When a traditional nonbanking company files a case under the Bankruptcy Code, a judge is appointed to be the neutral arbiter of disputes that arise between the debtor and its creditors.

In re General Growth Props., Inc., Case No. 09-11977 (ALG), 2011 BL 189724 (Bankr. S.D.N.Y. July 20, 2011)  

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Giuliano v. Shorenstein Company, LLC (In re Sunset Aviation, Inc.), Adv. No. 11- 50965, Bankr. No. 09-10778, 2011 WL 4002429 (Bankr. D. Del. Sept. 7, 2011)  

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In re Marcal Paper Mills, Inc., No. 09-4574, 650 F.3d 311 (3d Cir., 2011)

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Sprint Nextel Corporation v. U.S. Bank N.A. (In re TerreStar Networks, Inc.), Case No. 10-15446 (Bankr. S.D.N.Y., Aug. 19, 2011)

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Leading the Past Week

A federal district court, applying Pennsylvania law, has held that the insolvency exclusion in an insurance agency’s professional liability policy excused the insurer from the duty to defend the agency in lawsuits alleging that it had caused employee benefit plans that it created to be underfunded.  ACE Capital Limited v. Morgan Waldon Ins. Management, LLC, Civil Action No. 11-128, 2011 WL 5914275 (W.D. Pa. Nov. 28, 2011).

An English appellate court permitted an Australian reinsurer in liquidation to enforce a judgment entered in Australian insolvency proceedings against a Lloyd’s syndicate, which had elected not to participate in the foreign proceedings. On appeal, the syndicate argued that England’s reciprocity act did not apply to foreign judgments made in insolvency proceedings, and that England’s insolvency act, which recognizes Australian courts, should be interpreted as strictly permitting only Australian choice of law, rather than the enforcement of Australian judgments.

New bankruptcy forms and rules that took effect December 1, 2011, require secured creditors either to attach evidence of perfection of their security interest to the proof of claim form that they file, or attach a statement of why the documents are not available.

On 30 November 2011, New York Senate Bill 2713A was delivered to the desk of Governor Andrew Cuomo for signature. If signed by the Governor, the bill will add provisions to the New York Insurance Law regarding the treatment of qualified financial contracts in an insurance insolvency proceeding. “Qualified financial contracts” include derivatives, securities lending, repurchase agreements, futures contracts and other financial instruments. These contracts are typically documented under master agreements providing for netting of obligations between the parties.