In re Main Street Business Funding, LLC, No. 23-2430 (3d Cir. Sept. 5, 2024) (Ambro, J.), the Third Circuit confirmed that an all-assets lien that extends to after-acquired property does not extend to a borrower’s commercial tort claims unless described with sufficient particularity under the Uniform Commercial Code (“UCC”). The court also confirmed that commercial tort claims can constitute proceeds of collateral, but that the commercial tort claims here did not constitute proceeds of the loan at issue in the case.

Background

In MaIlinckrodt PLC v. Sanofi-Aventis U.S. LLC, No. 23-1111, the U.S. Court of Appeals for the Third Circuit affirmed a Delaware bankruptcy court decision finding a debtor’s obligation to pay a perpetual royalty was an unsecured claim that was dischargeable in bankruptcy. The decision is a cautionary tale for contract counterparties that negotiate future payment rights.

Background

In In re New Dragon Toy Wholesale, Inc., Chief Bankruptcy Judge Martin Glenn denied a debtor/tenant’s motion for a temporary restraining order to enjoin a landlord and the New York City marshal from evicting the debtor from a commercial property, holding that the eviction was excepted from the automatic stay since the commercial lease terminated pre-bankruptcy.

Background

In In re Hal Luftig Company, Inc., the U.S. District Court for the Southern District of New York (Judge Denise L. Cote), denied confirmation of a Subchapter V plan of reorganization that contained a nonconsensual release of a non-debtor party.

Background

When a bankruptcy debtor rejects a lease, a landlord is entitled to a rejection damages claim. Under Section 502(b)(6) of the Bankruptcy Code, a landlord’s claim is capped at “the rent reserved by such lease, without acceleration, for the greater of one year, or 15%, not to exceed three years, of the remaining term of such lease.”

Courts have taken two different approaches in interpreting what constitutes the “15%” in the statute: (A) the remaining rent due under the lease; or (B) the remaining time under the lease.

The “Rent Approach”

In In re Flatbush Rho Mezz LLC, the U.S. Bankruptcy Court for the Southern District of New York allowed a secured creditor to be paid the entirety of a $5 million bond based on a loan with 24% default rate interest that continued to accrue interest during the pendency of an appeal.

Background of the Dispute

One of the three debtors, 85 Flatbush RHO Mezz LLC ("Mezz"), acquired a mixed-use property “with a hotel component” in Brooklyn, New York.

The market for crypto assets has recently experienced significant tumult as evidenced by the bankruptcy filings of several key crypto players, including Three Arrows Capital, Voyager Digital, Celsius Networks, FTX and, most recently, BlockFi. These bankruptcy cases give rise to numerous issues for investors holding crypto assets, which can be mitigated with proper diligence and planning. In addition, there are several estate planning and trust-specific considerations that should be addressed when holding crypto assets (or determining whether to invest in crypto assets).

The market for crypto assets has recently experienced significant tumult as evidenced by the bankruptcy filings of several significant crypto players, including Three Arrows Capital, Voyager Digital, Celsius Networks, FTX and, most recently, BlockFi. These bankruptcy cases give rise to numerous issues for investors holding crypto assets, which can be mitigated with proper diligence and planning. In addition, there are several estate planning and trust-specific considerations that should be addressed when holding crypto assets (or determining whether to invest in crypto assets).

The recently enacted Consolidated Appropriations Act, 2021 (CAA) contains important temporary amendments to Chapter 11 of the Bankruptcy Code in response to the ongoing COVID-19 pandemic, including several that impact both landlords and tenants under commercial real estate leases.

Small-business debtors can seek an additional extension of time to pay rent

In In re Callaway (Bankr. N.D. Cal. 2024), the bankruptcy court refused to dismiss a Chapter 7 bankruptcy case in which the dy to file for bankruptcy, as another bankruptcy court recently denied a motion dismiss a cannabis-related bankruptcy.