“Whoever is careless with the truth in small matters cannot be trusted with important matters.”
– Albert Einstein
The Seventh Circuit Court of Appeals in Unsecured Creditors Committee of Sparrer Sausage Co., Inc. v. Jason’s Foods, Inc., 2016 WL 3213090 (7th Cir. June 10, 2016) expanded the scope of the ordinary course defense in a bankruptcy preference action. This case provides an excellent road map for a creditors’ rights attorney defending a preference suit and suggests arguments for increasing the payments a creditor can retain even if those payments were made during the 90-day preference period.
On July 18, 2016, Judge Walrath issued a concise written opinion ruling upon whether an executive’s claim for unpaid stock-based compensation was an equity security or rather a general unsecured claim against the Debtors’ estate. The opinion is styled as GSE Environmental, Inc., et al. v. Sorrentino (In re GSE Environmental, Inc., et al.), Adv. Pro. No. 16-50377 (MFW) (Bankr. D. Del.
For those who may be considering an investment in life settlements (see my previous blog for background), recent bankruptcy filings of life settlement entities have raised a concern not often considered when determining whether or not to invest: what would happen if the entity that owns or manages the underlying insurance policy(s) ends up in bankruptcy. Life settlement companies typically include provisions in their purchase agreements that downplay the potential ramifications of a bankruptcy filing.
Estate professionals are under continued scrutiny. Unlike other professionals, getting paid is not simply a matter of sending a bill. The bankruptcy court, appropriately so, closely oversees the amount and timing of payment of estate professional fees. And proper disclosure under the Bankruptcy Code and the Federal Rules of Bankruptcy Procedure (the “Bankruptcy Rules”) is critical for all estate professionals.
Virtually all public indentures contain provisions allowing the issuer to cure ambiguities and make other technical changes to the debt documentation without debtholder consent. When the purported ambiguities have substantive consequences, however, issuers may not be able to get away with an amendment that lacks debtholder approval. InGSO Coastline Credit Partners L.P. v. Global A&T Electronics Ltd. (NY App. Div. 1st Dept. May 3, 2016), a New York lower court bought into a “cure of ambiguity” argument and on that basis granted a motion to dismiss.
Remember Sabena, the ill-fated Belgian airline that declared bankruptcy in 2001? Well, to quote Ford Madox Ford, this is the saddest story I have ever heard.
In the latest decision to emanate from the Madoff bankruptcy, the United States District Court for the Southern District of New York denied the appeal of a protective order that relieved Irving Picard—the court-appointed trustee—from answering discovery requests regarding his compensation arrangement with his law firm.
When an adversary proceeding is transferred to the district court pursuant to a withdrawal of the reference, which rules—and deadlines—apply: those contained within the Federal Rules of Civil Procedure, or those contained within the Federal Rules of Bankruptcy Procedure? The Eleventh Circuit recently held the Federal Rules of Bankruptcy Procedure, not the Federal Rules of Civil Procedure, govern adversary proceedings before the district courts. Rosenberg v. DVI Receivables XIV, LLC, 2016 WL 1392642 (11th Cir. 2016).
UNITED STATES SUPREME COURT
Wellness Int'l Network, Ltd. v. Sharif, 135 S. Ct. 1932 (2015)
Key Issue: Post-Stern v. Marshall, whether a Bankruptcy Court (as an Art. I court) has a proper delegation of authority from the District Court (as an Art. III court) to enter findings of fact and final orders on non-core issues upon the consent of the parties and, if so, whether consent must be express or may be implied?