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Eleventh Circuit outlines bankruptcy courts’ allowance of non-consensual, non-debtor releases

The Eleventh Circuit’s recent opinion in SE Property Holdings, LLC v. Seaside Engineering & Surveying, Inc. (In re Seaside Engineering & Surveying, Inc.), No. 14-11590 (11th Cir. March 12, 2015), clarifies the circuit’s stance on the authority of bankruptcy courts to issue nonconsensual, non-debtor releases or bar orders and the circumstances under which such bar orders might be appropriate. In addition, the court gave a broad reading of what it means for a plan to have been proposed in good faith.

USA, Insolvency & Restructuring, Litigation, Alston & Bird LLP, Debtor, United States bankruptcy court, Eleventh Circuit
SDNY Bankruptcy Court holds that the bankruptcy safe harbors do not preclude state-law fraudulent transfer actions brought by creditors

A bankruptcy judge in the Southern District of New York recently held that section 546(e) of the Bankruptcy Code does not prevent a debtor’s creditors from bringing state-law fraudulent conveyance actions that challenge a leveraged buyout of the debtor. Weisfelner v. Fund 1 (In re Lyondell Chem. Co.), No. 10-4609 (REG), --- B.R. ----, 2014 WL 118036 (Bankr. S.D.N.Y. Jan. 14, 2014).

USA, New York, Insolvency & Restructuring, Litigation, Alston & Bird LLP, Debtor, Leveraged buyout, Title 11 of the US Code, United States bankruptcy court, US District Court for the Southern District of New York
SDNY bankruptcy court upholds swap provision that modifies the method to calculate amounts owing upon the counterparty’s bankruptcy

TheLehman Brothers bankruptcy court has determined that the contractually specified methodology for conducting the liquidation of a swap agreement is protected by the safe harbor provisions of the bankruptcy, even if the selected methodology would be more favorable to the non-defaulting counterparty than the liquidation methodology that would apply absent the bankruptcy.See Michigan State Housing Dev. Auth. v. Lehman Bros. Deriv. Prods. Inc. (In re Lehman Bros. Holdings Inc.), No. 08-13555, ---B.R.

USA, New York, Derivatives, Insolvency & Restructuring, Litigation, Alston & Bird LLP, Bankruptcy, Swap (finance), Liquidation, International Swaps and Derivatives Association, Lehman Brothers, United States bankruptcy court, US District Court for the Southern District of New York
Seventh Circuit adopts Second Circuit’s broad safe harbor definitions

The Seventh Circuit has explicitly adopted the Second Circuit’s broad interpretation of the terms “transfer” and “settlement payment” in the Bankruptcy Code’s safe harbor provisions. See Peterson v. Somers Dublin Ltd., No. 12-2463, --- F.3d ----, 2013 WL 4767495 (7th Cir. Sept.

USA, Insolvency & Restructuring, Litigation, Alston & Bird LLP, Federal Reporter, Enron, Second Circuit, Seventh Circuit
Ninth Circuit holds bankruptcy courts may recharacterize debt as equity

The Ninth Circuit has joined the majority of Circuit Courts in holding that bankruptcy courts have the authority to recharacterize alleged debts as equity. See Official Comm. of Unsecured Creds. v. Hancock Park Capital II, L.P. (In re Fitness Holdings Int’l, Inc.), No. 11-56677, --- F.3d ----, 2013 WL 1800000 (9th Cir. April 30, 2013). In doing so, the appellate court has explicitly reversed the contrary precedent of In re Pacific Express, Inc., 69 B.R. 112, 115 (B.A.P. 9th Cir. 1986).

USA, Insolvency & Restructuring, Litigation, Alston & Bird LLP, Debt, Ninth Circuit, United States bankruptcy court
TOUSA redux: the Eleventh Circuit Court of Appeals affirms bankruptcy court’s avoidance of constructively fraudulent transfers and reverses the district court

The outcome of the TOUSA appeal has been much anticipated and closely watched by the lending community, their counsel and advisors, and legal scholars. On May 15, 2012, the Eleventh Circuit Court of Appeals issued its opinion (found here), reversing the District Court for the Southern District of Florida and affirming the Bankruptcy Court for the Southern District of Florida, at least insofar as to the bankruptcy court’s factual findings, but not remedies.

USA, Florida, Banking, Insolvency & Restructuring, Litigation, Alston & Bird LLP, Bankruptcy, Subsidiary, United States bankruptcy court, Eleventh Circuit
Court holds that a bankruptcy termination provision that subordinates an in-the-money debtor’s right to a distribution may be an unenforceable ipso facto provision

In Lehman Brothers Special Financing, Inc. v. Ballyrock ABS CDO 2007-1 Limited (In re Lehman Brothers Holdings, Inc.), Adv. P. No. 09-01032 (JMP) (Bankr. S.D.N.Y. May 12, 2011) [hereinafter “Ballyrock”], the United States Bankruptcy Court for the Southern District of New York held that a contractual provision that subordinates the priority of a termination payment owing under a credit default swap (CDS) to a debtor in bankruptcy, and which caps the amount of the termination payment, may be an unenforceable ipso facto clause under section 541(c)(1)(B).

USA, New York, Derivatives, Insolvency & Restructuring, Litigation, Alston & Bird LLP, Bankruptcy, Debtor, Injunction, Statutory interpretation, Safe harbor (law), Swap (finance), Liquidation, Default (finance), Credit default swap, Lehman Brothers, Title 11 of the US Code, United States bankruptcy court, US District Court for the Southern District of New York