Suppliers to chapter 11 debtors-in-possession should always ensure that they are not being paid from the debtor’s “cash collateral” without court approval. Marathon Petroleum Company supplied products to debtor Delco Oil in the ordinary course of its business during the bankruptcy case, but was forced to return all of the postpetition payments it received from Delco, pursuant to section 549 of the Bankruptcy Code. Marathon was required to return these payments because they were deemed part of the cash collateral that was secured by Delco’s pre-petition creditor, CapitalSource Finance.

Longview Aluminum, LLC v Brandt (In re Longview Aluminum, LLC), 2010 WL 2635787 (ND Ill, June 28, 2010)

CASE SNAPSHOT

In this edition of the Landlord’s Corner, we review various cases that address the (i) rights of landlords to recover their property post-rejection, (ii) whether payments pursuant to a termination of lease agreement constitute preferential transfers and (iii) whether a lease could be retroactively rejected in the absence of a formal motion to reject.

The United States Bankruptcy Court for the District of Delaware (the "Delaware Bankruptcy Court"), recently in In re Leslie Controls, Inc., Bankr. D. Del., Case No. 10-12199, expounded on whether attorney-client and attorney work-product privileged documents remained protected from discovery under the common interest doctrine. The common interest doctrine permits counsel representing different clients with similar legal interests to share information without having to disclose that information to others.

We are seeing more and more challenges by borrowers to swaps. No big surprise since, with falling interest rates over the past few years, the borrowers are on the wrong end of the transactions. Although swaps are considered independent of the loans, they are often secured by the same collateral and are usually crossdefaulted with the loans, so the obligations that arise from early termination (which can be significant) become part of the collection process and are being fought vigorously by borrowers.

In re Leslie Controls, Inc., (Bankr. D. Del., Case No. 10-12199, 2010)

CASE SNAPSHOT

Sovereign Bank v Hepner (In re Roser), 613 F.3d 1240 (10th Cir. 2010).

CASE SNAPSHOT

Wells Fargo Home Mortgage, Inc. v Richardson (In re Brandt), 434 B.R. 493 (W.D. Mich. 2010)

CASE SNAPSHOT

Hitchin Post Steak Co v General Electric Capital Corporation (In re HP Distribution, LLP), 436 B.R. 679 (Bankr. D. Kan. 2010)

CASE SNAPSHOT

The United States Bankruptcy Court for the District of Kansas considered whether commercial vehicle leases that contained Terminal Rental Adjustment Clauses (or TRAC provisions) were true leases under Section 365 of the Bankruptcy Code or, instead, disguised financing transactions. The court held that the TRAC leases were true leases that must be either assumed or assigned pursuant to the terms of Section 365.

Parks v. Dittmar (In re Dittmar), 618 F.3d 1199 (10th Cir. 2010)

CASE SNAPSHOT