Bankruptcy courts often dismiss appeals of chapter 11 plans when granting the relief requested in the appeal would undermine the finality and reliability of the corresponding plans, a doctrine known as Equitable Mootness. Over the past several years, certain circuits criticized the doctrine for its lack of statutory basis and effect of avoiding review on the merits.1
As we previously reported, the CARES Act temporarily expanded the number of small businesses eligible for relief under the
Brazos Electric Power Cooperative recently filed for Chapter 11 relief in the U.S. Bankruptcy Court for the Southern District of Texas, weeks after the February ice storm severely disrupted Texas’s electricity supply and prices. Brazos filed for bankruptcy in part to shield its member cooperatives and consumers from liability for invoices totaling over $2.1 billion from the Electric Reliability Council of Texas.
Cognac Ferrand S.A.S. v. Mystique Brands LLC, No. 20 Civ. 5933 (S.D.N.Y. Jan. 31, 2021) [click for opinion]
In a recent decision, the Court of Appeals for the Third Circuit closed the door on triangular setoffs, ruling that the mutuality requirement under Section 553 of the Bankruptcy Code must be strictly construed and requires that the debt and claim sought to be setoff must be between the same two parties. In re: Orexigen Therapeutics, Inc., No. 20-1136 (3d. Cir. 2021).
Background
On January 14, 2021, the U.S. Supreme Court held in City of Chicago v. Fulton, 592 U.S. __ (2021), that a creditor in possession of a debtor's property does not violate the automatic stay, specifically section 362(a)(3) of the Bankruptcy Code, by retaining the property after the filing of a bankruptcy petition. The Court's decision provides important guidance to bankruptcy courts, practitioners, and parties on the scope of the automatic stay's requirements.
In In re Nuverra Environmental Solutions, Inc., 834 Fed. App'x 729 (3d Cir. 2021), the U.S. Court of Appeals for the Third Circuit handed down a long-awaited ruling that could have addressed, but ultimately did not address, the validity of "gifting" chapter 11 plans under which a senior creditor class gives a portion of its statutorily entitled recovery to one or more junior classes as a means of achieving consensual confirmation.
Section 365(h) of the Bankruptcy Code provides special protection for tenants if a trustee or chapter 11 debtor-in-possession ("DIP") rejects an unexpired lease under which the debtor was the lessor by giving the tenant the option of retaining possession of the leased premises. Although the provision clearly describes what rights a tenant has if it makes such an election, it does not unequivocally address the extent of the electing tenant's obligations under the rejected lease or any related agreements. The U.S.
There is longstanding controversy concerning the validity of release and exculpation provisions in non-asbestos trust chapter 11 plans that limit the potential exposure of various parties involved in the process of negotiating, implementing and funding the plan. The U.S. Bankruptcy Court for the Eastern District of Washington recently contributed to the extensive body of case law addressing these issues in In re Astria Health, 623 B.R. 793 (Bankr. E.D. Wash. 2021).