“ . . . [A] bankruptcy court may not designate claims for bad faith simply because (1) a creditor offers to purchase only a subset of available claims in order to block a [reorganization] plan . . . and/or

“Federal law does not prevent a bona fide shareholder from exercising its right to vote against a bankruptcy petition just because it is also an unsecured creditor,” held the U.S. Court of Appeals for the Fifth Circuit on May 22, 2018. In re Franchise Services of North America Inc., 2018 WL 2325909, *1 (5th Cir. May 22, 2018). According to the court, applicable Delaware law would not “nullify the shareholder’s right to vote against the bankruptcy petition.” Id.

Relevance

A bankruptcy trustee could not “avoid [a] debtor’s transfer” of encumbered asset sale proceeds when the debtor holds the funds “as a mere disbursing agent [under] a contract that” restricted its use, held the U.S. Court of Appeals for the First Circuit on April 18, 2018. Keach v. Wheeling & Lake Erie Railway Co. (In re Montreal, Me. & Atl. Ry.), 2018 U.S. App. LEXIS 9772 *14 (1st Cir. Apr. 18, 2018).

A bankruptcy court properly denied a bank’s motion to compel arbitration of a debtor’s asserted violation of the court’s discharge injunction, held the U.S. Court of Appeals for the Second Circuit on March 7, 2018. In re Anderson, 2018 U.S. App. LEXIS 5703, *20 (2d Cir. March 7, 2018).

The securities safe harbor protection of Bankruptcy Code (“Code”) § 546(e) does not protect allegedly fraudulent “transfers in which financial institutions served as mere conduits,” held the U.S. Supreme Court on Feb. 27, 2018. Merit Management Group LP v. FTI Consulting Inc., 2018 WL 1054879, *7 (2018). Affirming the Seventh Circuit’s reinstatement of the bankruptcy trustee’s complaint alleging the insolvent debtor’s overpayment for a stock interest, the Court found the payment not covered by §546(e) and thus recoverable. The district court had dismissed the trustee’s claim.

A super-priority debtor-in-possession (“DIP”) lender with a lien on all of the debtor’s assets has no “better claim” to a Chapter 11’s debtor’s leased property than the lessor, held the U.S. Court of Appeals for the Seventh Circuit on Jan. 11, 2018.Banco Panamericano, Inc. v. City of Peoria, 2018 U.S. App. LEXIS 738, *12 (7th Cir. Jan. 11, 2018). According to the court, the “lease between [the debtor] and [the lessor] gave [the debtor] no post-termination property interest” in “installations or structures” on the debtor’s property.Id.

“[T]he largely debt-financed purchase of a family-owned [business] was not a fraudulent [transfer] and did not amount to a violation of the fiduciary duty of the company’s directors,” held the U.S. Court of Appeals for the First Circuit on Dec. 4, 2017. In re Irving Tanning Co., 2017 W.L. 5988834, *1 (1st Cir. Dec. 4, 2017).

“[T]he Bankruptcy Code does not permit [an undersecured] creditor . . . to advance an unsecured claim for post-[bankruptcy] attorneys’ fees,” held the U.S. District Court for the Eastern District of North Carolina on Nov. 27, 2017. Summitbridge Nat’l Invs. Iii v. Faison, 2017 U.S. Dist. LEXIS 195267, *8 (E.D. N. C. Nov. 27, 2017). Affirming the bankruptcy court, the district court agreed that “the Code is most properly interpreted to allow only oversecured creditors to add post-[bankruptcy] attorneys’ fees.” Id., at *10.

“[B]ankruptcy does not constitute a per se breach of contract and does not excuse performance by the other party in the absence of some further indication that the [debtor] either cannot, or does not, intend to perform,” held the Supreme Court of Connecticut in a lengthy opinion on Nov. 21, 2017. CCT Communications, Inc. v. Zone Telecom, Inc., 2017 WL 5477540, *13 (Ct. Nov. 21, 2017) (en banc), superseding 324 Conn. 654, 153 A.3d 1249 (2017). Reversing the trial court, granting the plaintiff’s motion for en banc reconsideration of its earlier Feb.

“Officers and directors of [an operating corporate debtor] have fiduciary duties to the corporation — not the corporation’s creditors” under Texas law, held the U.S. Court of Appeals for the Fifth Circuit on Oct. 27, 2017. In re ATP Oil & Gas Corp., 2017 U.S. App. LEXIS 21337, *7 (5th Cir. Oct. 27, 2017). In affirming the district court’s dismissal of a Chapter 7 bankruptcy trustee’s complaint, the Fifth Circuit rejected the trustee’s breach of fiduciary claims against officers and directors for permitting “the payment of . . .