What Happened: The Third Circuit Court of Appeals joined five other circuits in holding that the unforeseen business circumstances exception excused WARN notice where an event outside the employer's control that would trigger layoffs was possible but not probable to occur.

The Larger Landscape: While the Fifth, Sixth, Seventh, Eighth, and Tenth Circuits have also adopted a probability standard for determining when the unforeseen business circumstances exception applies, the other circuits have not yet ruled on the issue.

In Beem v. Ferguson (In re Ferguson), 2017 BL 101650 (11th Cir. Mar. 30, 2017), the U.S. Court of Appeals for the Eleventh Circuit addressed the distinction between constitutional mootness (a jurisdictional issue that precludes court review of an appeal) and equitable mootness (which allows a court to exercise its discretion to refuse to hear an appeal under certain circumstances). The Eleventh Circuit ruled that an appeal from an order confirming a chapter 11 plan was not constitutionally moot because an "actual case or controversy" existed.

In 1994, Congress amended the Bankruptcy Code to add section 1123(d), which provides that, if a chapter 11 plan proposes to "cure" a default under a contract, the cure amount must be determined in accordance with the underlying agreement and applicable nonbankruptcy law. Since then, a substantial majority of courts, including the U.S. Court of Appeals for the Eleventh Circuit, have held that such a cure amount must include any default-rate interest required under either the contract or applicable nonbankruptcy law.

On July 26, 2016, a three-judge panel of the U.S. Court of Appeals for the Seventh Circuit ruled that the Bankruptcy Code section 546(e) "safe harbor" applicable to constructive fraudulent transfers that are settlement payments made in connection with securities contracts does not protect "transfers that are simply conducted through financial institutions (or the other entities named in section 546(e)), where the entity is neither the debtor nor the transferee but only the conduit."FTI Consulting, Inc. v. Merit Management Group, LP, 2016 BL 243677.

In February 2016, Energy Future Holdings Corp. (“EF”), which obtained confirmation of a chapter 11 plan on December 3, 2015, prevailed at the district court level in related appeals brought by first- and second-lien noteholders of bankruptcy court orders disallowing the noteholders’ claims for make-whole premiums allegedly due under their note indentures. The forum in this hotly contested and long-running dispute has now moved to the Third Circuit Court of Appeals.

Enforceability of Make-Whole Premiums in Bankruptcy

Recent Developments

Whether a provision in a bond indenture or loan agreement obligating a borrower to pay a “make-whole” premium is enforceable in bankruptcy has been the subject of heated debate in recent years. A Delaware bankruptcy court recently weighed in on the issue in Del. Trust Co. v. Energy Future Intermediate Holding Co. LLC (In re Energy Future Holdings Corp.), 527 B.R. 178 (Bankr. D. Del. 2015).

To promote the finality and binding effect of confirmed chapter 11 plans, the Bankruptcy Code categorically prohibits any modification of a confirmed plan after it has been "substantially consummated." Stakeholders, however, sometimes attempt to skirt this prohibition by characterizing proposed changes to a substantially consummated chapter 11 plan as some other form of relief, such as modification of the confirmation order or a plan document, or reconsideration of the allowed amount of a claim. The U.S.

Despite the absence of any explicit directive in the Bankruptcy Code, it is well understood that a debtor must file a chapter 11 petition in good faith. The bankruptcy court can dismiss a bad faith filing "for cause," which has commonly been found to exist in cases where the debtor seeks chapter 11 protection as a tactic to gain an advantage in pending litigation. A ruling recently handed down by the U.S.

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.