Here’s an aggregation of some of my Twitter posts from May 25-31, 2018, with links to important cases, articles, and news briefs that restructuring professionals will find of interest. Don’t hesitate to reach out and contact me to discuss any posts. Thanks for reading!
BK RELATED CASES:
Should a Massachusetts homeowner be allowed to claim a homestead exemption in a principal residence that is also used for business or other commercial purposes? Answering this question several years ago as a matter of first impression, the U.S.
The appellate courts are usually the last stop for parties in business bankruptcy cases. The courts issued at least three provocative, if not questionable, decisions in the past six months. Their decisions have not only created uncertainty, but will also generate further litigation over reorganization plan manipulation, arbitration of routine bankruptcy disputes and the treatment of trademark licenses in reorganization cases. Each decision apparently disposes of routine issues in business cases. A closer look at each case, though, reveals the sad truth: they are anything but routine.
The Supreme Court held that a statement about a single asset can be a “statement respecting the debtor’s financial condition” for purposes of determining the application of the exception to discharge set forth in Section 523(a)(2) of the Bankruptcy Code. Lamar, Archer & Cofrin LLP v. Appling, 2018 WL 2465174 (June 4, 2018).
The Bottom Line
In a case decided on March 28, 2018, the Ninth Circuit Court of Appeals held that a maritime lien on a vessel for the "maintenance and cure" of an injured seaman was not subject to the "automatic stay" that generally arises as the result of a bankruptcy filing by the owner of the vessel. In the case entitled Barnes v. Sea Hawaii Rafting, LLC, 886 F.3d 758, the Ninth Circuit Court of Appeals considered whether the special rules invoked by maritime law trumped the rules and equitable principles set out in the Bankruptcy Code, or whether bankruptcy law triumphed.
Alerts and Updates
The Supreme Court’s opinion is significant because it will encourage creditors to rely on written, rather than oral, statements of debtors as to both their assets and overall financial status, which are better evidence in a nondischargeability case.
In the recent case of Garcia v. Garcia, the guarantor of a loan (Morris) is sued by the bank to honor his guarantee obligation of about $1.5 million. The debtor was not able to pay under the guarantee, so the bank obtained a charging order against the debtor member’s 50% LLC interest. The bank wanted access to the funds in that LLC, but the third-party manager of the LLC refused to pay any distribution to the debtor member. As a result, the debtor member filed Chapter 7 bankruptcy.
The Bottom Line
In a recent Chapter 11 case and subsequent Chapter 7 case, Judge Timothy Barnes of the N.D. of Illinois allowed counsel for an assignee (“Assignee”) in an Illinois assignment for the benefit of creditors (“ABC”) to recover attorneys’ fees and expenses incurred pre-petition and post-petition. The decision is noteworthy because it addresses a custodian’s counsel’s entitlement to the recovery of both pre- and post-petition fees and expenses as an administrative expense.