Before ingesting too much holiday cheer, we encourage you to consider a recent opinion from the United States Court of Appeals for the Second Circuit.

Weil Bankruptcy Blog connoisseurs will recall that, in May 2019, we wrote on the Southern District of New York’s decision in In re Tribune Co. Fraudulent Conveyance Litigation, Case No. 12-2652, 2019 WL 1771786 (S.D.N.Y. April 23, 2019) (Cote, J.) (“Tribune I”).

A recent chapter 15 decision by Judge Martin Glenn of the United States Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”) suggests that third-party releases susceptible to challenge or rejection in chapter 11 proceedings may be recognized and enforced under chapter 15. This decision provides companies with cross-border connections a path to achieve approval of non-consensual third-party guarantor releases in the U.S.

Background

A recent chapter 15 decision by Judge Martin Glenn of the United States Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”) suggests that third-party releases susceptible to challenge or rejection in chapter 11 proceedings may be recognized and enforced under chapter 15. This decision provides companies with cross-border connections a path to achieve approval of non-consensual third-party guarantor releases in the U.S.

Background

In its decision published on March 13, 2013 (dated February 21, 2013 – IX ZR 32/12), the German Federal Court of Justice (BGH or Bundesgerichtshof) made it clear that it will uphold its prevailing case law regarding two questions at hand even though the relevant legal provisions relating to equitable subordination have been moved from the corporate law regime to the insolvency law regime with the 2008 Act to Modernize the Law on Private Limited Companies and Combat Abuses (MoMiG or Gesetz zur Modernisierung des GmbH-Rechts und zur Bekämpfung von Mißbräuchen).