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The Bankruptcy Strategist
New York District Court Rules that Chapter 15 Recognition Is Not Prerequisite to Enforcement of Foreign Bankruptcy Judgment under Principles of Comity
Dan T. Moss and Mark G. Douglas
It has been generally understood that recognition of a foreign bankruptcy proceeding under Chapter 15 is a prerequisite to the enforcement by a U.S. court of an order or judgment entered in such a foreign bankruptcy proceeding under the doctrine of "comity." A ruling recently handed down by the U.S. District Court for the Southern District of New York directly challenges that principle.
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The Bankruptcy Strategist
Safe Harbor Shields Shareholders In Tribune Fraudulent Transfer Litigation
Michael L. Cook
The U.S. District Court for the Southern District of New York denied a litigation trustee’s motion for leave to file a sixth amended complaint that would have asserted constructive fraudulent transfer claims against 5,000 Tribune Company shareholders. The safe harbor of Bankruptcy Code §546(e) barred the trustee’s proposed claims.
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The Bankruptcy Strategist
‘Fresh Start’ Leads To Bankruptcy Discharge of Environmental Contamination Claims
Andrew C. Kassner and Joseph N. Argentina Jr.
One of the powerful benefits of bankruptcy is the ability to obtain a “fresh” start by obtaining a discharge of most, but not all claims that arose prior to the filing of the bankruptcy case. But when does a claim arise? This issue is especially complex when environmental contamination claims are involved.
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The Bankruptcy Strategist
Fifth Circuit Blocks Fraudulent Transferee’s Good Faith Defense
Michael L. Cook
“A … transferee [who] received fraudulent transfers with actual knowledge or inquiry notice of fraud or insolvency” loses any “good faith” defense available under the Texas version of the Uniform Fraudulent Transfer Act (TUFTA), held the Fifth Circuit in Janvey v. GMAG, LLC
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The Bankruptcy Strategist
What Has Merit Management Changed?
Matthew Gold
It has been nearly two years since the Supreme Court upended the world of the Bankruptcy Code securities safe harbor with its decision in Merit Management Group, LP v. FTI Consulting, Inc.. For all of the speculation regarding its consequences, there have been few subsequent lower court decisions applying Merit Management, however those cases provide valuable guidance to practitioners facing safe harbor litigation as well as transactional lawyers looking to take advantage of safe harbor protections.
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The Bankruptcy Strategist
A Clash Between ‘Free and Clear’ and Tenants’ Rights Under Bankruptcy Code Section 365(h)
Albena Petrakov
With the recent carnage in the retail industry, a lot of attention goes to the fate of landlords when their tenants seek bankruptcy protection. A recent case that brings balance is Revel AC Inc. v. IDEA Boardwalk, LLC.
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The Bankruptcy Strategist
Preference Attacks To Recover Prepetition Compensation Paid to Consultants of Troubled Companies
Paul A. Rubin and Hanh V. Huynh
Employees of a troubled company who stay on as consultants to assist in liquidating its assets or preparing the company for a bankruptcy filing may later be disappointed to face claims to claw back their prepetition compensation.
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The Bankruptcy Strategist
Quasi-Bankruptcy Quagmires
Howard C. Rubin and Deirdre M. Richards
When Entities May Not Have a Filing Choice and How Creditors Are Impacted
This article explores the difficulties some entities have encountered in filing bankruptcies and how one organization used extraordinary civil remedies in an attempt to accomplish what reorganization under Chapter 11 of the United States Bankruptcy Code would have provided.
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Commercial Leasing Law & Strategy
A Clash Between ‘Free and Clear’ and Tenants’ Rights Under the Bankruptcy Code’s Section 365(h)
Albena Petrakov
With the recent carnage in the retail industry, including Sears and many other retailers of all shapes and sizes, a lot of attention goes to the fate of landlords when their tenants seek bankruptcy protection.
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The Bankruptcy Strategist
Take-Aways from the Sears Sale Process
Adam L. Rosen
As widely reported, the downfall of Sears was a slow-motion train wreck. Despite its unique size and complexity, however, some of the strategies and techniques used by the stakeholders in Sears can be applied in cases of any size.
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Business Crimes Bulletin
Eighth Circuit Rejects Ponzi Scheme Presumption to Protect Legitimate Loan Repayments
Michael L. Cook
In Stoebner v. Opportunity Finance, LLC, the U.S. Court of Appeals for the Eighth Circuit held that “… Ponzi scheme payments to satisfy legitimate antecedent debts to defendant banks could not be avoided” by a bankruptcy trustee “absent transaction-specific proof of actual intent to defraud or the statutory elements of constructive fraud — transfer by an insolvent debtor who did not receive reasonably equivalent value in exchange.”
