A Delaware bankruptcy court has joined what appears to be a recent trend toward invalidating limited liability company operating agreement provisions that effectively afford lenders veto power over the LLC’s authority to file for bankruptcy protection; the court found one such provision void as contrary to federal public policy. In re Intervention Energy Holdings, LLC, et al., Case No. 16-11247 (KJC) (D.I. 69), 2016 W.L. ___________ (Bankr. D. Del. June 3, 2016).

Yes, Gathering Agreements Can Be Rejected as Executory Contracts (At Least Under One Court’s Interpretation of Texas Law)

Introduction

Although distressing for the owners and employees, an insolvent businesses can represent an opportunity for a buyer. One of the benefi ts of insolvency is that it can release the underlying business (which may be profi table in itself) from debts and give a buyer the opportunity to make a fresh start.

In doing so, however, buyers should beware of the employment law risks represented by any employees who remain in the business through the insolvency process.

The Acquisition

Introduction

In light of the decisions made in the case of BTI 2014 LLC v Sequana SA [2019] EWCA Civ 112 (the Sequana case), consideration may need to be given to the interests of creditors when declaring a dividend. The Court of Appeal in the Sequana case concluded that the payment of an otherwise lawful dividend constituted a transaction defrauding creditors under section 423 of the UK’s Insolvency Act 1986 (IA 1986).

Background to the Sequana Case

A recent bankruptcy decision in Florida may have implications for troubled healthcare entities that seek to avoid Medicare termination and preserve reimbursements. In the case In re: Bayou Shores SNF, LLC, Case No. 8:14-bk-09521-MGW, (Bankr. M.D. Fla. Dec. 31, 2014), the bankruptcy court found that a nursing home’s Medicare provider agreement had survived bankruptcy despite notice and intent to terminate the agreement issued by the Center for Medicare and Medicaid Services (CMS).

On October 31, 2014, the U.S. Court of Appeals for the 4th Circuit interpreted Maryland law in ruling that a bank’s security interest in a Chapter 11 debtor’s property created by a deed of trust that was executed before, but recorded after, the Internal Revenue Service filed a tax lien, had priority over the tax lien.

Background

Bankruptcy Court Decision

The Bankruptcy Court for the District of Delaware recently ruled in In re NE OPCO, INC., 2013 Bankr. LEXIS 4569 (Bankr. D. Del. Nov. 1, 2013), that electricity is not a “good” for purposes of 11 U.S.C. § 503(b)(9).

Going through bankruptcy is traumatic enough; doing so and still having your credit report still list your discharged debts as "delinquent" is enough to drive some people to litigation. And that's how several credit agencies found themselves on the receiving end of a series of Fair Credit Reporting Act class actions.

Tax-qualification requirements generally prohibit plan sponsors from eliminating optional methods of distribution under a retirement plan. This “anti-cutback” requirement is subject to only a limited number of exceptions. A recent modification to this rule adds a new exception for single-employer defined benefit plans maintained by employers in bankruptcy. Such employers may amend their plans to eliminate lump-sum distribution options if certain conditions are met.

The Anti-Cutback Rule