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The Bankruptcy Strategist
Bankruptcy Risk and Fraud In Cryptocurrency
J. Eric Wise
Among the risks of cryptocurrency exchanges are bankruptcy risk and fraud, including: the inalienability of account claims, holding an unsecured claim versus an entitlement to the return of coin, and bankruptcy preference risk.
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The Bankruptcy Strategist
Bankruptcy Court Says Bankruptcy Case Is ‘Filed’ When Uploaded, Not Stamped
Lawrence J. Kotler and Drew S. McGehrin
The U.S. Bankruptcy Court for the Southern District of New York summed up the importance of the determination as to when a bankruptcy case is actually filed of record, thereby triggering the imposition of the automatic stay and found that the “upload” time of a bankruptcy filing — and not the time physically “stamped” on a bankruptcy petition — determines when a case is commenced. In doing so, the Bankruptcy Court offered direction and guidelines that debtors and creditors will be well advised to observe in future cases.
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The Bankruptcy Strategist
Fourth Circuit Ruling Underscores Judicial Divide On Use of ‘Texas Two-Step’
Avalon Zoppo
A sharply divided U.S. Court of Appeals for the Fourth Circuit ruling shielding a nondebtor in bankruptcy proceedings from asbestos lawsuits underscores the wider and growing divide among judges across the country on the bounds of Chapter 11 protection and corporations’ use of the “Texas two-step” to address mass tort litigation.
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The Bankruptcy Strategist
Novel Issues of Chapter 11 Mass Tort and Complex Claims Cases Impact Claims Against Unrelated Debtors
Francis J. Lawall and Brenden S. Dahrouge
Chapter 11 cases involving mass tort and complex personal injury claims often require the resolution of novel legal issues that stretch the bounds of existing precedent. As these cases evolve, they can also impact claims against other debtors unrelated to the case at hand through court-approved injunctions, releases or settlements.
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The Bankruptcy Strategist
After Dismissal of J&J’s Second Talc Bankruptcy, Plaintiffs Lawyers Call for Consolidated Trials
Amanda Bronstad
With the dismissal of Johnson & Johnson’s second talc bankruptcy, plaintiffs lawyers are doubling down on their plans to pursue trials across the country.
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Commercial Leasing Law & Strategy
Distressed Investors Should Take Advantage of the Upcoming Plethora of Defaulted CRE Loans
Joseph J. Ori
What is different about this distressed cycle is that most of the lenders are not foreclosing and taking title to the CRE assets, managing, and leasing them for a few months and then selling the properties. They are more likely to sell the note/mortgage rather than foreclose on the property. This presents a unique and interesting opportunity for astute distressed investors, who are experienced in acquiring mortgage notes secured by commercial property and in the arduous foreclosure and bankruptcy process,
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The Bankruptcy Strategist
Evolution of Pre-Bankruptcy Planning Raises Questions of Good Faith
Andrew C. Kassner and Joseph N. Argentina Jr.
In recent years, as extensive pre-bankruptcy planning has evolved, bankruptcy filings frequently involve affiliates of larger companies, engineered with a structuring of liabilities in mind. The question of whether these targeted filings are for a legitimate bankruptcy purpose or should be dismissed has been the subject of significant high-profile litigation.
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The Bankruptcy Strategist
How the Texas Two-Step Changes How Plaintiffs Litigate Mass Torts
Mark Eveland
By enabling defendants to shield themselves from mass tort liability, the “Texas Two-Step” is a new obstacle for plaintiffs pursuing mass tort cases against manufacturers of dangerous products.
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The Bankruptcy Strategist
Could the $18.8M Talc Verdict Threaten J&J’s Bankruptcy Plan?
Amanda Bronstad
The verdict, which excluded punitive damages, could have been much larger. But the jury’s award has the potential to threaten the $8.9 billion settlement and, as a result, a proposed Chapter 11 reorganization plan in the bankruptcy of Johnson & Johnson’s LTL Management.