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The Bankruptcy Strategist
Don’t Set Me Off: No Triangular Setoff Among Affiliated Entities and a Debtor Counterparty
Adam C. Rogoff
In today’s global economy, companies often have multiple business lines operating through separate entities. Outside of bankruptcy, these affiliated operations sometimes transact in a holistic — albeit legally distinct — debtor-creditor relationship with their counterparty. But, as this article discusses, the legal separateness of affiliates can hinder economic protections that a creditor might have otherwise when its counterparty files for bankruptcy.
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The Bankruptcy Strategist
Caveat Intercreditor: Bankruptcy May Be Coming
Joel H. Levitin, Richard A. Stieglitz Jr. and Stephen J. Gordon
Bankruptcy Provisions in First Lien/Second Lien Intercreditor Agreements
While intercreditor agreements (ICAs) are not necessarily the most attention-grabbing of the various loan documents common to large financing transactions, they are nevertheless important, and lack of attention to detail with respect to their provisions could lead to unintended results in any future bankruptcy case.
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The Bankruptcy Strategist
Case Study: Delaware Bankruptcy Court Denies Trustee’s Breach of Fiduciary Duty Suit
Earl M. Forte
In January, a bench trial occurred in In re Covenant Partners, L.P., in which the Trustee of Debtor, Covenant Partners, L.P., sued for breach of fiduciary duty.
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The Bankruptcy Strategist
How Bankruptcy Courts Will Treat Cases Involving Cryptocurrency Exchanges
Richard J. Mason
This article looks at some of the issues that may arise if a cryptocurrency exchange becomes a debtor in a case under the Bankruptcy Code.
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The Bankruptcy Strategist
The How, What and Why of a Potential PG&E Bankruptcy
John J. Rapisardi and Daniel Shamah
PG&E Corporation and its subsidiary, Pacific Gas & Electric Company announced that it expects to file for Chapter 11 bankruptcy protection on or around Jan. 29, 2019, right around the conclusion of a mandatory 15-day notice requirement under California law. Such a filing would represent the second time PG&E resorted to protection under the U.S. Bankruptcy Code.
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The Bankruptcy Strategist
Junior Noteholders Successfully Petition for Dismissal of Involuntary Filing
H. Peter Haveles, Jr. and Eric Winston
The bankruptcy court’s ruling is a seminal decision that meaningfully circumscribes the ability of a secured noteholder under an indenture, particularly for structured debt, to force the debtor (i.e., issuer of the debt) into an involuntary bankruptcy.
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The Bankruptcy Strategist
Reports of the Demise of ‘Gifting’ Chapter 11 Plans Are An Exaggeration
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.
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Commercial Leasing Law & Strategy
The Bankruptcy Code’s Inherent Limitations for Struggling Golf Courses
Daniel A. Lev
Part One of a Two-Part Article
This article describes conflicts with zoning boards and neighbors as it relates to distressed golf course properties and the methods sometimes available in the bankruptcy realm for working around the problem of restrictive covenants that run with the land.
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The Bankruptcy Strategist
Eighth Circuit Rejects Ponzi Scheme Presumption to Protect Legitimate Loan Repayments
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.’”
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The Bankruptcy Strategist
Fifth Circuit Holds Asset Purchaser Unable to Acquire Rejected License Agreement
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
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The Bankruptcy Strategist
Secured Creditors Beware of Your Descriptions, Nomenclature and Terminations
Deirdre M. Richards and Howard C. Rubin
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 UCC.
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The Bankruptcy Strategist
Strawberry Fields For Sale
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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The Bankruptcy Strategist
Debtor v. UST: The Battleground Over Retention of a Chief Restructuring Officer
Mark S. Melickian and Jack O’Connor
The battle over retaining a chief restructuring officer, which the United States Trustee has traditionally not objected to, is heating up.
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The Bankruptcy Strategist
Second Circuit Rejects Use of Involuntary Bankruptcy Petition As Collection Tool
Michael L. Cook
A bankruptcy court properly dismissed a creditor’s involuntary bankruptcy petition “for cause” when it “would serve none of the Bankruptcy Code’s goals or purposes … and [when] the sole [petitioning] creditor is not substantially prejudiced by remedies available under state law,” held the U.S. Court of Appeals for the Second Circuit in In re Murray.
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The Bankruptcy Strategist
Which Financial Representations Will Justify a Discharge Objection after Lamar, Archer?
John A. Thomson, Jr.
The Supreme Court’s decision in Lamar, Archer & Cofrin, LLP v. Appling has significantly constricted the range and nature of statements that will support a successful objection by a creditor to the discharge of a debt that was obtained by the statements in question. This constriction could have a very real impact on how entities that loan money or provide services on credit review and collect information regarding a borrower’s creditworthiness.
