On May 5, 2009, Judge James Peck, the Bankruptcy Judge in the Lehman Brothers bankruptcy cases, held that the safe harbor provisions of the Bankruptcy Code do not override the mutuality requirements for setoff under section 553(a) of the Bankruptcy Code. As a consequence, the Bankruptcy Court prohibited Swedbank, a non-debtor counter party to a swap agreement, from setting off pre-petition claims against Lehman against funds collected for Lehman’s account postpetition. See In re Lehman Bros. Holdings Inc., Bankr. Case No. 08-13555 (JMP) (Bankr. S.D.N.Y.

According to the U.S. Bankruptcy Court for the Southern District of New York, a lack of bad faith is no longer a defense to court sanctions for failure to produce documents in a timely manner. That court, in In re A&M Florida Properties II, recently awarded sanctions against both a party and its counsel for the counsel’s failure to become familiar with the client’s email and data-retention policies and systems— despite the absence of any bad faith or willful delay.1

A recent Delaware bankruptcy court decision1 on the ability of “bankruptcy remote” single-purpose entities emphasizes the complicated nature of the bankruptcy process and the issues that need to be considered when using “bankruptcy remote” entities in funding structures. Given the prevalence of such entities, this is an important decision for all participants in the structured fi nance industry.

On May 5th, the Senate voted 93-5 to adopt an amendment proposed by Senators Christopher Dodd and Richard Shelby that would give the FDIC authority to liquidate failing financial institutions without the creation of a controversial $50 billion "bailout" fund. Instead, the FDIC would use a new line of credit with the Treasury Department, supported by the assets of the failed institution, to pay the liquidation expenses.

In In re Kohls, 2007 LEXIS 76 (Bankr NDWVa 2007), the debtor filed this adversary proceeding against the Bank to cancel indebtedness and recover damages related to a $34,864 loan that the Bank made to the Debtor on the grounds that the loan was unconscionable at the time it was executed in violation of W. Va. Code § 46A-2-121.

Friday, the Florida Office of Financial Regulation closed The Bank of Bonifay, headquartered in Bonifay, Florida, and the FDIC was appointed receiver. As receiver, the FDIC entered into a purchase and assumption agreement with First Federal Bank, headquartered in Lake City, Florida, to assume all of the deposits of The Bank of Bonifay.

Friday, the California Department of Financial Institutions closed 1st Pacific Bank of California, headquartered in San Diego, California, and the FDIC was appointed receiver.

Friday, the Minnesota Department of Commerce closed Access Bank, headquartered in Champlin, Minnesota, and the FDIC was appointed receiver. As receiver, the FDIC entered into a purchase and assumption agreement with Prinsbank, headquartered in Prinsburg, Minnesota, to assume all of the deposits of Access Bank.

Friday, the Arizona Department of Financial Institutions closed Towne Bank of Arizona, headquartered in Mesa, Arizona, and the FDIC was appointed receiver.

Credit bidding has become a really hot issue recently. For those of us who don't normally work on bankruptcy matters, the right to credit bid is an important right that secured lenders usually have in a bankruptcy proceeding. If you're the senior secured lender and you want to buy the company's assets in a bankruptcy sale, you can show up at the auction and, instead of bidding cash, you can place credit bids.