On May 3, 2021, Judge Marvin Isgur of the United States Bankruptcy Court for the Southern District of Texas held that indenture trustees must satisfy the “substantial contribution” standard to obtain administrative expense status for their fees and expenses incurred in a chapter 11 case. In his ruling, Judge Isgur expressly rejected the indenture trustee’s argument that it could obtain administrative expense status upon a showing that its fees and expenses were an actual, necessary cost of preserving the debtor’s estate.
On May 11, 2021, the United States Bankruptcy Court for the Northern District of Texas (“Court”) issued a decision[1] dismissing the chapter 11 cases of the National Rifle Association of America and its affiliate (“NRA”) for cause pursuant to section 1112(b) of the Bankruptcy Code.
Chapter 11 plans commonly protect a debtor’s key stakeholders that participate in the chapter 11 process from claims arising in connection with the bankruptcy case. The Office of the United States Trustee (the “US Trustee”), the branch of the Department of Justice tasked with monitoring bankruptcy cases, has recently taken aim at limiting the use and scope of these “exculpation” provisions in large restructuring cases across the country.
Background and Standards
The Bankruptcy Court for the Northern District of Texas dismissed the National Rifle Association’s (“NRA”) bankruptcy case on May 11, finding that the case was not filed in good faith. In his opinion, Judge Harlin Hale found that there was cause for dismissal because the case was filed “to gain unfair litigation advantage and … to avoid a state regulatory scheme,” neither of which he considered to be a purpose intended or sanctioned by the Bankruptcy Code.
On April 19, 2021, the United States Supreme Court denied a petition for certiorari from the Second Circuit’s decision in In re Tribune Company Fraudulent Conveyance Litigation (“Tribune II”),[1] leaving intact the Second Circuit’s decision upholding the safe harbor defense to avoidance actions und
“The discharge of claims in bankruptcy applies with no less force to claims that are meritorious, sympathetic, or diligently pursued. Though the result may chafe one’s innate sense of fairness, not all unfairness represents a violation of due process.”
In a March 2021 decision in the jointly administered bankruptcy cases of Fencepost Productions, Inc. and certain of its affiliates, Judge Dale L.
On Friday, March 19, 2021, Congressional lawmakers introduced a bill that would amend the U.S. Bankruptcy Code to prohibit bankruptcy judges from permanently enjoining or releasing legal claims of states, tribes, municipalities or the U.S. government against non-debtors.
On March 19, 2021, the United States Court of Appeals for the Third Circuit issued a unanimous decision[1] affirming that the mutuality requirement of section 553(a) of the Bankruptcy Code must be strictly construed and, therefore, that triangular setoffs are not permissible in bankruptcy.