In Harrington v. Purdue Pharma LP, in a 5-4 decision, the Supreme Court held that the Bankruptcy Code does not authorize bankruptcy courts to confirm a Chapter 11 bankruptcy plan that discharges creditors’ claims against third parties without the consent of the affected claimants. The decision rejects the bankruptcy plan of Purdue Pharma, which had released members of the Sackler family from liability for their role in the opioid crisis. Justice Gorsuch wrote the majority decision. Justice Kavanaugh dissented, joined by Chief Justice Roberts and Justices Kagan and Sotomayor.
In earlier posts, the Red Zone has discussed the Supreme Court’s ruling in Siegel v. Fitzgerald, 142 S. Ct. 1770 (2022), which held that increased U.S. Trustee quarterly fees for large Chapter 11 debtors between 2018 and 2020 under the Bankruptcy Judgeship Act of 2017 (the “2017 Act”) were unconstitutional because of disparate treatment of Chapter 11 debtors in Bankruptcy Administrator (“BA”) districts, and subsequent judicial decisions determining the appropriate remedy for debtors who overpaid those fees.
We have previously discussed the growing list of judicial decisions addressing the appropriate remedy for overpayment of U.S. Trustee (“UST”) quarterly fees. In U.S. Tr. Region 21 v. Bast Amron LLP (In re Mosaic Mgmt. Grp., Inc.), No. 20-12547, 2023 WL 4144557 (11th Cir.
In a unanimous decision handed down on Feb. 22, 2023, the Supreme Court reinforced one of the Bankruptcy Code’s important creditor protections. In Bartenwerfer v. Buckley, No. 21-908, 598 U.S. ___ (2023), the Court confirmed, in an opinion authored by Justice Barrett, that the Bankruptcy Code bars the discharge by individual debtors of debts fraudulently obtained by the debtor’s agent or business partner.
Introduction
What happens when a shady businessman transfers $1 million from one floundering car dealership to another via the bank account of an innocent immigrant? Will the first dealership’s future chapter 7 trustee be allowed to recover from the naïve newcomer as the “initial transferee” of a fraudulent transfer as per the strict letter of the law? Or will our brave courts of equity exercise their powers to prevent a most grave injustice?
A foreign (non-U.S.) company can be dragged unwillingly into a U.S. bankruptcy case if the bankruptcy court has “personal jurisdiction” over the company.
A foreign (non-U.S.) company can be dragged unwillingly into a U.S. bankruptcy case if the bankruptcy court has “personal jurisdiction” over the company.
The issue of whether directors, officers, and/or shareholders breached their fiduciary duties to a company prior to bankruptcy is commonly litigated in chapter 11 cases, as creditors look to additional sources for recovery, such as D&O insurance or “deep-pocket” shareholders, including private equity firms. The recent decision in In re AMC Investors, LLC, 637 B.R. 43 (Bankr. D. Del. 2022) provides a helpful reminder of the importance of timing in bringing such claims and the use by defendants of affirmative defenses to defeat those claims.
There is a common misconception that lender liability is a thing of the past. However, a recent decision provides a warning to lenders that they can be held liable and face substantial damages if they exercise excessive control over a debtor’s business affairs.