On January 14, 2014, Judge Robert E. Gerber of the United States Bankruptcy Court for the Southern District of New York in Weisfelner v. Fund 1. (In re Lyondell Chemical Co.), Adv. Proc. No. 10-4609 (REG), 2014 WL 118036 (Bankr. S.D.N.Y. Jan.

On January 7, 2013, the Judge Robert D. Drain of the United States Bankruptcy Court for the Southern District of New York held that a dispute concerning the debtors’ use of cash collateral was not subject to arbitration, notwithstanding a broad arbitration clause in the parties’ underlying agreement, because the decision to allow a debtor to use cash collateral constituted a “core” issue and was a fundamental aspect of the bankruptcy process. In re Hostess Brands, Inc., No. 12-22052 (RDD), 2013 WL 82914 (Bankr. S.D.N.Y. Jan. 7, 2013).

Background

On December 4, 2012, the United States Court of Appeals for the Ninth Circuit added to the growing body of case law delineating the extent of bankruptcy courts’ jurisdiction in the wake the Supreme Court’s decision in Stern v. Marshall.

With companies facing significant distress due to vast over-leverage, debtors have increasingly turned to asset sales under Section 363 of the Bankruptcy Code, rather than Chapter 11 plans, to dispose of their assets quickly and begin the process of winding down their estates.  According to the UCLA-LoPucki Bankruptcy Research Database, less than 4 percent of all large, public company bankruptcies were resolved by substantial asset sales  from 1990-2000.  However, in the period from 2001-2010, that figure rose to nearly 20 percent – peaking in 2011 when 43 percent of large pu

The United States Court of Appeals for the Third Circuit recently reiterated its position that the doctrine of equitable mootness should only apply if granting relief on appeal would undermine a consummated bankruptcy plan. In In re Philadelphia Newspapers, LLC, the Third Circuit held that the United States District Court for the Eastern District of Pennsylvania abused its discretion when summarily finding that the appeal at issue was equitably moot simply because the appellants failed to seek a stay and the debtors’ plan had been substantially consummated.

On June 28, 2012, Judge Shira A. Scheindlin of the United States District Court for the Southern District of New York affirmed the order of the United States Bankruptcy Court for the Southern District of New York granting Ahapura Minechem Ltd.’s petition for recognition of its Indian insolvency proceeding as a foreign main proceeding under chapter 15 of the Bankruptcy Code. Armada v. Shah (In re Ashapura Minechem Ltd.), 2012 WL 2478467 (S.D.N.Y. June 28, 2012).

The recent chapter 11 case of the storied New York law firm, Dewey & LeBoeuf LLP, will raise a host of issues attendant to the dissolution of a modern day “big law” firm partnership.  Chief among these issues is likely to be whether the profits earned by former Dewey partners in completing Dewey’s open client matters belong to Dewey or the former Dewey partners.

On May 4, 2012, Judge J. Paul Oetken of the United States District Court of the Southern District of New York held that the Bankruptcy Court has the injunctive power to enforce the automatic stay against entities falling within the Bankruptcy Court’s in personam jurisdiction, and that, in this case, the enforcement of the automatic stay did not violate interests of comity.  Sec. Investor Prot. Corp v. Bernard L. Madoff Inv. Sec., LLC (In re Bernard L. Madoff Inv. Sec., LLC), No. 11 Civ. 8629 (JPO), 2012 WL 1570859 (S.D.N.Y. May 4, 2012).  

Earlier this year, the U.S. Court of Appeals for the Second Circuit held that a proposed “gifting” plan distributing value from the second lien lenders to the prepetition equity holder violated the absolute priority rule and was confirmed in error.2 This decision, by a 2-1 panel vote,3 reversed the decisions of the Bankruptcy and District Courts for the Southern District of New York. The Second Circuit also affirmed unanimously the designation of the vote of an indirect competitor of the debtor that held no claims prior to the petition date.

When selling assets under section 363 of the Bankruptcy Code or pursuant to a plan, debtors typically conduct auctions, selecting the highest or best bidder as the purchaser. Section 363 auctions are intended to enable debtors to maximize the value of their assets, while ensuring "finality and integrity in the process . . . ."1