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The Bankruptcy Strategist
Second Circuit Affirms Slashing of Unreasonable Fees In Dismissed Involuntary Bankruptcy Case
Michael L. Cook
An involuntary bankruptcy petition is a limited, risky remedy for both creditors’ counsel and debtor’s counsel. The fee problems encountered by counsel for the petitioners and the putative debtor in this case provide a cautionary tale.
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The Bankruptcy Strategist
Second Circuit Sets Up Seven-Factor Test for Third-Party Releases In Bankruptcy Cases
Alan B. Morrison
The Second Circuit had a tough call to make in the Purdue Pharmacy bankruptcy appeal: What to do about the release given to the Sackler families who had agreed to contribute $5.5 to $6 billion to Purdue’s reorganization plan but were not themselves in bankruptcy.
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The Bankruptcy Strategist
Bankruptcy Court Highlights Pitfalls to Avoid When Retaining Experts
Francis J. Lawall and Marcy J. McLaughlin Smith
Simply because the expert is retained by counsel in anticipation of litigation, does not automatically render all communications privileged.
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The Bankruptcy Strategist
Bankruptcy Judge Dismisses 3M Unit’s Earplug Case, Concluding It Had No ‘Valid Reorganization Purpose’
Amanda Bronstad
U.S. Chief Bankruptcy Judge Jeffrey Graham found that 3M subsidiary Aearo Technologies, which is financially solvent, had no “valid reorganization purpose” to file for Chapter 11 protection last year.
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The Bankruptcy Strategist
Delaware Bankruptcy Court Provides Guidance On Drafting Proxies
Robert B. Greco
Proxies in voting and support agreements, secured debt instruments, and other corporate documents should be drafted in a manner that fully reflects the intended scope of the parties’ proxy relationship.
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Commercial Leasing Law & Strategy
Third Circuit: Pre-Bankruptcy Commercial Lease Termination Not Fraudulent Transfer
Michael L. Cook
Is an insolvent debtor’s pre-bankruptcy termination of a commercial lease a fraudulent transfer? The circuit courts seem to be split, however a close reading of cases in the Third and Seventh Circuits shows that the reasoning of both courts can be reconciled on their facts.
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The Bankruptcy Strategist
Lease Terminations As Fraudulent Transfers
Michael L. Cook
Is an insolvent debtor’s pre-bankruptcy termination of a commercial lease a fraudulent transfer? The circuit courts seem to be split, however a close reading of cases in the Third and Seventh Circuits shows that the reasoning of both courts can be reconciled on their facts.
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The Bankruptcy Strategist
The Role of Third-Party Releases In Successful Chapter 11 Reorganizations
John J. Rapisardi and Jacob T. Beiswenger
Part Two of a Two-Part Article
In Part Two, we continue the analysis by evaluating two constitutional issues arising from third-party releases: whether creditor consent to be bound by a third-party release is required to satisfy the due process clause of the Fifth and Fourteenth Amendments; and whether bankruptcy courts have constitutional authority to issue final orders granting third-party releases in a plan of reorganization under Stern v. Marshall.
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The Bankruptcy Strategist
Fourth Circuit: Corporate Subchapter V Debtors Subject to Discharge Exceptions Under Bankruptcy Code
Lawrence J. Kotler and Elisa Hyder
In a matter of first impression not yet addressed by any circuit court, the Fourth Circuit addressed whether the discharge exceptions under Section 523(a) apply to corporate debtors under Subchapter V of Chapter 11 of the Bankruptcy Code.
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The Bankruptcy Strategist
Appellate Court Reverses Chapter 11 Confirmation Order Based on Faulty Tax Ruling
Michael L. Cook
The Northern District of California recently issued two blistering opinions on appeals by the IRS and California Franchise Tax Board from a bankruptcy court’s Chapter 11 plan confirmation order and a tax determination order.
