On Jan. 17, the U.S. Court of Appeals for the Second Circuit vacated the decision of the District Court for the Southern District of New York in Marblegate Asset Management, LLC v.

The U.S. Supreme Court heard oral argument Tuesday in Midland Funding v. Johnson. A primary issue before the Court is whether the federal Fair Debt Collection Practices Act is violated by the filing in a Chapter 13 bankruptcy case of a proof of claim representing a debt subject to an expired limitations period. The case originated from the Eleventh Circuit Court of Appeals, which along with its earlier decision in Crawford v. LVNV, held the FDCPA is violated in those instances. Every other Circuit Court of Appeals has since found otherwise.

January 19, 2017

Second Circuit Overturns Marblegate, Rejecting Expansive Interpretation of Section 316(b) of the Trust Indenture Act

In Split Decision, Appeals Court Rules That Section 316(b) of the Trust Indenture Act of 1939 Prohibits Only Formal Non-Consensual Amendments to a Qualified Indenture's Core Payment Terms

SUMMARY

On November 17, 2016, the US Court of Appeals for the Third Circuit in Delaware Trust Co. v. Energy Future Intermediate Holding Co. LLC, No. 16-1351 (3d Cir. Nov. 17, 2016) clarified the often-muddy interplay between indenture acceleration provisions and "make-whole" redemption provisions, holding that Energy Future Intermediate Holding Co. LLC and EFIH Finance Inc. (collectively, "EFIH") were unable to avoid paying lenders approximately $800 million in expected interest by voluntarily filing for bankruptcy.

The Second Circuit issued its much anticipated decision in Marblegate Asset Management LLC v. Education Management Corp., holding that “Section 316(b) prohibits only non-consensual amendments to an indenture’s core payment terms.” At issue is whether the phrase “right . . . to receive payment” forecloses “more than formal amendments to payment terms that eliminate the right to sue for payment.” The Second Circuit held that it does not.

In its highly anticipated Marblegate Asset Management LLC v. Education Management Corp. decision,[1] the U.S.

Imagine that while a bankruptcy case is pending, the debtor-in-possession or bankruptcy trustee files a state law claim against one of the estate's creditors. Presumably, if the debtor wins its state law claim, that recovery augments the bankruptcy estate and increases the amount available to pay the debtor's creditors.[1] The creditor, seeking to avoid litigating the action in the debtor's home state court, timely removes the lawsuit to federal court as permitted under 28 U.S.C.

Precipitous commodity price declines and high volatility, coupled with high operating costs and high levels of borrowing, led to a wave of restructuring in the energy industry. In the frenzy of restructuring, a company is consumed with legal issues, employee layoffs, salary cuts, asset sales, and workload reassignments, to name a few. When the company emerges out of restructuring, the focus turns to healing.

The Bankruptcy Appellate Panel (“BAP”) for the First Circuit recently upheld a licensee’s rights to use a debtor’s trademarks and logo after a rejection by the debtor of the underlying licensing and distribution agreement. Mission Product Holdings, Inc., v. Tempnology LLC (In re Tempnology LLC) 2016 WL 6832837 (Bankr. 1st Cir. 11/18/16).

Trust Indenture Act Section 316(b) Limited to Actual Amendments to An Indenture’s Core Terms