In this article, we report on two recent decisions. One involves the calculation of landlord damage claims under Section 502 of the Bankruptcy Code, and the other involves whether environmental clean-up claims under federal and state law for commercial real estate were discharged under a confirmed Chapter 11 plan.
In a matter of first impression, the U.S. Bankruptcy Appellate Panel for the U.S. Court of Appeals for the Eighth Circuit determined that allegations of abuse constituted a personal injury tort claim, reversing a lower court’s conclusion that the allegations constituted a mental health condition.
Many single asset real estate (SARE) bankruptcies will check some or all of the boxes for a bad faith filing. The timing of a SARE filing commonly suggests an intent to delay, as SARE filings are generally a last resort to stay foreclosure. Nevertheless, courts may be reluctant to dispose of these cases as bad faith filings, absent particularly egregious circumstances evidencing patent abuse of the bankruptcy process.
So-called “creditor on creditor violence” resulting from liability management exercises (LME) can take different forms. In some aggressive cases, certain lenders are given the opportunity to finance the borrower and gain extra value or better their positions in a restructuring, while other similar lenders are left out.
In the recent case of In re ONH AFC CS Investors, the U.S. Bankruptcy Court for the District of Delaware examined the issue of standing in the context of a fraudulent conveyance action and whether a liquidating trustee had standing to pursue fraudulent conveyance claims when the beneficiaries of those claims were the debtors’ equity holders. Under limited circumstances, which were present in this case, the court found that the trustee could pursue such claims.
A three-judge panel for the Michigan Court of Appeals held last month that receivers directing insolvent marijuana companies can reject burdensome leases and disregard contract provisions that could lead to widespread defaults.
Following the U.S. Supreme Court’s 2024 decision in Purdue, which held that nonconsensual third-party releases are impermissible under the Bankruptcy Code, bankruptcy judges across multiple jurisdictions have been grappling with what constitutes a “consensual” release. Harrington v. Purdue Pharma L.P., 603 U.S. 204 (2024). This article analyzes how different judges have defined “consent” and provides guidance on best practices for structuring third-party releases.
The Fourth Circuit’s opinion focused on answering the core question presented — whether jurisdiction is determined by statute, rather than by a debtor’s financial condition. It reasoned that since the Constitution grants Article III power over “all cases arising under the laws of the United States” and the Bankruptcy Code is a law under the United States, the petition to reorganize under Chapter 11 of the Bankruptcy Code is clearly within the judicial ambit of the U.S. Bankruptcy Court.
In 2020, the Supreme Court ruled that a bankruptcy court’s decision to lift the automatic stay of pending litigation imposed by the Bankruptcy Code is a final, appealable order. But what if a bankruptcy court lifts the stay and later reimposes it? Is the latter order also immediately appealable, or is it considered interlocutory?
In a recent decision, the U.S. Bankruptcy Court for the District of New Jersey subordinated a 502(h) claim to prevent the claimant from being paid in full prior to investors defrauded by the debtors’ pre-petition operation of a Ponzi scheme. In its decision, the court maintained that the equitable powers of bankruptcy courts were sufficiently broad to subordinate a claim on equitable grounds under Section 510(c) and that there is nothing in the Bankruptcy Code that prevents a court from so doing.