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The Bankruptcy Strategist
Corporate Bankruptcies and the Restructuring Solution
Brian Wanat
Recent, big-name Chapter 11 filings have brought to the light the importance of insurance solutions for companies in financial distress, as companies in this situation face oftentimes new and uncharted issues.
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The Bankruptcy Strategist
Ninth Circuit Bankruptcy Panel Holds Lack of Timely Objection Bars Objection to Homestead Value Exemption
Lawrence J. Kotler and Geoffrey A. Heaton
In In re Masingale, the U.S. Bankruptcy Appellate Panel for the Ninth Circuit held that in the absence of a timely objection, debtors who claimed a homestead exemption of “100% of FMV” in their residence had a valid exemption claim for the full fair market value of the property.
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The Bankruptcy Strategist
Bankruptcy Court Rules Limited Partnership Agreement Is Not an Executory Contract
Andrew C. Kassner and Joseph N. Argentina Jr.
Certain types of agreements, such as real estate leases, clearly are executory contracts subject to assumption or rejection in bankruptcy cases. But what about the partnership agreement itself?
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The Bankruptcy Strategist
Courts and Plaintiffs Lawyers Question Viability of ‘Texas Two-Step’
Christine Schiffner
As defendants increasingly seek bankruptcy as a resolution to multidistrict litigation claims, plaintiffs firms and judges are starting to ask questions about the legitimacy of the tool commonly referred to as the "Texas Two-Step."
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The Bankruptcy Strategist
Innocent Business Partner’s Fraud Liability Survives Bankruptcy
Michael L. Cook
The decision by the Supreme Court has practical significance for corporate officers and others in an agency or partnership relationship, and also may have serious consequences for corporate Chapter 11 debtors whenever a “domestic governmental unit” is a creditor.
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The Bankruptcy Strategist
Prejudgment Attachment of Assets Allowed By DE Bankruptcy Court
Andrew C. Kassner and Joseph N. Argentina Jr.
Are there exceptions to the general rule against prejudgment attachment that may allow a plaintiff to obtain injunctive relief against a defendant freezing the defendant’s assets prior to the outcome of the litigation? This issue was recently considered by the U.S. Bankruptcy Court for the District of Delaware.
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The Bankruptcy Strategist
The Role of Third-Party Releases In Successful Chapter 11 Reorganizations
By John J. Rapisardi and Jacob T. Beiswenger
Part One of a Two-Part Article
This two-part article will examine the role of third-party releases in successful Chapter 11 reorganizations. This part will address the factors considered in each Circuit where such releases have been deemed permissible within the confines of the Bankruptcy Code, evaluate several recent cases highlighting the uncertainty created by the current Circuit split, and consider options for creating a clear, nationwide standard.
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The Bankruptcy Strategist
Hourly Billing in FTX Bankruptcy Already At Historically High Level
Ellen Bardash
Attorneys and consultants involved in the FTX bankruptcy have asked the District of Delaware bankruptcy court to approve billed hours and expenses totaling just under $37 million for the first six weeks of Chapter 11 proceedings.
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The Bankruptcy Strategist
Can a Debtor That Has No Ongoing Business Operations Reorganize Under Chapter 11 In Good Faith?
Lawrence J. Kotler and Roxanne J. Indelicato
In a recent decision, the U.S. Bankruptcy Court for the Southern District of Texas (the court) addressed whether a debtor that has no independent assets or ongoing business operations can reorganize under Chapter 11 in good faith.
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The Bankruptcy Strategist
J&J Gets Stay In Talc Chapter 11 Dismissal
Amanda Bronstad
Johnson & Johnson’s talc bankruptcy may be on its last legs, but it’s still standing — at least for a while. On February 13, Johnson & Johnson subsidiary LTL Management petitioned the U.S. Court of Appeals for the Third Circuit to rehear its Jan. 30 decision dismissing its Chapter 11 case
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The Bankruptcy Strategist
Fifth Circuit Adds Color to Abstention Issue
Francis J. Lawall and Brenden Dahrouge
Rules Bankruptcy Court Lacked Jurisdiction to Decide State-Governed Question
Jurisdictional boundaries within the federal system as between bankruptcy and district courts as well as various federal agencies can be a maze that is at times nearly impossible to navigate. Further complicating matters are those cases involving state-regulated issues that add abstention to the mix.
