A recent decision by the United States District Court for the Southern District of New York highlights directors’ fiduciary duty to evaluate all aspects of multi-stage transactions, including those portions to be effectuated post-closing by successor directors.

Part 2: Amendments Affecting Mortgage Lenders and Landlords

As discussed in a previous post, the Consolidated Appropriations Act of 2021 (the “Act”), which was enacted on December 27, 2020 in response to the economic distress caused by the COVID-19 pandemic, amended numerous provisions of the Bankruptcy Code. This post discusses amendments specifically affecting landlords.

On December 27, 2020, in response to the economic distress caused by the COVID-19 pandemic and to supplement the CARES Act enacted in March 2020, the Consolidated Appropriations Act of 2021 (the “Act”) was enacted. In addition to providing $900 billion in pandemic relief, the Act benefits both debtors and creditors by temporarily modifying the following sections of the Bankruptcy Code, which may be of particular interest to creditors:

In French v. Linn Energy, L.L.C. (In re Linn Energy, L.L.C.), the United States Court of Appeals for the Fifth Circuit addressed the scope of Bankruptcy Code Section 510(b), settling on an expansive reading of the Section, holding that a claim for “deemed dividends” should be subordinated.

In its ruling in FTI Consulting, Inc. v. Sweeney (In re Centaur, LLC), the United States Bankruptcy Court for the District of Delaware addressed the Supreme Court’s recent clarification of the scope of Bankruptcy Code Section 546(e)’s “safe harbor” provision, affirming a more narrow interpretation of Section 546(e).

In In re Louisiana Riverboat Gaming P’ship (Global Gaming Legends, LLC v. Legends Gaming of Louisana-1, LLC) (“Global Gaming”), the United States Bankruptcy Court for the Western District of Louisiana stayed discovery in an adversary proceeding pending decision on a party’s motion to withdraw the reference to the district court, finding too much risk that the bankruptcy court would later be found to be without authority to handle pre-trial discovery for the “Stern-governed” core claims at issue. Adv. Proc. No. 13AP-1007 (Bankr. W.D. La. Jan. 10, 2014).

In an adversary proceeding filed in the American Home Mortgage Holdings, Inc. bankruptcy case, the Delaware bankruptcy court affirmed that triangular setoffs are not allowed under the Bankruptcy Code and cannot be modified by contract or under the Bankruptcy Code’s safe harbor provision. In re American Home Mortgage Holdings, Inc., et al., Adv. Proc. No. 11-51851 (Bankr. D. Del. Nov. 8, 2013). Two contracts were at issue – a swap agreement between a bank and American Home Mortgage Investment Corp.

In re Big M, Inc., No. 13-10233 (DHS), 2013 WL 1681489 (Bankr. D.N.J. April 17, 2013). In Big M, the Bankruptcy Court for the District of New Jersey (the “Bankruptcy Court”) held that the debtor’s privilege did not pass to the creditors’ committee, even though the creditors’ committee obtained authority to investigate certain of the debtor’s causes of action, because the committee was acting as a fiduciary to creditors as opposed to the debtor’s estate.