a product into the stream of commerce, which over time causes harm to those exposed, gives rise to questions such as when and whether a claim arises, and further how do you get proper notice to those persons so that a claims bar date will be binding? It is the latter issue that was recently addressed by the U.S. Court of Appeals for the Third Circuit, which examined whether the content of a debtor’s bar date notice satisfied due process, so as to discharge unknown litigation creditors’ claims against the company after confirmation of the debtor’s Chapter 11 plan of reorganization. See, Sweeney v. Alcon Laboratories, Case No. 20-2066 (3d. Cir. April 20, 2021).
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Seventh Circuit Applies Safe Harbor to Private Securities Transaction
By Michael L. Cook
“… [T]he term ‘securities contract’ as used in [Bankruptcy Code] §546(e) unambiguously includes contracts involving privately held securities,” The Seventh Circuit held in Petr v. BMO Harris Bank, N.A.
By Lawrence J. Kotler and Elisa Hyder
In Lafferty v. Off-Spec Solutions, the U.S. Bankruptcy Appellate Panel of the Ninth Circuit held that the discharge exceptions under Section 523(a) do not apply to corporate debtors under Subchapter V of Chapter 11 of the Bankruptcy Code.
Merchant Cash Advances Could Be More Trouble Than They’re Worth
By Joseph Pack and Jessey Krehl
As small-business owners have continued to struggle in an uncertain economy, a growing number have begun the dangerous practice of relying on merchant cash advances — essentially seeking financial shelter in a lion’s den.
Biotech Industry Bankruptcy Case Update: ‘Zymergen’ and ‘Humanigen’
By Edward E. Neiger, Marianna Udem and Joo Hee Park
This Bankruptcy Case Update focuses on the recent biotech industry bankruptcy cases of Zymergen and Humanigen.