Piercing the corporate veil (PCV) is a remedy often pursued by a creditor of an insolvent entity against the entity’s parent or principal.  While the corporate veil generally shields a shareholder from the general obligations of his or her corporation, PCV allows a creditor to look beyond the corporate shield and, in certain instances, hold a shareholder liable for the corporation’s debts.

Federal bankruptcy judges, who are not appointed under Article III of the Constitution, do not have the power to enter a final judgment in all matters that come before them. Pursuant to 28 U.S.C. § 157(b)(2), they generally may enter a judgment in all cases under the Bankruptcy Code or in certain proceedings defined as “core proceedings.”

Joining the Fourth, Fifth, Eighth and Ninth Circuit Courts of Appeal, the Eleventh Circuit recently held that new value does not need to remain unpaid in order to support the subsequent new value defense in a preference action.  See Kaye v. Blue Bell Creameries, Inc. (In re BFW Liquidation, LLC), Case No. 17-13588, 2018 WL 3850101 (11th Cir.

To Lease or Not to Lease

In Corporate Claims Management, Inc. v. Shapier, et al. (In re Patriot National Inc.), Adv. Pro. No. 18-50307 (Bankr. D. Del August 8, 2018), the Delaware Bankruptcy Court found that alleged misappropriation of trade secrets could constitute a violation of the automatic stay under section 362 of the Bankruptcy Code and be subject to turnover under section 542 of the Bankruptcy Code. 

InLaMonica v. CEVA Group PLC, et al. (In re CIL Limited), Adversary No. 14-02442 (Bankr. S.D.N.Y June 15, 2018), the Bankruptcy Court for the Southern District of New York was tasked with deciding whether the “collapsing doctrine” could be used to determine the situs of a fraudulent transfer, which was part of an international, multi-step transaction occurring inside and outside of the United States. 

In Topfer v. Topfer (In re Topfer), Case No. 5-18-ap-00066 RNO (M.D. Pa. July 25, 2018), the Bankruptcy Court for the Middle District of Pennsylvania remanded a three-and half year old divorce proceeding that had been removed to bankruptcy court. But, the remand became more complicated than it needed to be.

The chapter 7 debtor had removed the divorce action immediately after filing for chapter 7 bankruptcy. Shortly after removal, the non-debtor spouse moved to remand the case on mandatory abstention and permissive abstention grounds.

In the recent court decision of Trenfield v HAG Import Corporation (Australia) Pty Ltd [2018] QDC 107, the liquidators recovered unfair preferences from a retention of title creditor who argued it was a secured creditor.

The issues

Banks regularly enter into commercial relationships with their customers such as opening new depository accounts.  These relationships are often contractual in nature and seem relatively straightforward until an unexpected incident occurs that causes the relationship to unravel. What then are the duties owed by each party to each another?  The default rule seems to be that the terms and conditions that the parties agreed to at first govern the parties’ actions throughout their banking relationship.

In the recent decision of Heavy Plant Leasing [2018] NSWSC 707, a creditor successfully defended an unfair preference claim by establishing it did not have reasonable grounds to suspect the insolvency of the debtor company, who was a subcontractor in the earth moving business.

The most common way of defending a liquidator’s unfair preferences claim is to rely upon section 588FG(2) of the Corporations Act 2001(Cth); commonly called the ‘good faith defence’.