Introduction

Industry observers have been waiting to see when bank failures arising out of the recent financial crisis would produce a wave of Federal Deposit Insurance Corporation (“FDIC”) litigation similar to that seen in the early 1990s after the savings and loan crisis. With its second suit in recent months, the FDIC has shown that it will aggressively pursue claims against directors and officers in connection with failed depository institutions.

Late this summer, the United States District Court for the Northern District of Illinois, Eastern Division, took on an issue of first impression – whether the fraud of one partner can be imputed to an “innocent” partner in order to render a judgment non-dischargeable.

Introduction: Earlier this year, the Third Circuit Court of Appeals' decision in In re Philadelphia Newspapers, LLC[1] sent shockwaves through the secured lending community. In a 2-1 decision, the court held that a debtor can confirm a plan of reorganization while denying the secured creditor the opportunity to credit bid for its collateral if the plan provides the lender with the "indubitable equivalent" of its claim.

Manufacturers, distributors and other merchants of goods who sell their products on credit terms routinely accept a high level of risk of defaulted payment from their customers. In good times, credit-related losses are relatively predictable as a percentage of sales and can be offset by variations in pricing and volume across a seller’s sales transactions. Unfortunately, we are far removed from the good times. The prolonged economic slump has resulted in increased payment defaults and a 150 percent rise in business bankruptcies since the summer of 2007.

The Delaware Court of Chancery has held that under the Delaware Limited Liability Company Act, creditors of an insolvent Delaware limited liability company do not have standing to pursue a derivative claim against the managers of the company.

The Delaware Court of Chancery has granted the plaintiffs' request for judicial dissolution of BVWebTies LLC, a Delaware limited liability company. In the case, co-equal owners and managers of the LLC disagreed over the company's management. The company's LLC agreement, however, provided no method by which to break a deadlock among the members.

The U.S. Bankruptcy Code provides for the appointment of a bankruptcy examiner to investigate the debtor with respect to allegations of fraud, dishonesty, incompetence, misconduct or mismanagement. The right examiner, with a clearly defined mission, will have a major influence on the bankruptcy process. The difference between a successful financial restructuring or liquidation-resulting in substantial recoveries for the key constituencies-and a time-consuming (and asset-consuming) meltdown, can depend on the approach of the examiner and the examiner's support team.

The United States Supreme Court declined to review a Second Circuit decision wherein a bankruptcy trust fund established to reimburse asbestos victims while barring them from future lawsuits against insurers was held to not apply to Chubb Indemnity Insurance Co. In the underlying matter, Chubb sought contribution for asbestos injury claims from The Travelers Indemnity Co. The trust was established in 1986 by a bankruptcy court and funded with hundreds of millions of dollars from insurers for the benefit of asbestos claimants and their families.

The Delaware Court of Chancery has held the seller in an asset purchase transaction liable for breach of an exclusivity provision in the subject asset purchase agreement, dismissing the seller's argument that the fiduciary duties owed by management to creditors negate the contractual exclusivity provision.