The Third Circuit recently took a “pragmatic approach” when affirming lower court orders denying a stay of bankruptcy settlement distributions pending appeal. In re S.S. Body Armor I, Inc., 2019 WL 2588533 (3d Cir. June 25, 2019). After holding that the district court’s “stay denial order” was “final” for jurisdictional purposes, it also confirmed “the applicable standard of review” on motions for stays pending appeals.

Relevance

A purported conditional sale agreement “created a security interest rather than a lease,” held the U.S. Court of Appeals for the Fifth Circuit on Aug. 7, 2018. In re Pioneer Health Services Inc., 2018 WL 3747537, *3 (5th Cir. Aug. 7, 2018). Affirming the lower courts’ finding “that the relevant agreements were not ‘true leases,’” the court rejected a bank’s “motion to compel payment under [its] contract as an unexpired lease or an administrative expense.” Id., at *1. The economic substance, not the form of the transaction, was decisive.

Claims held by employees of a Chapter 11 debtor based on “restricted stock units (‘RSUs’) … must be subordinated [under Bankruptcy Code § 510(b)] to the claims of general creditors because … (i) RSUs are securities, (ii) the claimants acquired them in a purchase, and (iii) the claims for damages arise from those purchases or the asserted rescissions thereof,” held the U.S. Court of Appeals for the Second Circuit on May 4, 2017. In re Lehman Brothers Holdings, Inc., 2017 U.S. App. LEXIS 7920, *6 (2d Cir. May 4, 2017).

A bankruptcy court’s asset sale order limiting specific pre-bankruptcy product liability claims required prior “actual or direct mail notice” to claimants when the debtor “knew or reasonably should have known about the claims,” held the U.S. Court of Appeals for the Second Circuit on July 13, 2016. In re Motors Liquidation Co., 2016 U.S. App. LEXIS 12848, *46-47 (2d Cir. July 13, 2016).

An unsecured creditor had “adequately alleged a de facto merger” between a corporate defendant and a purported asset acquiror, held the U.S. District Court for the Southern District of New York when refusing to dismiss the defendants’ “alter ego and de facto merger claims.” John Deere Shared Services Inc. v. Success Apparel LLC, 2015 WL 6656932, at *5-7 (S.D.N.Y. Oct. 30, 2015) (Furman, J.).

An undersecured creditor (“C”) intending to credit bid at a sale of the debtor’s unencumbered property must give “notice” of its intent to the bankruptcy trustee, held the U.S. Court of Appeals for the Fifth Circuit on April 23, 2015. In re R.L. Adkins Corp., 2015 WL 1873137 (5th Cir. April 23, 2015). Affirming the bankruptcy and district courts’ denials of C’s belated request, the Fifth Circuit held that C “failed to exercise” its right to credit bid at a sale of its collateral.

The U.S. Court of Appeals for the Fourth Circuit, on Feb. 21, 2014, affirmed the dismissal of a bankruptcy trustee’s fraudulent transfer complaint against a “warehouse” lender who had been paid by a distressed home mortgage originator several months prior to the originator’s bankruptcy. Gold v. First Tennessee Bank, N.A., 2014 U.S. App. LEXIS 3279 (4th Cir. Feb. 21, 2014) (2-1). Affirming the lower courts, the Fourth Circuit held that “the bank accepted the payments” from its borrower “in good faith.” Id., at *2.

A New York bankruptcy court recently held that a losing acquiror in a competing Chapter 11 plan fight had “standing” to seek reimbursement of its legal fees and expenses as a “substantial contribution” to the reorganization case. In re S & Y Enterprises, LLC, et al., 2012 Bankr. LEXIS 4622, at *4-*5 (Bankr. E.D.N.Y., September 28, 2012). Nevertheless, the losing acquiror failed to recover because, in the court’s view, it did not satisfy the statutory requirements for reimbursement with the requisite “preponderance of the evidence.” Id.

The U.S. Court of Appeals for the Second Circuit, on Feb. 7, 2011, held that senior creditors could not “gift” part of their reorganization plan recovery to existing shareholders of the debtor.In re DBSD N. Am., Inc., __ F.3d __, 2011 WL 350480 (2d Cir. Feb. 7, 2011) (2-1) (Lynch, J.) (explainingIn re DBSD N. Am., Inc., 627 F.3d 496 (2d Cir. 2010) (summary opinion)). Its extensive 62-page opinion explained the court’s previous two-page summary ruling of Dec.