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The Bankruptcy Strategist
Defusing the UST Tax Bomb
Jacob H. Marshall
How Lenders and Debtors can Minimize UST Fees and Maximize Creditor Recoveries
As predicted in the first part of this article (May, 2018), the new United States Trustee (UST) fee has had a disproportionate effect on middle-market, high-velocity cash flow companies. The best solution is for Congress to revisit the fee structure and refine it to reflect the realities of particular cases and the actual burden on the UST.
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The Bankruptcy Strategist
Eleventh Circuit Strengthens Creditor’s Defense to Preference Claim
Michael L. Cook
A defendant creditor in a preference suit may offset 1) the amount of later “new value” it sold to the Chapter 11 debtor against 2) the debtor’s earlier preferential payment to the creditor, the U.S. Court of Appeals for the Eleventh Circuit recently held.
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The Bankruptcy Strategist
The Bankruptcy Code’s Inherent Limitations for Struggling Golf Courses
Daniel A. Lev
Part Two of a Two-Part Article
The ability of a debtor to reject a restrictive covenant under Section 365 or to sell free and clear of a covenant under Section 363(f) is limited and the obstacles are difficult to surmount. A possible solution, however, may surface if a debtor can demonstrate a change of circumstances under state law.
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The Bankruptcy Strategist
Third Circuit Affirms Reversal of $275M Break-Up Fee in Del. Bankruptcy Case
Tom McParland
The U.S. Court of Appeals for the Third Circuit on Sept. 13 upheld a Delaware Bankruptcy Court’s decision to block a Florida-based energy company from collecting a $275 million merger termination fee against the bankruptcy estates of Energy Future Holdings Corp. and a subsidiary.
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The Bankruptcy Strategist
Acquisition of Claims for Plan Control
Jeff J. Friedman
The United States Court of Appeals for the Ninth Circuit recently provided additional guidance to creditors seeking to block confirmation of a plan by…
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The Bankruptcy Strategist
'Secured Lender's Corner:' Protecting the Secured Lender Before a Mortgagor or Lessee Files Bankruptcy
Deirdre M. Richards and Howard C. Rubin
It is important for a secured lender to protect itself when entering a transaction with a borrower or lessee to avoid a total loss if the borrower or lessee files a bankruptcy petition or if the leased equipment is damaged, missing or both.
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The Bankruptcy Strategist
The Bankruptcy Code’s Inherent Limitations for Struggling Golf Courses
Daniel A. Lev
Part One of a Two-Part Article
A simple Web search will unearth countless privately-owned golf courses that have closed, are for sale, or have sought bankruptcy protection as an avenue toward a financial restructuring or redevelopment. However, there are limitations on what the owner of a golf course can accomplish in Chapter 11 when the property is burdened with restrictive covenants limiting the use of the property.
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The Bankruptcy Strategist
On the Move
Attorney and law firm moves in bankruptcy law.
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The Bankruptcy Strategist
The Domesticity Barrier to Recognition of a Foreign Proceeding Under Chapter 15
Brian L. Shaw and Christina M. Sanfelippo
How Low Can You Go?
In In re B.C.I. Finances Pty Limited, Judge Sean Lane reiterated the low domestic presence threshold (Domesticity) that a foreign representative must meet when it is petitioning for recognition of a foreign proceeding under Chapter 15.
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The Bankruptcy Strategist
Lease Rejection in Shiekh Shoes
David Kupetz and Asa Hami
Store closing or liquidation sales are a routine part of Chapter 11 cases involving retail debtors. These sales are consistently authorized by bankruptcy…
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The Bankruptcy Strategist
Due Diligence in Distressed Community Hospitals
Deborah Williamson, Mark Andrews and Richard Y. Cheng
Many community hospitals are in distress. The causes are varied but have a constant theme — the cost to adapt to a rapidly changing environment.
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The Bankruptcy Strategist
Fifth Circuit Affirms Shareholder Veto of Chapter 11 Petition
Michael L. Cook
“Federal law does not prevent a bona fide shareholder from exercising its right to vote against a bankruptcy petition just because it is also an unsecured creditor,” held the U.S. Court of Appeals for the Fifth Circuit in In re Franchise Services of North America, Inc. According to the court, applicable Delaware law would not “nullify the shareholder’s right to vote against the bankruptcy petition.”
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The Bankruptcy Strategist
State Attorney-Client Privilege Rule Incorporated into Federal Law
Robert J. Stearn, Jr., Cory D. Kandestin and Christopher M. De Lillo
Delaware Bankruptcy Court Protects Communications with Financial Professionals Originating In Delaware
Because state law applies at the time the transaction is negotiated, the parties might assume — reasonably so — that state privilege law will govern communications with their attorneys and financial professionals. But what happens if, years later, a fraudulent transfer plaintiff files suit in federal court and brings claims under federal law? Does state privilege law still apply?
