Substantive consolidation is the ultimate disregard of the corporate separateness of a group of related debtors--it is “the effective merger of two or more legally distinct (albeit affiliated) entities into a single debtor with a common pool of assets and a common body of liabilities,”[1] but without the actual de jure merger of the debtors.
Our February 22 post reported that the Franchise Services of North America, Inc. decision of Bankruptcy Judge Edward Ellington of the Southern District of Mississippi dismissing a Chapter 11 petition because a holder of “golden share” stock had not approved the petition as required by the debtor’s charter was going directly to the U.S. Court of Appeals for the Fifth Circuit on an expedited basis. It is the first case concerning the merits of contractual or structural bankruptcy-remoteness in my memory to reach a Court of Appeals since the adoption of the Bankruptcy Code in 1978.
Back in the day--say, the last two decades of the twentieth century--we bankruptcy lawyers took it largely on faith that the right structural and contractual provisions purporting to confer bankruptcy-remoteness[1] were enforceable and likely to be successful in preventing an entity from becoming, voluntarily or involuntarily, a debtor under the Bankruptcy Code.
A long-running issue concerning the treatment of trademark licenses in bankruptcy has seen a new milestone with the January 12 decision of the First Circuit in Mission Product Holdings, Inc. v. Tempnology, LLC.[1] The issue was implicit in the Bankruptcy Code from the time of its adoption in 1978 and flared into the open with the decision of the Fourth Circuit in Lubrizol Enterprises, Inc. v.
When the fallout from failed intellectual-property litigation collides with bankruptcy, the complexities may be dizzying enough, but when the emerging practices and imperatives of litigation financing are imposed on those complexities, the situation might be likened to three-dimensional chess. But in the court of one veteran bankruptcy judge, the complexities were penetrated to reveal that elementary errors and oversights can have decisive effects.
It is a unique characteristic of debt restructuring under Chapter 11 of the Bankruptcy Code that a majority of a class of creditors can accept a modification of the terms of the debts owed to the class members, as provided in a plan of reorganization, and thereby bind non-accepting class members.[1] The ordinary route to confirming a Chapter 11 plan is to obtain its acceptance by a majority of every impaired class of creditors and equity hold
Avoiding a fraudulent transfer to the Internal Revenue Service (“IRS”) in bankruptcy has become easier, or at least clearer, as a result of a recent unanimous decision by a panel of the Court of Appeals for the Ninth Circuit, Zazzali v. United States (In re DBSI, Inc.), 2017 U.S. App. LEXIS 16817 (9th Cir. Aug. 31, 2017).
The long-running litigation spawned by the leveraged buyout of Tribune Company, which closed in December 2007, and the subsequent bankruptcy case commenced on December 8, 2008[1] has challenged the maxim that “there’s nothing new under the sun” even for this writer with four decades of bankruptcy practice behind him.
Despite a modest uptick in recent years, it is still a relatively rare occasion for the Supreme Court of the United States to tackle issues involving bankruptcy. This term, however, the Supreme Court has granted certiorari in two bankruptcy appeals that could have important consequences for the financial community. In FTI Consulting, Inc. v. Merit Management Group, LP, the Court will define the parameters of the safe harbor of Bankruptcy Code section 546(e), which excludes certain financial transactions from the debtor’s avoidance powers. In PEM Entities LLC v.
These days, the threat of counterparty insolvency looms over the energy sector: whether it is a natural disaster or precipitous decline in the price of oil, perhaps no industry is more susceptible to the financial decline and potential default of contracting parties.