The United States Court of Appeals for the Second Circuit recently articulated a standard to determine what claims may be barred against a purchaser of assets "free and clear" of claims pursuant to section 363(f) of the Bankruptcy Code and highlighted procedural due process concerns with respect to enforcement.1 The decision arose out of litigation regarding certain defects, including the well-known "ignition switch defect," affecting certain GM vehicles. GM's successor (which acquired GM's assets in a section 363 sale in 2009) asserted that a "free and clear" provisi
Recently, the United States Court of Appeals for the Second Circuit entered a decision in the General Motors bankruptcy case that found an exception to the “free and clear” language of Section 363(f) of the Bankruptcy Code2 where adequate notice of the sale order is not provided.3 However, the exception may not be far reaching due to the “peculiar” facts of the case.
Factual Background and Lower Court Decision
The Supreme Court again will be addressing the powers of bankruptcy courts. At the end of the term, the Court granted certiorari in Czyzewski v. Jevic Holding Corp. to decide whether a bankruptcy court may authorize the distribution of settlement proceeds in a way that violates the statutory priority scheme in the Bankruptcy Code. No. 15-649, 2016 WL 3496769 (S. Ct. June 28, 2016). The Supreme Court is expected to address this fundamental bankruptcy issue sometime early next year.
Background
On July 25, 2016, Judge Kevin Carey of the Delaware Bankruptcy Court issued a thorough decision pursuant to a motion for judgment on the pleadings analyzing the intersection of a preference defendant’s post-petition administrative claim and their preference exposure. A copy of the Opinion is available here.
Parties to an appeal who condition a settlement on the vacating of the lower court’s judgment “may still [have] an appropriate remedy,” held the U.S. Court of Appeals for the Eleventh Circuit on July 12, 2016. Hartford Cas. Ins. Co. v. Crum & Forster Specialty Ins. Co., 2016 U.S. App LEXIS 12813, *15 (11th Cir. July 12, 2016). Reversing the district court’s “narrow” refusal to vacate its judgment after the parties had settled, the Eleventh Circuit found that “exceptional circumstances” warranted the vacatur. Id., at *3, *14.
Pursuant to a provision of the Bankruptcy Code familiar to readers of Weil’s Bankruptcy Blog (see our prior post, To Assume or Not to Assume, that Is the Question: What Act Constitutes “Assumption” Under Section 365(d)(4) of the Bankruptcy Code?), the United States District Court for the District of Delaware recently affirmed a bankruptcy c
In 2009, General Motors (“Old GM”) commenced a chapter 11 case and sold the bulk of its business and assets to a new entity (“New GM”) “free and clear” of liabilities against New GM. Notwithstanding the “free and clear” language of the 2009 sale order (the “Sale Order”), a Second Circuit panel recently held that plaintiffs could assert claims against New GM over faulty ignition switches in cars manufactured by Old GM and recalled in early 2014.
In re Intervention Energy Holdings, LLC, Case No. 16-11247 (D. Del. June 3, 2016), the Bankruptcy Court for the District of Delaware dealt with the issue of whether a Delaware LLC lacked authority to file a Chapter 11 petition under the Bankruptcy Code because the limited liability company agreement of the LLC in question required the consent of all members and one member did not consent to the filing.
The Bankruptcy Court for the District of Delaware recently held that the Bankruptcy Code Section 546(e) safe harbors do not prevent a liquidation trust from pursuing some state law constructive fraudulent conveyance claims assigned to the trust by creditors.1 Notably, the Bankruptcy Court declined to follow the Second Circuit's recent Tribune decision, in which the Second Circuit concluded that the Section 546(e) safe harbors apply to state law constructive fraudulent conveyance claims on federal preemption grounds.2 Instead, the Bankruptcy Court decided that federal preemption did not appl