Jurisdiction of Bankruptcy Courts to Enter Final Judgment on “Stern Claims” Based on Consent of Parties Affirmed

The U.S. Supreme Court in Wellness Int’l Network, Ltd. v. Sharif1 explicitly affirmed the jurisdiction of Article I bankruptcy courts to issue final decisions on claims for which litigants are constitutionally entitled to Article III adjudication if the parties consent to the bankruptcy court adjudicating such claims.

Over the past few months, the economics of the oil and gas industry have changed dramatically. As oil and gas prices have fallen, so too have profit margins and working capital. Many companies will weather this storm. A fortunate few will expand their positions and acquire additional assets, some of which will be purchased from distressed companies. In dealing with these distressed companies and their assets, landmen and other oil and gas industry professionals will need to have a working-knowledge of select bankruptcy-related laws and concepts to protect their company’s assets.

Last week, in Wellness Int’l Network Ltd. v. Sharif, No. 13-935 (May 26, 2015), the Supreme Court held that a bankruptcy court can enter final judgment on “non-core” claims under 28 U.S.C. § 157 if the parties consent to that court’s jurisdiction.  It overturned a decision by the Seventh Circuit that relied heavily on the Sixth Circuit’s decision in Waldman v.

The U.S. Supreme Court recently held that a debtor in a Chapter 7 case cannot “strip-off” or void a wholly unsecured junior mortgage under section 506(d) of the Bankruptcy Code.

A copy of the opinion is available at: Link to Opinion.

Judge Vincent Bricetti of the United States District Court for the Southern District of New York issued a ruling in the Momentive Performance Materials cases affirming the bankruptcy court’s confirmation rulings on Monday, May 4.  Key themes raised in this case of interest to distressed investors and addressed in Judge Bricetti’s ruling include the appropriate interpretation of certain inde

On June 1, 2015, the United States Supreme Court in Bank of America, N.A. v. Caulkett, 575 U.S. ____ (2015), unanimously held that a Chapter 7 debtor cannot strip off wholly “underwater” liens secured by the debtor’s property. In Caulkett, the debtor’s property was subject to two liens when the bankruptcy case was commenced. Since the obligation owed on the first lien exceeded the value of the property, the second lien was underwater and therefore had no value.

The U.S. Supreme Court decided on Monday, June 1, 2015, that Chapter 7 debtors may not rid themselves of second-mortgage liens in cases where, at the time of the bankruptcy, the first mortgage is undersecured. The decision reverses two Eleventh Circuit rulings that would have made such liens disappear under Section 506(d) of the Bankruptcy Code. 

On June 1, 2015, the United States Supreme Court issued its decision in Bank of America, N.A. v. Caulkett, in which all nine Justices joined in an opinion that reversed an Eleventh Circuit ruling that chapter 7 debtors may “strip off” wholly unsecured junior liens. The Caulkett opinion largely relies upon the Supreme Court’s prior decision in Dewsnup v. Timm, 502 U.S. 410 (1992), in which the Court held that a chapter 7 debtor may not “strip down” liens where the value of the property partially secures the underlying claim.

The First Circuit recently joined the Tenth and Fifth Circuits in determining that untimely tax returns are not “returns” for purposes of discharging tax debt. The Court in In re Faheyreviewed the four bankruptcy court decisions concerning the dischargeability of state tax liabilities where the debtor filed the return untimely. The returns at issue were Massachusetts state tax returns that were filed late, but more than two years before the filing of the bankruptcy petition.

In a decision that could have far reaching implications on the manner and level of secured creditor participation in bankruptcy cases, the Court of Appeals for the Seventh Circuit recently held that the deadline for filing proofs of claim under Bankruptcy Rule 3002(c) applied to all creditors – both unsecured and secured.  Previously, secured creditors had relied on conflicting cases that permitted secured creditors to f