On April 19, 2023, the U.S. Supreme Court issued its opinion inMOAC Mall Holdings LLC v. Transform Holdco LLC, 598 U.S. (2023), reversing the Second Circuit decision and determining that the limitations on appeals of bankruptcy sale orders provided in section 363(m) of the Bankruptcy Code are not jurisdictional. Rather section 363(m) merely provides a "caveated constraint" on the appellant’s remedies on such appeals.

Johnson & Johnson filed bankruptcy back in 2021 (In re LTL Management, Case No. 21-30589, New Jersey Bankruptcy Court).

That bankruptcy is now dismissed—on order of the U.S. Third Circuit Court of Appeals.

So, Johnson & Johnson refiles its bankruptcy (In re LTL Management, Case No. 23-12825, New Jersey Bankruptcy Court).

New and Improved

Here’s what’s new and improved about the second bankruptcy[fn. 1]:

Key Points

As the economy continues to face challenges and the threat of bankruptcy becomes more prevalent among businesses, landlords must be more vigilant in protecting their interests in commercial leases. One area of particular concern is leases that fall under Section 467 of the Internal Revenue Code (“Section 467 Leases”).

On April 19, 2023, the Supreme Court, in a unanimous opinion written by Justice Ketanji Brown Jackson in MOAC Mall Holdings LLC, ruled Bankruptcy Code section 363(m) to be non-jurisdictional, i.e. just a “mere restriction on the effects of a valid exercise” of judicial power “when a party successfully appeals a covered authorization.” Before MOAC, the Third, Sixth, Seventh, Ninth, Tenth and Eleventh Circuits held section 363(m) to be non-jurisdictional, but the Fifth and Second Circuits had diverged.

Reasoning

In a departure from prior precedent in the United States Bankruptcy Court for the Southern District of New York (SDNY), a recent opinion by Judge Michael E. Wiles in In re Cortlandt Liquidating LLC,[1] effectively lowered the Bankruptcy Code section 502(b)(6) cap on rejection damages that a commercial real estate landlord may claim, by holding that the cap should be calculated using the “Time Approach,” rather than the “Rent Approach.”

Calculation of Lease Rejection Damages

Yes, says the Delaware Bankruptcy Court in the case of CII Parent, Inc., cementing the advice routinely given by bankruptcy counsel to borrowers in default. We always counsel borrower clients in default of the risk associated with lenders taking unilateral actions pre-filing, stripping debtors of valuable options and assets. Thus, we normally recommend to always obtain a forbearance and undertake the preparations required to file a bankruptcy petition immediately upon forbearance termination, although whether or not to file depends on variety of factors that should be considered.

In what might prove to be an important ruling, on April 12th the Bankruptcy Court for the District of Delaware ruled that a secured creditor had, before the debtor filed bankruptcy, properly exercised an irrevocable proxy to change the management of the debtor’s subsidiary. The Court also ruled that the creditor had not violated the automatic stay by refusing to relinquish the proxy following the bankruptcy filing. Though a clear victory for secured creditors, the Court’s ruling hinges on a well drafted proxy provision.

The Facts of the Case

The United States Bankruptcy Court for the Southern District of New York has ruled that a creditor or trustee seeking to recover a subsequent transfer under Section 550(a) of the Bankruptcy Code need not obtain a judgment of avoidance against the subsequent transferee before proceeding with the recovery action.

The Second Circuit recently held that a non-party to an assumed executory contract is not entitled to a cure payment (although it may be so entitled if is a third-party beneficiary of the contract). The result would have seemed obvious to bankruptcy practitioners. So, what in the world made the party pursuing payment take this to the Second Circuit? Well, surprisingly, as the Second Circuit decision shows, the answer is not found in the plain text of the Bankruptcy Code. And while it was argued prior to the Supreme Court’s ruling in Bartenwerfer v. Buckley, No. 21-908, 598 U.S.