The United States Court of Appeals for the Third Circuit recently upheld a $182.9 million judgment against PricewaterhouseCoopers, LLP (“PWC”) for allegedly contributing to the failure of Ambassador Insurance Company (“Ambassador”) through negligent auditing. Thabault v. Chait, No. 06-2209 (3d Cir., Sept. 9, 2008).
Nothing is certain in today's financial crisis - except that the legal system will be sorting out the rights and obligations of financial market participants for years to come. This is especially true for participants in the over-the-counter derivatives markets.
Sales of assets under a confirmed plan in a Chapter 11 bankruptcy are exempt from transfer taxes. Many courts had interpreted the exemption broadly and applied the exemption to sales that occur during a bankruptcy, but before a Chapter 11 plan had actually been confirmed, so long as the sale was generally in furtherance of the ultimate goals of bankruptcy. The Supreme Court imposed a strict interpretation of the statute stating that transfer taxes must be paid unless the sale actually occurs pursuant to an already confirmed plan. Florida Department of Revenue v.
In an interpretive statement, the Commodity Futures Trading Commission has taken the position that “cleared-only contracts,” over-the-counter contracts submitted for clearing through a futures commission merchant to a derivatives clearing organization, should be included within the definition of “net equity” for purposes of U.S. Bankruptcy Code provisions applicable to commodity brokers. The CFTC’s interpretation generally would treat cleared-only contracts in the same manner as exchange-traded futures contracts in the event of a futures commission merchant bankruptcy.
In Burkhart v. Coleman, (In re Tippett) --- F.3d ---, 2008 WL 4070690 (9th Cir. Sept. 4, 2008), the Ninth Circuit held that an unauthorized post-petition sale of real property may be upheld where: 1) the bankruptcy trustee failed to record the bankruptcy petition with the county recorder; and 2) a bona fide purchaser thereafter bought and recorded title in the property.
USCA Ninth Circuit, September 23, 2008
In In re Bryan Road LLC,1 the United States Bankruptcy Court for the Southern District of Florida considered whether a waiver of the automatic stay provision included in a prepetition workout agreement is enforceable in the debtor’s subsequent bankruptcy. The Bankruptcy Court enforced the waiver and held the creditor was not bound by the automatic stay after engaging in a four-factor analysis of the agreement and the circumstances surrounding its execution. The Bankruptcy Court cautioned, however, that relief from stay provisions are neither per se enforceable nor self-executing.
In Bethlehem Steel Corp. v. Moran Towing Corp. (In re Bethlehem Steel Corp.),1 the United States Bankruptcy Court for the Southern District of New York held that preferential transfer claims were not arbitrable. The Court reasoned that because the avoidance powers did not belong to the debtor, but rather were creditor claims that could only be brought by a trustee or debtor-in-possession, they were not subject to the arbitration clauses in contracts to which the creditors were not parties.
The Dispute and the Arbitration Clauses
The United States Bankruptcy Court for the District of Delaware has approved a settlement agreement between three Sea Containers companies, their unsecured creditors and the trustees of the two pension schemes belonging to the UK subsidiary Sea Containers Services Limited.
On September 25, 2008 in Washington, D.C., the Federal Trade Commission (“FTC”) held an all-day workshop, entitled “Consumer Protection and the Debt Settlement Industry,” to explore growth in the for-profit debt settlement industry and to examine its impact on consumers and businesses.