In bankruptcy cases under chapter 11, debtors sometimes opt for a "structured dismissal" when a consensual plan of reorganization or liquidation cannot be reached or conversion to chapter 7 would be too costly. In Czyzewski v. Jevic Holding Corp., 137 S. Ct. 973, 2017 BL 89680 (U.S. Mar. 27, 2017), the U.S. Supreme Court held that the Bankruptcy Code does not allow bankruptcy courts to approve distributions in structured dismissals which violate the Bankruptcy Code's ordinary priority rules.

On May 1, 2017, the U.S. Supreme Court agreed to hear Merit Management Group v. FTI Consulting, No. 16-784, on appeal from the U.S. Court of Appeals from the Seventh Circuit. The Court's decision could resolve a circuit split as to whether section 546(e) of the Bankruptcy Code can shield from fraudulent conveyance attack transfers made through financial institutions where such financial institutions are merely "conduits" in the relevant transaction.

On May 1, 2017, the U.S. Supreme Court agreed to hear Merit Management Group v. FTI Consulting, No. 16-784, on appeal from the U.S. Court of Appeals from the Seventh Circuit. See FTI Consulting, Inc. v. Merit Management Group, LP, 830 F.3d 690 (7th Cir. 2016) (a discussion of the Seventh Circuit's ruling is available here).

The U.S. Supreme Court ruled on March 22, 2017, in Czyzewski v. Jevic Holding Corp., that without the consent of affected creditors, bankruptcy courts may not approve "structured dismissals" providing for distributions that "deviate from the basic priority rules that apply under the primary mechanisms the [Bankruptcy] Code establishes for final distributions of estate value in business bankruptcies."

In Ritchie Capital Mgmt., LLC v. Stoebner, 779 F.3d 857 (8th Cir. 2015), the U.S. Court of Appeals for the Eighth Circuit affirmed a bankruptcy court’s decision that transfers of trademark patents were avoidable under section 548(a)(1)(A) of the Bankruptcy Code and Minnesota state law because they were made with the intent to defraud creditors.

The U.S. Supreme Court in RadLAX Gateway Hotel, LLC v. Amalgamated Bank, ___ S. Ct. ___, 2012 WL 1912197 (May 29, 2012), held that a debtor may not confirm a chapter 11 "cramdown" plan that provides for the sale of collateral free and clear of existing liens, but does not permit a secured creditor to credit-bid at the sale. The unanimous ruling written by Justice Scalia (with Justice Kennedy recused) resolved a split among the Third, Fifth, and Seventh Circuits.

On December 12, 2011, the Supreme Court granted a petition for certiorari in a case raising the question of whether a debtor's chapter 11 plan is confirmable when it proposes an auction sale of a secured creditor's assets free and clear of liens without permitting that creditor to "credit bid" its claims but instead provides the creditor with the "indubitable equivalent" of its secured claim. RadLAX Gateway Hotel, LLC v. Amalgamated Bank, No. 11-166 (cert. granted Dec. 12, 2011).

Earlier this year, the United States Court of Appeals for the Eleventh Circuit decided in In re Lett that objections to a bankruptcy court’s approval of a cram-down chapter 11 plan on the basis of noncompliance with the “absolute priority rule” may be raised for the first time on appeal. The Eleventh Circuit ruled that “[a] bankruptcy court has an independent obligation to ensure that a proposed plan complies with [the] absolute priority rule before ‘cramming’ that plan down upon dissenting creditor classes,” whether or not stakeholders “formally” object on that basis.

A decision by the High Court in December has strengthened the position of landlords who sometimes do not get paid during the administration even where the administrator is running the business from the property.

Certain categories of expense which may be incurred by the company after it has gone into administration, and which an administrator has to pay are known as "expenses of the administration" and the assets of the company in administration must be applied towards payment of these expenses ahead of any payment to creditors under floating charges or to unsecured creditors.

We have spent a lot of time thinking about landlords being affected by tenants going into administration over the last year. This posting is about a court case where the landlord’s administrators were trying to postpone the tenant’s application to Court for the grant of a new tenancy under the 1954 Act.

The administrators failed in their attempts to defer the 1954 Act proceedings even though it severely affected the value of the property in question and the amount that was going to be paid out to the secured creditor.