The July 6, 2011 Federal Deposit Insurance Corporation Board of Directors (the “FDIC Board”) meeting marked the changing of the guard from Chairman Sheila Bair to FDIC Vice Chairman Martin Gruenberg. Chairman Bair’s valedictory meeting was not merely ceremonial; it also covered several key developments regarding the timing of a final rule on resolution plans under section 165(d) of Title I and a final rule on the Orderly Liquidation Authority (“OLA”) under Title II.
A. RESOLUTION PLANS/ LIVING WILLS
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.