A few weeks ago, the Sixth Circuit affirmed the Western District Court of Michigan’s holding in U.S. v. Quality Stores Inc., 424 B.R. 237 (W.D. Mich. 2010), that severance payments made to employees pursuant to an involuntary reduction in force were not “wages” for Federal Insurance Contribution Act (“FICA”) tax purposes. U.S. v. Quality Stores Inc., No. 10-1563 (6th Cir. 2012). The Sixth Circuit’s decision creates a circuit court split with the Federal Circuit and its 2008 decision in CSX Corporation v. United States, 518 F.3d 1328 (Fed. Cir. 2008).

On October 18th, Bloomberg reported on H.R. 2433, the Chapter 11 Bankruptcy Venue Reform Act of 2011. The bill would restrict corporate bankruptcy filings to the state in which a firm has its principal place of business or holds most of its assets. Forum Shopping.

On April 21st, the Federal Reserve Board requested comment on two bankruptcy-related studies. The Dodd-Frank Act requires the Federal Reserve Board to study the resolution of financial companies under Chapter 7 or Chapter 11 of the U.S. Bankruptcy Code. The Dodd-Frank Act also requires the Federal Reserve Board to study international coordination of the resolution of systemically important financial companies under the Bankruptcy Code and applicable foreign law.

On September 14th, a Bankruptcy Court entered partial summary judgment in favor of defendants, brokerages through whom the debtor conducted a fraudulent stock lending scheme. The Chapter 7 bankruptcy trustee cannot avoid as fraudulent transfers funds and stock received by defendants directly from the victims of the scheme, margin interest paid to defendants by the debtor, and cash transfers that the debtor directly deposited into the brokerage accounts in the year prior to the bankruptcy filing.

This week, in a 2-1 decision affirming the District Court’s reversal of a ruling of the Bankruptcy Court for the Eastern District of Pennsylvania, the United States Court of Appeals for the Third Circuit held that secured creditors do not have a right as a matter of law to credit bid their claim at an auction pursuant to a plan of reorganization where the debtor intends to impose the plan on its secured creditors through a “cramdown” under section 1129(b)(2)(A)(iii) of the Bankruptcy Code; i.e., a plan providing the secured creditors with the “indubitable equivalent” of their secured claim.

In the wake of the recent economic downturn caused by the COVID-19 pandemic, there will likely be a sharp rise in bankruptcy filings by businesses seeking to obtain relief from the burdens of excessive debt.[1] The bankruptcy code is designed to provide debtors relief and protection from creditors, which includes the Internal Revenue Service (“IRS”).  One of the benefits of bankruptcy court protection is the automatic stay, which will prevent the IR

The International Swaps and Derivatives Association, Inc. (“ISDA”) published the ISDA 2014 Resolution StayProtocol (the “Protocol”) on November 12, 2014 in response to continued efforts by regulators to build additional flexibility into the statutory regimes that would apply in the event of the insolvency of a major financial institution.

On September 14, the Sixth Circuit affirmed the trial court's finding that a failed bank's parent did not make a capital maintenance commitment to the bank. After the parent filed for bankruptcy, the FDIC was appointed receiver for the bank. The FDIC then sought payment from the parent under the statute requiring a party seeking reorganization to fulfill commitments to maintain the capital of an insured depository institution.

A New York bankruptcy court recently considered the effects of Bankruptcy Code section 552 on a lender’s security interest in the proceeds of an FCC broadcast license and held that a prepetition security interest extended to proceeds received from a post-petition transfer of the debtors’ FCC license. Sprint Nextel Corp. v. U.S. Bank. N.A. (In re Terrestar Networks, Inc.), Case No. 10-15446, Adv. Pro. No. 10-05461 (Bankr. S.D.N.Y. Aug. 18, 2011). This result directly conflicts with Spectrum Scan LLC v. Valley Bank and Trust Co. (In re Tracy Broadcasting Corp.), 438 B.R.

On April 12th, a federal district court addressed the in pari delicto defense, including the sole actor exception to the adverse interest exception. In the instant case, a litigation trust created in bankruptcy court to pursue the debtor's claims sued Credit Suisse for allegedly assisting the debtor's founders' looting of the debtor's subsidiaries. Credit Suisse sought summary judgment, asserting the in pari delicto defense. The Court agreed, finding that the evidence supported the conclusion that the founders so dominated the subsidiaries that the subsidiaries lacked a separate existence.