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The Bankruptcy Strategist
Rights of Tenant to Security Deposit When Landlord Files for Bankruptcy
Andrew C. Kassner and Joseph N. Argentina Jr.
As we debate whether there will be a “soft” or “hard” landing of the economy and the resulting effect of different landings on the volume of bankruptcy filings, it is helpful to review how a bankruptcy filing affects not only rights between a creditor and the debtor, but also the respective rights of creditors against property held by the debtor.
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The Bankruptcy Strategist
Bankruptcy Veterans See Surge In Corporate Filings
Everett Catts
Corporate bankruptcies have been a hot topic lately, with several businesses or their parent companies declaring bankruptcy, announcing they plan to do so or saying they may to do so soon. Two veteran bankruptcy attorneys in Georgia give their take on this and other bankruptcy topics.
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Cybersecurity Law & Strategy
Live Webinar: The Crypto Landscape Post-FTX
CLS Staff
On Feb. 15 at 4 p.m. ET, Cybersecurity Law & Strategy will present a complimentary live webinar titled “The Crypto Landscape Post-FTX.” The presentation will cover the current status and near-future outlook for the blockchain (crypto) sector.
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Commercial Leasing Law & Strategy
New Bankruptcy Code May Provide Way Out of Commercial Leases
Eric Snyder
In major metropolitan areas, commercial office vacancies have skyrocketed and rents have plummeted. Tenants, required to examine their space needs post-pandemic, are eager to take advantage of the lower rents. A recent addition to the Bankruptcy Code provides these lessees with an opportunity to walk away from above-market leases.
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The Bankruptcy Strategist
Eleventh Circuit Stops Plan Confirmation Stampede
Michael L. Cook
In a recent ruling, the Eleventh Circuit upended a hastily confirmed reorganization plan. Its holding should stop the stampede known as the “confirmation express.”
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The Bankruptcy Strategist
Treating Student Loan Debt Relief By Standardizing 'Undue Hardship' In Bankruptcy Code
Rudolph J. Di Massa and Diane J. Kim
On Aug. 24, 2022, President Joe Biden announced the plan to forgive up to $10,000 in federal student debt for qualifying borrowers. This relief, however, was challenged in the courts and is now pending before the U.S. Supreme Court.
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The Bankruptcy Strategist
Duties of and Risks to Directors and Officers of Insolvent Enterprises
Marshall S. Huebner and Amber Leary
Traditionally, the bankruptcy risk for D&Os has been fairly low. Several recent developments have, however, shifted the landscape somewhat and altered the risk profile.
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The Bankruptcy Strategist
Online Extra: In 'Landmark' Win for Talc Plaintiffs, Third Circuit Dismisses Johnson & Johnson Unit's Bankruptcy
Amanda Bronstad
On Jan. 30, the U.S. Court of Appeals for the Third Circuit reversed a bankruptcy judge's decision, concluding that Johnson & Johnson subsidiary LTL Management was not in financial distress at the time it filed its Chapter 11 case in 2021.
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The Bankruptcy Strategist
U.S. Bankruptcy Court Denies Chapter 15 Recognition to a Case on the Isle of Man
Daniel A. Lowenthal
Cases interpreting Chapter 15 of the Bankruptcy Code after it was enacted in 2005 often addressed basic issues, such as whether a foreign debtor must have property in the U.S to file a case there. But even when there’s no property in the U.S., there’s an easy remedy: the foreign administrator can deposit a retainer payment with its U.S. law firm.
