On March 18th, the Fifth Circuit held that a U.S. bankruptcy court may offer avoidance relief under a foreign country's law in a Chapter 15 bankruptcy proceeding. Plaintiffs had been appointed trustees by a Nevis court in a Nevis winding up petition. Plaintiffs filed a Chapter 15 bankruptcy petition in the U.S. alleging that the debtor had transferred assets to put them out of the reach of the Nevis court. The U.S.

Summary

The US Court of Appeals for the Seventh Circuit has weighed in on the question of whether a secured creditor’s ability to credit bid—to offset the amount of the creditor’s debt against the purchase price of sale assets rather than bid in cash—is a right guaranteed by statute even in “cramdown” plans of reorganization conducted under Chapter 11 of the Bankruptcy Code. On June 28, 2011, the court ruled in favor of secured creditors with its much anticipated decision in In re River Road Hotel Partners, LLC (River Road).1

The U.S. Court of Appeals for the First Circuit held on June 23, 2011, that junior creditors could receive a distribution over the objection of senior creditors who claimed they were entitled to post-petition interest under contractual subordination provisions. In re Bank of New England Corporation, ___ F.3d ___, 2011 WL 2476470 (1st Cir. June 23, 2011). In reaching its decision, based on the bankruptcy court's fact findings, the court stressed "that the parties did not intend to subordinate the Junior Noteholders to post-petition interest."Id. at *5.

RIVER ROAD HOTEL PARTNERS v. AMALGAMATED BANK (June 28, 2011)

The FDIC has adopted final rules which provide that the FDIC, as receiver of a covered financial company, may recover from senior executives and directors who were substantially responsible for the failed condition of the company any compensation they received during the two-year period preceding the date on which the FDIC was appointed as receiver, or for an unlimited period in the case of fraud.

The United States Court of Appeals for the First Circuit upheld a bankruptcy court’s ruling that, where subordination agreements lacked explicit provisions addressing the payment of post-petition interest on senior unsecured debt, the agreements were ambiguous, and an inquiry into the parties’ intent was required. After probing the facts and analyzing New York law, the bankruptcy court determined that the contracting parties did not intend to subordinate the junior unsecured debt to post-petition interest on the senior debt.

Background

On June 23, 2011, the US Supreme Court issued a narrowly-divided decision in Stern v. Marshall, limiting Bankruptcy Court jurisdiction over certain types of claims. The Court found that while the Bankruptcy Court was statutorily authorized to enter final judgment on a tortious interference counterclaim (as a core proceeding under 28 U.S.C. § 157(b)(2)(C)), it was not constitutionally authorized to do so.

In a long awaited action, the Federal Deposit Insurance Corporation (FDIC) issued a final rule on July 6 which addresses the FDIC's rights and powers as receiver of a nonviable systemic financial company under the orderly liquidation authority provisions of Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

A bankrupt holding company has reportedly agreed to pay $8.7 million to settle nuisance claims brought by a number of California cities and counties alleging public health problems caused by lead paint in homes and buildings. The funds will apparently be used to remediate lead paint-related health issues. Other defendants include lead paint manufacturers and distributors; trial against them is expected in 2012. California prosecutors are seeking an order requiring the cleanup of lead-contaminated buildings and a monetary contribution for public health efforts. See Law360, June 24, 2011.