A secured lender's "mere retention of property [after a pre-bankruptcy repossession] does not violate" the automatic stay provision [362(a) (3)] of the Bankruptcy Code, held a unanimous U.S. Supreme Court on Jan. 14, 2021. City of Chicago v. Fulton, 2021 WL 125106, 4 ( Jan. 14, 2021). Reversing the Seventh Circuit's affirmance of a bankruptcy court judgment holding a secured lender in contempt for violating the automatic stay, the Court resolved "a split" in the Circuits. Id. at 2. The Second, Eighth and Ninth Circuits had agreed with the Seventh Circuit.

“[A] secured creditor [has no] affirmative obligation under the automatic stay to return a debtor’s [repossessed] collateral to the bankruptcy estate immediately upon notice of the debtor’s bankruptcy,” held the U.S. Court of Appeals for the Third Circuit on Oct. 28, 2019. In re Denby-Peterson, 2019 WL 5538570, *1 (3d Cir. Oct. 28, 2019). Affirming the lower courts, the Third Circuit joined “the minority of our sister courts – the Tenth and D.C. Circuits” with its holding.

The Bankruptcy Code (“Code”) “does not limit the allowability of unsecured claims for contractual post-[bankruptcy] attorneys’ fees,” held the U.S. District Court for the District of Delaware on Nov. 26, 2018. In re Tribune Media Company, 2018 WL 6167504 (D. Del. Nov. 26, 2018). In a short and sensible opinion, the district court reversed the bankruptcy court’s disallowance of an undersecured lender’s fees.

The securities safe harbor protection of Bankruptcy Code (“Code”) § 546(e) does not protect allegedly fraudulent “transfers in which financial institutions served as mere conduits,” held the U.S. Supreme Court on Feb. 27, 2018. Merit Management Group LP v. FTI Consulting Inc., 2018 WL 1054879, *7 (2018). Affirming the Seventh Circuit’s reinstatement of the bankruptcy trustee’s complaint alleging the insolvent debtor’s overpayment for a stock interest, the Court found the payment not covered by §546(e) and thus recoverable. The district court had dismissed the trustee’s claim.

An undersecured mortgagee’s “release of [its entire underlying claim] was value obtained ‘in exchange for’ the [pre-bankruptcy] sale of the [debtor’s] property,” held the U.S. Court of Appeals for the Tenth Circuit on Dec. 6, 2016. In re Expert South Tulsa LLC, 2016 U.S. App. LEXIS 21704, at *11 (10th Cir. Dec. 6, 2016). The Tenth Circuit flatly rejected the debtor’s attempt “to set aside as a fraudulent transfer its own sale of real estate that was encumbered by a mortgage far exceeding the sale price.” Id. at *1.

“Reasonably equivalent value” as a defense to a fraudulent transfer suit “can be satisfied with evidence that the transferee (1) fully performed under a lawful, arm’s-length contract for fair market value, (2) provided consideration that had objective value at the time of the transaction, and (3) made the exchange in the ordinary course of the transferee’s business,” held the Supreme Court of Texas on April 1, 2016, in response to a certified question from the U.S. Court of Appeals for the Fifth Circuit. Janvey v. Golf Channel, ___ S.W.3d ___, 2016 WL 1268188, at *2 (Tex.

A “bankruptcy court has discretion to award the [bankruptcy] trustee the actual [fraudulently transferred] property or its pre-transfer value,” held the U.S. Court of Appeals for the Seventh Circuit on Oct. 23, 2015. Hebenstreit v. Kaur, 2015 WL 6445461, at *2 (7th Cir. Oct. 23, 2015).

A settlement providing for dismissal of a Chapter 11 case and distribution of estate property “that deviates from the Bankruptcy Code’s priority” scheme is permissible, held a divided panel of the U.S. Court of Appeals for the Third Circuit on May 21, 2015. Official Committee of Unsecured Creditors v. CIT Group/Business Credit Inc. (In re Jevic Holding Corp.), 2015 WL 2403443, at *1 (3d Cir. May 21, 2015) (2- 1) (“Jevic”).

The U.S. Court of Appeals for the Fifth Circuit, on Sept. 3, 2014, vacated bankruptcy court and district court Chapter 11 debtor-in-possession (“DIP”) financing orders due to: (1) the lender’s lack of good faith in relying on a third party’s shares of stock as collateral; and (2) the bankruptcy court’s lack of subject matter jurisdiction. In re TMT Procurement Corp., 2014 WL 4364894 (5th Cir. Sept. 3, 2014).

The U.S. Court of Appeals for the Fifth Circuit held on Jan. 27, 2014 that a lender’s acceleration due to a borrower’s payment default did not trigger a prepayment premium. In re Denver Merchandise Mart, Inc., 2014 WL 291920, *1 (5th Cir. Jan. 27, 2014) (“Denver Merchandise”). Affirming the lower courts’ application of state law, the court held that “the plain language of the contract does not require the payment of the Prepayment Consideration in the event of mere acceleration.” Id. at *5.  

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