In the fifth opinion involving the repo liquidation saga of HomeBanc, the Third Circuit addressed several crucial issues involving the liquidation and valuation of repo collateral in bankruptcy. In re HomeBanc Mortg. Corp., 2019 WL 7161215 (3d Cir. Dec. 24, 2019).

Background

A recent bankruptcy court decision out of the United States Bankruptcy Court for the Central District of California, In re Verity Health Sys. of Cal., Inc., Case No. 2:18-bk-20151 (ER) (Bankr. C.D. Cal. Nov. 27, 2019), is a good reminder of how difficult it is for a purchaser under an asset purchase agreement to get out of the deal by invoking a Material Adverse Effect clause (also known as a Material Adverse Change clause) (an “MAE”).

On December 19, 2019, the United States Court of Appeals for the Second Circuit (the “Second Circuit”) affirmed a ruling of the United States District Court for the Southern District of New York (the “District Court”) dismissing constructive fraudulent conveyance claims brought by representatives of certain unsecured creditors of Chapter 11 debtor Tribune Company (“Tribune”)

The Bottom Line

On January 7, 2020, the presidential campaign of Senator Elizabeth Warren released a plan to overhaul the consumer bankruptcy system in the United States. The plan would repeal means testing and other provisions of the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act. It would also implement enhanced protections for consumer debtors who file for bankruptcy.

On December 19, the Court of Appeals for the Third Circuit became the first federal circuit court of appeals to hold that a bankruptcy court may confirm a plan containing nonconsensual third-party releases without exceeding the constitutional limits on its jurisdiction articulated in Stern vs.

On December 12, 2019, the US Court of Appeals for the Sixth Circuit issued a highly anticipated ruling in theFirstEnergy Solutions Corp. bankruptcy case, regarding the efforts of FirstEnergy Solutions Corp. (FirstEnergy or FES) to reject certain wholesale power purchase contracts.

Courts struggled last year to find a balance between state-licensed cannabis activity and the federal right to seek bankruptcy protection under the Bankruptcy Code. During 2019, we had the first circuit-level opinion in the bankruptcy/cannabis space that appeared to open the door to bankruptcy courts, albeit slightly. We also had lower court opinions slamming that door shut.

Below, we look at a few of the most important decisions issued throughout 2019 and analyze the current state of the law.

The Ninth Circuit's Garvin Decision

On December 12, 2019, the Third Circuit issued a decision in In re Odyssey Contracting Corp., finding a debtor-subcontractor had waived its right to appeal from a bankruptcy court’s order directing the prime contractor and the debtor-subcontractor to resolve an adversary proceeding in accordance with a stipulation entered into by the parties and approved by the bankruptcy court prior to trial.  This ruling has implications for all parties litigating in the Third Circuit, as the Odyssey ruling makes clear that parties who enter into stipulated agreements that depend on

A Texas bankruptcy court recently ruled that dedication clauses in gas-gathering agreements run with the land and cannot be rejected by a debtor. That decision, In re Alta Mesa Resources, Inc., affirms an industrywide practice that faced an uncertain future following the ruling in In re Sabine Oil & Gas Corp. from the Southern District of New York, which was upheld by the 2nd U.S. Circuit Court of Appeals in 2018.