Intercreditor agreements between secured creditors are intended to limit the potential for litigation and result in predictable commercial outcomes with respect to recoveries from collateral in enforcement actions and bankruptcies. Despite the extensive drafting efforts of sophisticated counsel to eliminate ambiguities in these agreements, the interpretation of intercreditor agreements has been the subject of substantial bankruptcy litigation.

In a recent decision, In re Orexigen Therapeutics, Inc., No. 18-10518 (KG) (Bankr. D. Del. Nov. 13, 2018), Judge Kevin Gross of the United States Bankruptcy Court for the District of Delaware held that the mutuality requirement of section 553 of the Bankruptcy Code must be strictly construed, declining to find mutuality in a triangular setoff between the debtor, a parent entity that owed the debtor money, and that entity’s subsidiary, which was a creditor.

During this mostly quiet week in restructuring, most of us are either away on vacation (think beach or ski) or home for the holidays, maybe back in our hometowns. For me, it’s always the latter, and home for the holidays is Virginia Beach, Virginia, where I sit while I write this blog post (alas, not the beach vacation some of you may be enjoying; my relatives live about 20 minutes from the beach and the high temperature this time of year is usually in the 40s).

On November 8, 2018, the United States Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”) issued a decision dismissing an involuntary chapter 11 case filed against Taberna Preferred Funding IV, Ltd. (“Taberna”), a CDO, by holders of non-recourse notes (the “Petitioning Creditors”).

Parties involved in cross-border bankruptcy/restructuring situations may be wary of the risk that repeated litigation in different courts with jurisdiction over the same debtor will result in conflicting judgments. The principle of “universalism” is the theory whereby the decisions of one primary jurisdiction addressing a debtor’s bankruptcy/restructuring issues are given universal effect by courts in other jurisdictions.

In Judge Glenn’s recent lengthy decision recognizing and enforcing a restructuring plan in the chapter 15 proceedings of In re Agrokor1, a Croatian company in Croatian insolvency proceedings, he highlighted that the concept of comity – respect for rulings in other countries – remains an important U.S.

On September 21, 2018, the United States District Court for the District of Delaware issued a decision holding that the Bankruptcy Court had constitutional authority to approve the nonconsensual third-party releases contained in the debtor’s plan of reorganization. The District Court also dismissed as equitably moot all other issues raised on appeal by the appellant in connection with the confirmation order.

The consummation of a plan of reorganization typically involves a series of complex actions by the debtor and its stakeholders (for example, existing debt and equity are extinguished and new debt and equity issued in their place). If an appeal of a confirmation order is taken, and the appeal reaches the appellate court following consummation of the plan, it raises the difficult question of whether it is possible to grant effective relief to the appellant at that stage. As a constitutional matter, courts — including appellate courts — cannot hear matters that have become moot.

On August 14, 2018, the United States Court of Appeals for the Eleventh Circuit issued a decision holding that section 547(c)(4) of the Bankruptcy Code, which provides a defense to the avoidance of preferential transfers to the extent the transferee provided new value to the debtor,[1] does not require new value to remain unpaid as of the date the bankruptcy petition was filed.

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