Since it was decided in June 2011, countless scholars and courts have weighed in on the impact and implications of the Supreme Court’s seminal opinion in Stern v. Marshall.

The Department of Energy announced June 28 that Abound Solar Manufacturing LLC, a Colorado-based manufacturer of thin film solar panels and recipient of a $400 million loan guarantee, plans to stop operations this week, making it the fourth company backed by the Department of Energy’s loan guarantee program to file for bankruptcy. The company received a loan guarantee in December 2010 to help fund construction of two commercial-scale plants.

The secured lender industry experienced a collective sigh of relief on May 29 after the Supreme Court ruled in RadLAX Gateway Hotel, LLC, et al. v. Amalgamated Bank that credit bidding remains a viable option to protect collateral in a cramdown bankruptcy plan. Expressly inscribed in Sections 363(k) and 1129(b)(2)(A) of the Bankruptcy Code, credit bidding has long been understood as a fairly uncontroversial right; until recently.

In our May 24 entry on this topic, the Northern Mariana Islands Retirement Fund (the “Fund”) was battling numerous challenges to its Chapter 11 eligibility. The dispute revolved around whether the Fund, which provides benefits to government workers and retirees, was a “governmental unit” as defined by the Bankruptcy Code. In a decision from the bench on June 1st, U.S. Bankruptcy Court Judge Robert Faris affirmed his May 29th tentative ruling that the Fund is a “governmental unit” and, as such, is ineligible for Chapter 11.

In a much anticipated opinion,In re TOUSA, Inc., --- F.3d ----, 2012 WL 1673910 (11th Cir. May 15, 2012), the Eleventh Circuit Court of Appeals has resolved a disagreement between the Bankruptcy Court and District Court for the Southern District of Florida by upholding the Bankruptcy Court’s findings—to the chagrin of lenders, who are now arguably exposed to new liabilities and higher standards of due diligence.

On April 17, 2012, the Northern Mariana Islands Retirement Fund (the “Fund”) became the first United States public pension fund to seek formal bankruptcy protection. The Fund, which provides retirement benefits to government employees of the Commonwealth of the Northern Mariana Islands (the “Commonwealth”) a U.S. territory, listed $256 million in assets and $1 billion in liabilities and has alleged it will exhaust its claims paying ability by as early as 2014. ”

Clients often raise questions concerning the enforceability of arbitration clauses in bankruptcy proceedings. While this topic has been hotly debated for many years, a recent Ninth Circuit opinion, In re Thorpe Insulation Co., 671 F.3d 1011 (9th Cir. 2012), reminds us that arbitration clauses are not sacrosanct and can be struck down by the court.

Leading the Past Week

It has long been understood by buyers of assets of distressed companies that once a sale is authorized pursuant to Section 363 of the Bankruptcy Code, the buyer is absolved of any liabilities which may have encumbered the assets of the previous owner, including causes of actions against them. However, a recent decision from the influential United States District Court for the Southern District of New York saddles buyers with the burden of unknown potential future claims.

In a significant expansion of the potential risk for distressed claims traders, the Delaware bankruptcy court has recently ruled¹ that traders who engage in insider trading may have their claims subordinated to equity, and that traders who amass claims sufficient to block a plan of reorganization owe fiduciary duties to all other creditors and shareholders during plan negotiations.