Two years ago in Stern v Marshall, the Supreme Court surprised many observers by placing constitutional limits on the jurisdiction of the United States Bankruptcy Courts. The Court, in limiting the ability of a bankruptcy court judge to render a final judgment on a counterclaim against a party who had filed a claim against a debtor’s bankruptcy estate, re-opened separation of powers issues that most bankruptcy practitioners had thought settled since the mid-1980s. While the
A Western District of New York bankruptcy court has held that the safe harbor provisions of section 546(e) of the Bankruptcy Code apply to leveraged buy-outs of privately held securities. See Cyganowski v. Lapides (In re Batavia Nursing Home, LLC), No. 12-1145 (Bankr. W.D.N.Y. July 29, 2013).
In the last two weeks, the Honorable Steven W. Rhodes of the Bankruptcy Court for the Eastern District of Michigan held two important in hearings in the City of Detroit's chapter 9 case, the largest in history.
Under the Bankruptcy Code, a bankruptcy trustee or chapter 11 debtor in possession (“DIP”) is required to satisfy postpetition obligations under any unexpired lease of commercial property pending a decision to assume or reject the lease. Specifically, section 365(d)(3) requires the trustee, with limited exceptions, to “timely perform all the obligations of the debtor . . . arising from and after the order for relief” under any unexpired lease of nonresidential real property with respect to which the debtor is the lessee.
Several insurers in liquidation proceedings have upcoming claims bar dates:
Fall-out from the subprime and Alt-A mortgage crisis continued recently with court approval of a multi-million dollar settlement of a lawsuit filed against former top officers of what had been one of the country’s leading subprime lenders before its bankruptcy in January 2008.
The ability of a bankruptcy court to reorder the priority of claims or interests by means of equitable subordination or recharacterization of debt as equity is generally recognized. Even so, the Bankruptcy Code itself expressly authorizes only the former of these two remedies. Although common law uniformly acknowledges the power of a court to recast a claim asserted by a creditor as an equity interest in an appropriate case, the Bankruptcy Code is silent upon the availability of the remedy in a bankruptcy case.
The U.S. Court of Appeals for the Tenth Circuit―in Rajala v. Gardner, 709 F.3d 1031 (10th Cir. 2013)―has joined the Second Circuit and departed from the Fifth Circuit by holding that an allegedly fraudulently transferred asset is not property of the estate until recovered pursuant to section 550 of the Bankruptcy Code and therefore is not covered by the automatic stay. According to the court, its decision “gives Congress’s chosen language its ordinary meaning, and abides by a rule against surplusage.”
“Safe harbors” in the Bankruptcy Code designed to minimize “systemic risk”—disruption in the securities and commodities markets that could otherwise be caused by a counterparty’s bankruptcy filing—have been the focus of a considerable amount of judicial scrutiny in recent years. The latest contribution to this growing body of sometimes controversial jurisprudence was recently handed down by the U.S. Court of Appeals for the Second Circuit.
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