An important aspect of the Puerto Rico Oversight, Management, and Economic Stability Act, 48 U.S.C. §§ 2101–2241 ("PROMESA")—the temporary stay of creditor collection efforts that came into effect upon its enactment—was the subject of a ruling handed down by the U.S. Court of Appeals for the First Circuit. In Peaje Investments LLC v. García-Padilla, 845 F.3d 505 (1st Cir. 2017), the First Circuit affirmed in part and vacated in part a lower court order denying two motions for relief from the PROMESA stay.
On March 22, 2017, the United States Supreme Court held that bankruptcy courts cannot approve a “structured dismissal”—a dismissal with special conditions or that does something other than restoring the “prepetition financial status quo”—providing for distributions that deviate from the Bankruptcy Code’s priority scheme absent the consent of affected creditors. Czyzewski v.Jevic Holding Corp., No. 15-649, 580 U.S. ___ (2017), 2017 WL 1066259, at *3 (Mar. 22, 2017).
Only a handful of courts have had an opportunity to address the ramifications of rejection of a trademark license since the U.S. Court of Appeals for the Seventh Circuit handed down its landmark decision in Sunbeam Prods., Inc. v. Chicago Am. Manuf., LLC, 686 F.3d 372 (7th Cir. 2012), cert. denied, 133 S. Ct. 790 (2012). A bankruptcy appellate panel for the First Circuit recently did so in Mission Prod. Holdings, Inc. v. Tempnology LLC (In re Tempnology LLC), 559 B.R. 809 (B.A.P. 1st Cir. 2016).
On January 17, 2017, the Court of Appeals for the Second Circuit issued its long-anticipated opinion in Marblegate Asset Management, LLC v. Education Management Finance Corp., 1 ruling that Section 316(b) of the Trust Indenture Act of 1939, 15 U.S.C. § 77ppp(b) (the “Act”), prohibits only non-consensual amendments to core payment terms of bond indentures.
In Deutsche Bank Trust Co. Ams. v. Large Private Beneficial Owners (In re Tribune Co. Fraudulent Conveyance Litig.), 818 F.3d 98 (2d Cir. 2016), the U.S. Court of Appeals for the Second Circuit held that the “safe harbor” under section 546(e) of the Bankruptcy Code for settlement payments and for payments made in connection with securities contracts preempted claims under state law by creditors to avoid as fraudulent transfers pre-bankruptcy payments made to shareholders in connection with a leveraged buyout (“LBO”) of the debtor.
On June 13, 2016, the U.S. Supreme Court upheld lower court rulings declaring unconstitutional a 2014 Puerto Rico law, portions of which mirrored chapter 9 of the Bankruptcy Code, that would have allowed the commonwealth’s public instrumentalities to restructure a significant portion of Puerto Rico’s bond debt (widely reported to be as much as $72 billion). In Commonwealth v. Franklin Cal. Tax-Free Tr., 2016 BL 187308 (U.S.
The United States Court of Appeals for the Second Circuit recently articulated a standard to determine what claims may be barred against a purchaser of assets "free and clear" of claims pursuant to section 363(f) of the Bankruptcy Code and highlighted procedural due process concerns with respect to enforcement.1 The decision arose out of litigation regarding certain defects, including the well-known "ignition switch defect," affecting certain GM vehicles. GM's successor (which acquired GM's assets in a section 363 sale in 2009) asserted that a "free and clear" provisi
On March 29, 2016, the Second Circuit addressed the breadth and application of the Bankruptcy Code's safe harbor provisions in an opinion that applied to two cases before it. The court analyzed whether: (i) the Bankruptcy Code's safe harbor provisions preempt individual creditors' state law fraudulent conveyance claims; and (ii) the automatic stay bars creditors from asserting such claims while the trustee is actively pursuing similar claims under the Bankruptcy Code. In In re Tribune Co.
One of the prerequisites to confirmation of any chapter 11 plan is that at least one “impaired” class of creditors must vote in favor of the plan. This requirement reflects the basic (but not universally accepted) principle that a plan may not be imposed on a dissident body of stakeholders of which no class has given approval. However, it is sometimes an invitation to creative machinations designed to muster the requisite votes for confirmation of the plan.
The District Court for the Central District of California recently held that an assignee that acquired rights to a terminated swap agreement was not a "swap participant" under the Bankruptcy Code and, therefore, could not invoke safe harbors based on that status to foreclose on collateral in the face of the automatic stay. [1] The court ruled that the assignee acquired only a right to collect payment under the swap agreement, not the assignor's rights under the Bankruptcy Code to exercise remedies without first seeking court approval.
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