December 2012 marked the fifth anniversary of the beginning of the Great Recession, which officially began in December 2007 and ended in June 2009 (at least in the U.S.). Five years down the road, the U.S. economy is undeniably on the road to recovery, with unemployment down to 7.8 percent from a high of 10.2 percent in October 2009, a significant drop in mortgage-foreclosure rates, and a housing market strengthened by the lowest mortgage rates in history. Even so, the recovery is shaky.

Introduction

The ability of a trustee or chapter 11 debtor in possession (“DIP”) to sell bankruptcy estate assets “free and clear” of competing interests in the property has long been recognized as one of the most important advantages of a bankruptcy filing as a vehicle for restructuring a debtor’s balance sheet and generating value. Still, section 363(f) of the Bankruptcy Code, which delineates the circumstances under which an asset can be sold free and clear of “any interest in such property,” has generated a fair amount of controversy.

In 1988, Congress added section 365(n) to the Bankruptcy Code, which grants some intellectual property licensees the right to continued use of licensed property notwithstanding rejection of the underlying executory license agreement by a debtor or bankruptcy trustee. The addition came three years after the Fourth Circuit Court of Appeals ruled in Lubrizol Enters., Inc. v. Richmond Metal Finishers, Inc., 756 F.2d 1043 (4th Cir. 1985), that if a debtor rejects an executory intellectual property license, the licensee loses the right to use any licensed copyrights, trademarks, and patents.

Participants in the multibillion-dollar market for distressed claims and securities have had ample reason to keep a watchful eye on developments in the bankruptcy courts during the last decade. That vigil appeared to have been over five years ago, after a federal district court ruled in the Enron chapter 11 cases that sold claims are generally not subject to equitable subordination or disallowance on the basis of the seller's misconduct or receipt of a voidable transfer. A ruling recently handed down by a Delaware bankruptcy court, however, has reignited the debate.

Senior Transeastern Lenders v. Official Comm. Of Unsecured Creditors of TOUSA, Inc. (In re TOUSA, Inc.), 2012 US App. LEXIS 9796 (11th Cir. May 15, 2012)

“In chapter 11, a creditor should be able to assert the full amount of any guarantee claim against the debtor without reducing the claim for recoveries against another obligor.”

“Whether the Nortel Senior Notes will be entitled to post-petition interest, and at what rate, in the chapter 11 cases are open questions that may hinge, among other things, on proving solvency of the Nortel chapter 11 debtors.”

A "roller-coaster ride of financial and economic uncertainty" would be one way to describe 2011. Limiting the script to financial and economic developments, however, would leave a big part of the story untold, as we chronicle the (not so certain) aftermath of the Great Recession. Impacting worldwide financial and economic affairs in 2011 was a seemingly endless series of groundbreaking, thought-provoking, and sometimes cataclysmic events, including:

This Client Alert addresses the impact on a customer of a futures commission merchant (FCM) with respect to his or her accounts held by that FCM prior to a filing for bankruptcy under Title 11 of the United States Code, 11 U.S.C. §§ 101-1532 (the Bankruptcy Code) by the FCM.

Summary

Much attention in the commercial bankruptcy world has been devoted recently to judicial pronouncements concerning whether the practice of senior creditor class “gifting” to junior classes under a chapter 1 1 plan violates the Bankruptcy Code’s “absolute priority rule.” Comparatively little scrutiny, by contrast, has been directed toward significant developments in ongoing controversies in the courts regarding the absolute priority rule outside the realm of senior class gifting— namely, in connection with the “new value” exception to the rule and whether the rule was written out of the Bankr