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Entertainment Law & Finance
The NFT Market and Fallout from the FTX Scandal
Mark Cianci, Charles Humphreville, Kelley Chandler and Ty Owen
The FTX bankruptcy scandal that has shaken the largely unregulated cryptocurrency world has slowed but isn’t likely to end the roll-out of celebrity-related, non-fungible digital token (NFT) offerings. But how might the FTX story impact a push for federal regulation of the NFT market?
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The Bankruptcy Strategist
Appellate Review of a Bankruptcy Court’s Preliminary Injunction
Michael L. Cook
A bankruptcy court preliminary injunction should be reviewable as of right because of Supreme Court precedent, the rulings of other courts and common sense.
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The Bankruptcy Strategist
Second Circuit Orders Refund of Unconstitutional Quarterly Fee Overpayment
Francis J. Lawall and Marcy J. McLaughlin Smith
Many practitioners have been speculating as to how courts will address the potential remedy for the unconstitutional U.S. trustee fees imposed against Chapter 11 debtors pending in U.S. trustee districts under the 2017 amendment to 28 U.S.C. Section 1930.
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The Bankruptcy Strategist
What’s In Store for Bankruptcy In 2023?
Dan Roe
Practitioners Weigh In
If anyone was holding out hope for a tidal wave of corporate bankruptcies in 2022, it’s time to abandon ship. If that was part of your 2023 budget, don’t get on the ship altogether.
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The Bankruptcy Strategist
Another Appellate Court Vacates A Bankruptcy Court Contempt Judgment
Michael L. Cook
The Southern District of New York vacated a bankruptcy court’s judgment holding a debtor’s business competitor “in contempt for violation of the [Bankruptcy Code’s] automatic stay … and assessing sanctions” of $19.2 million.
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The Bankruptcy Strategist
What Can We Learn from the FTX Bankruptcy?
Steven Salkin
The sudden and spectacular crash of crypto-exchange FTX will send long-lasting tremors through both the nation’s financial regulatory and bankruptcy landscapes.
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The Bankruptcy Strategist
Successor Liability Claims Constitute a ‘Property Interest’ for Purposes of a 363 Sale In Bankruptcy
Rudolph J. Di Massa Jr. and Malcolm Bates
In In re Norrenberns Foods, the U.S. Bankruptcy Court for the Southern District of Illinois had occasion to rule on a creditor’s objection to the sale of a debtor’s assets.
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The Bankruptcy Strategist
District Court Provides Guidance on ‘Psychedelic Confusion’
John J. Rapisardi and Matthew Kremer
The U.S. District Court for the Southern District of New York recently provided critical guidance on what the court observed as the “psychedelic confusion” surrounding the intersection of Bankruptcy Code §365, governing the assumption and rejection of executory contracts, and Bankruptcy Code §503, governing administrative priority.
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The Bankruptcy Strategist
Inflation, Interest Rates, and Already-Increasing Commercial Bankruptcy Filings
Erich N. Durlacher
What Should Financial Institutions Do Now In
Anticipation of a Potential (and Long-Awaited)
Downturn
What should a prudent lender be doing right now to “brace” itself for the coming financial uncertainty? Adopt a five-point “CAPER” strategy: Communicate, Analyze, Preserve, Execute, and Resolve.
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The Bankruptcy Strategist
Fifth Circuit Follows Ninth Circuit, Allows Post-Bankruptcy Contract Rate Interest In Solvent Debtor Case
Michael L. Cook
“… [B]ecause Congress has not clearly abrogated the solvent-debtor exception,” the U.S. Court of Appeals for the Fifth Circuit held that a reorganized solvent debtor had to “pay what it promised now that it is financially capable.”
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The Bankruptcy Strategist
Cybercrime and Bankruptcy: The Crypto Winter
Sean J. Coughlin and Vivian B. Isaboke
It comes as no surprise that the crypto winter has reinforced the perception of critics that digital currencies are “risky, flawed and unproven digital financial instruments.” This article analyzes the state of the cryptocurrency market and examines the impact of cybercrimes and crypto bankruptcies on the current market.
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