The U.S. Court of Appeals for the Ninth Circuit recently affirmed final judgments against corporate borrowers and guarantors in three separate cases, holding that:
(a) the Nevada statute limiting the amount of the deficiency recoverable in a foreclosure action was preempted by federal law as applied to transferees of the Federal Deposit Insurance Corporation (FDIC);
(b) the plaintiff bank had standing to enforce the loans it acquired from the FDIC;
(c) the bank was not issue-precluded from showing that the subject loans had been transferred to it;
In In re Hungry Horse, LLC, Adversary Proceeding No. 16-11222 (Bankr. D. N.M. September 20, 2017) (“Hungry Horse”), the New Mexico Bankruptcy Court reminded us that many U.S. Supreme Court opinions can be limited in scope and do not necessarily dispose of all potential remedies to an issue.
The bankruptcy bar is abuzz following the Supreme Court’s recent decision in Czyzewski v. Jevic Holding Corp., 15-649, 2017 BL 89680, 85 U.S.L.W. 4115 (Sup. Ct. March 22, 2017), holding that bankruptcy courts may not approve structured dismissals that do not adhere to the Bankruptcy Code’s priority scheme.
U.S. Bankruptcy Rule 9019 provides that on a motion brought by a trustee (and thus a chapter 11 debtor-in-possession as well) the court may approve a settlement. The prevailing view is that due to the court’s approval requirement, pre-court approval settlement agreements are enforceable by the debtor but not against the debtor. The District Court for the Eastern District of New York recently disagreed. It held that the statutory approval requirement is not an opportunity for the debtor to repudiate the settlement.
Vitamin World, Inc., along with eight of its affiliates and subsidiaries, has filed a petition for relief under Chapter 11 in the Bankruptcy Court for the District of Delaware (Lead Case No. 17-11933). In the Petition, Vitamin World reports $50 million to $100 million in assets and $10 million to $50 million in liabilities.
Breach letters have been heavily litigated in many states, but up until now, Alabama has generally stayed out of the fray. Not any longer. In September 2017, the Supreme Court of Alabama found that failure to strictly comply with the requirements of the mortgage invalidates a foreclosure sale. Ex Parte Turner, __ Ala__ (2017). In this case, after the borrowers defaulted on their loan, the loan servicer sent a letter notifying them of its intent to foreclose on the property (the “Default Letter”).
Some “D&O policies” (Directors and Officers liability policies) exclude claims for losses “arising out of” the prior wrongful acts of officers or directors. The Eleventh Circuit recently interpreted the phrase “arising out of” broadly, finding that it is not a difficult standard to meet. Zucker for BankUnited Financial Corp. v. U.S. Specialty Insurance Co., -- F.3d -- , 2017 WL 2115414, *7 (2017) (determining that under Florida law “‘arising out of’ . . . has a broad meaning even when used in a policy exclusion”); but see Brown v. American Intern.
The United States District Court for the Eastern District of New York issued a decision in July, 2017 that holds banks liable for diversion of funds in violation of New York’s lien law, when it should have known of the trust nature of the funds it receives. In Delco Electrical Corp. v. Wells Fargo Capital Finance, Inc., 2017 WL 3311224 (E.D.N.Y. July 31, 2017), Teltronics, Inc. (“Teltronics”) contracted with the New York City Department of Education to make telecommunications-related improvements at public schools from 2007-2011.