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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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Entertainment Law & Finance
Bankruptcy Impact on Trademarks, Distribution Rights
Shmuel Vasser and Yehuda Goor
It’s not uncommon for rights licensees in the entertainment industry to find themselves in a rights dispute when a licensor files for bankruptcy.
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The Bankruptcy Strategist
The Ripple Effect of Rejecting Trademark Licenses
Mark W. Page
The First Circuit Widens the Controversy
In In re Tempnology, the First Circuit held that the debtor’s rejection of a trademark license strips the nondebtor licensee of any right to continue to use the trademarks. In so doing, the court takes the same approach as the Fourth Circuit and rejects the approaches advocated by the Third and Seventh Circuits.
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The Bankruptcy Strategist
SCOTUS: No Safe Harbor Protection Where Financial Institutions are Mere Intermediaries
Sheryl P. Giugliano
The Supreme Court’s decision and analysis are instructive for both bankruptcy and corporate practitioners, and will likely yield significant returns for estate beneficiaries.
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The Bankruptcy Strategist
A Cautionary Tale for Lender Overreaching into Bankruptcy Remoteness
Jeffrey S. Greenberg
In re Lexington Hospitality Group, LLC
Bankruptcy remote structures are often used to protect against the impact of default under a credit facility. A common mechanism is organizational documents requiring an outside director or member’s vote to authorize a bankruptcy filing. However, the United States Bankruptcy Court for the Eastern District of Kentucky found that such a requirement implemented at the behest of a lender, among other bankruptcy restrictions, and where there was not true independence frustrated the important federal public policy of favoring fresh starts in bankruptcy.
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The Bankruptcy Strategist
On the Move
Movers and shakers in bankruptcy law.
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The Bankruptcy Strategist
Offshore Restructuring Outlook
David Bulley
The first quarter of 2018 has seen the Dow and NASDAQ pushing through record highs, increasing consumer confidence in the U.S. and Europe. However, there are segments in the market that are expected to need continued restructuring work, both onshore and offshore through 2018, particularly: offshore oil and gas drillers; European and U.S. retail; and the highly leveraged Chinese real estate sector.
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The Bankruptcy Strategist
What Retailers Can Learn from Recent Bankruptcies
Corali Lopez-Castro and Mindy Y. Kubs
Understanding the factors leading up to these bankruptcies, as well as the strategies used by retailers to emerge from bankruptcy, can give retailers significant knowledge about trends in consumer spending and how retailers can improve their overall positions going forward.
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Commercial Leasing Law & Strategy
Serving Two Masters: When ‘Bankruptcy Remote’ Meets Public Policy
Pamela J. Martinson
How Lenders to BREs Can Reduce the Risk of Debtor Bankruptcy Without Compromising Public Policies
Structured financing transactions, including those pertaining to commercial real estate, make extensive use of entities formed for the specific purpose of reducing the likelihood that assets will be involved in a potential bankruptcy proceeding. Known as “bankruptcy-remote entities,” or “BREs,” these entities are subject to structures and covenants in financing documents and their own formation documents, which are designed to reduce the likelihood that the BRE will file for bankruptcy protection.
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The Bankruptcy Strategist
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
Bankruptcy Venue Reform Bill Introduced
Adam Schlagman
On Jan 8, 2018, Senators John Cornyn (R-TX) and Elizabeth Warren (D-MA) introduced the Bankruptcy Venue Reform Act of 2018, which is designed to prevent forum shopping in Chapter 11 bankruptcy cases, a practice that has resulted in a concentration of bankruptcy cases in a few districts.
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The Bankruptcy Strategist
Recovering Administrative Claims in Chapter 9 Bankruptcy and Title III of PROMESA
James B. Bailey
Municipal bankruptcies under Chapter 9 of the Bankruptcy Code are rare. These cases are often filed to adjust bonded indebtedness and pension obligations. Congressional authorization for Puerto Rico and its instrumentalities to file for bankruptcy under the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA) was similarly out of concern for excessive bond debt and pensions.
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The Bankruptcy Strategist
Bankruptcy Venue Reform Bill
On Jan. 8, 2018, Senators John Cornyn (R-TX) and Elizabeth Warren (D-MA) introduced the Bankruptcy Venue Reform Act of 2018, which is designed to prevent forum shopping in Chapter 11 bankruptcy cases, a practice that has resulted in a concentration of bankruptcy cases in a few districts.
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The Bankruptcy Strategist
Bankruptcy Court Authorizes Rejection of Employment Separation Agreements
Francis J. Lawall and Michael J. Custer
The Bankruptcy Code can be an effective tool for reducing liabilities and enhancing asset value for the benefit of creditors. One of the more important…
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The Bankruptcy Strategist
Bankruptcy in a House of Worship
James R. Selth and Eden Gillott Bowe
A Public Relations Case Study
It’s a story as old as time: A matter of the heart becomes a matter of revenge, power, and money for a scorned lover. Regardless of the reason, when an organization is pushed into bankruptcy, it requires an attention to detail, creativity, and compassion for how scary the term “bankruptcy” is for most people.
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