The US Court of Appeals for the Third Circuit on September 10, 2024 issued its anticipated opinion in In re The Hertz Corp., with a majority holding that make-whole premiums constitute unmatured interest disallowed by the US Bankruptcy Code, but also finding that solvent debtors must pay creditors their full claims as dictated by contract, including make-whole and post-petition interest, before distributions can be made to equity.

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.

One of the primary goals of bankruptcy law is to provide debtors with a fresh start by imposing an automatic stay and allowing for claims of reorganizing debtors to be discharged. In environmental law, a primary goal is to ensure that the “polluter pays” for environmental harms. These two goals collide when an entity with environmental liabilities enters bankruptcy. The result is often outcomes that are the exception, rather than the rule, with many unsettled areas of law that can be dealt with by bankruptcy courts in varying ways.

In a decision likely to have a knock-on effect for future fraudulent transfer defense and valuation litigation, the Delaware bankruptcy court recently ruled that the price agreed in the sale of an oil and gas company closed by market participants represents the reasonably equivalent value for the assets being sold and is more reliable evidence of value than expert testimony prepared for the purposes of litigation.

US governmental authorities, including the US Department of the Treasury, the Board of Governors of the Federal Reserve System, and the Federal Deposit Insurance Corporation, took actions to provide both insured and uninsured depositors of Silicon Valley Bank (SVB) (as well as Signature Bank) access to their deposits beginning Monday, March 13. However, despite these actions, many customers are still dealing with the aftermath of an uncertain weekend, and practical questions remain to be answered.

Introduction

A panel of the US Court of Appeals for the Fifth Circuit issued its long-anticipated decision in the Ultra Petroleum make-whole and post-petition interest dispute, with the majority holding that the solvent-debtor exception survived the enactment of the US Bankruptcy Code.

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.