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The Bankruptcy Strategist
Chapter 11 Plan Proponents: Getting Service Right
Tinamarie Feil
This article reviews the detailed service basics of Rule 3017 of the Federal Rules of Bankruptcy Procedure and relevant portions of Rule 2002. In addition, it provides some tips on how to save time and money when executing service.
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The Bankruptcy Strategist
New Bill Would Protect Law Licenses of Student Loan Defaulters
Nineteen states currently allow government agencies to revoke the professional licenses — including law licenses — of student loan defaulters. But that may change.
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Entertainment Law & Finance
Impact on Accusers of Court-Approved Weinstein Co. Sale
Tom McParland
A Delaware federal bankruptcy judge’s ruling in May approved the $310 million sale of The Weinstein Co.’s television and film assets to Dallas-based Lantern Capital Partners. The development was the latest blow to women who had hoped to recover against the company for abuses suffered at the hands of company co-founder Harvey Weinstein.
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The Bankruptcy Strategist
Second Circuit Rejects Arbitration of Debtor’s Asserted Discharge Violation
Michael L. Cook
A bankruptcy court properly denied a bank’s motion to compel arbitration of a debtor’s asserted violation of the court’s discharge injunction, the U.S. Court of Appeals for the Second Circuit held.
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The Bankruptcy Strategist
Current Issues In Enforcing Judgments Against LLCs
Joseph P. Briggett
When a creditor obtains a judgment against a debtor, the debtor’s assets are sometimes held in membership interests in an LLC, which presents challenges for the creditor seeking recovery. The Uniform LLC Law provided for a charging order in such instances. Although the precise terms of each state’s LLC laws vary, some version of the charging order procedure is available in all states.
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The Bankruptcy Strategist
Chapter 15 Practice: U.S. Venue Selection Clause Does Not Trump Distribution Scheme in Italian Restructuring Plan
Dan T. Moss and Mark G. Douglas
The U.S. Bankruptcy Court for the District of Delaware recently ruled that choice of law and venue selection provisions in a contract between a U.S. creditor and Italian debtor did not trump the debt restructuring plan approved by an Italian bankruptcy court.
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Commercial Leasing Law & Strategy
Leased Property in Bankruptcy: Residential vs. Non-Residential
Janice G. Inman
Bankruptcy is a fact of life in the United States. When it happens, the treatment of a lease as either residential or non-residential may be crucial to all parties -- landlords, tenants, subtenants and their counselors.
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The Bankruptcy Strategist
How the New UST Fee Schedule Is a Ticking Tax-Bomb for Middle Market Debtors
Jacob H. Marshall and Randall Klein
As of Jan. 1, 2018, each jointly administered debtor with quarterly disbursements of at least $1,000,000 must pay a fee of 1% of all disbursements, up to $250,000 per quarter. Although this change in the law was only intended to address shortfalls in UST funding, it has taken a little-noticed component of bankruptcy and magnified it into a ticking tax-bomb for unsuspecting debtors and their lenders.
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Commercial Leasing Law & Strategy
Anti-Forfeiture Statute Saves a Debtor’s Exercise of Option to Renew Lease
Barry M. Klayman and Mark E. Felger
In a recent decision, Bankruptcy Judge Christopher S. Sontchi addressed the question of whether a Chapter 11 debtor, the tenant under a commercial lease, could exercise an option to renew the lease during the bankruptcy proceedings, even though the debtor was in default under the lease and the lease specified that it could not be renewed if defaults existed at the time the option was exercised.
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The Bankruptcy Strategist
Ninth Circuit Ruling Eases Plan Acceptance Requirement in Multi-Debtor Plans of Reorganization
Adam H. Friedman, Jonathan T. Koevary and Lauren B. Irby
In a case of first impression at the circuit level, the United States Court of Appeals for the Ninth Circuit held that section 1129(a)(10) of the Bankruptcy Code — which requires a favorable vote of at least one impaired class of creditors in order to confirm a Chapter 11 plan — applies on a “per-plan” basis, rather than a “per-debtor” basis.
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The Bankruptcy Strategist
SCOTUS Recap: What Lies Ahead for the Lower Courts’ Tests for “Non-Statutory Insiders”
Daniel A. Lowenthal and J. Taylor Kirklin
Ultimately, Village at Lakeridge is noteworthy for what the Supreme Court did not decide. In granting certiorari, the Supreme Court declined to address whether the lower courts’ various “non-statutory insider” tests should be refined. As concurrences from Justices Sotomayor and Kennedy emphasized, though, that issue is ripe for increased scrutiny.
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