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District Court adopts subjective good faith defense for fraudulent transfer claims in SIPA case

The U.S. District Court for the Southern District of New York, on April 27, 2014, issued a decision directing the bankruptcy court to dismiss fraudulent transfer complaints brought by the Madoff Securities Investor Protection Act of 1970 (“SIPA”) trustee against investment funds, their customers and individuals when the trustee failed “plausibly [to] allege that defendant[s] did not act in good faith.” SIPC v. Bernard L. Madoff Inv. Sec. LLC, 2014 WL 1651952, at *5 (S.D.N.Y. April 27, 2014).

USA, New York, Capital Markets, Insolvency & Restructuring, Litigation, White Collar Crime, Schulte Roth & Zabel LLP, Good faith, United States bankruptcy court, US District Court for the Southern District of New York
Second Circuit holds that senior creditors’ “gifting” of value to existing shareholder under reorganization plan violates absolute priority rule

The U.S. Court of Appeals for the Second Circuit, on Feb. 7, 2011, held that senior creditors could not “gift” part of their reorganization plan recovery to existing shareholders of the debtor.In re DBSD N. Am., Inc., __ F.3d __, 2011 WL 350480 (2d Cir. Feb. 7, 2011) (2-1) (Lynch, J.) (explainingIn re DBSD N. Am., Inc., 627 F.3d 496 (2d Cir. 2010) (summary opinion)). Its extensive 62-page opinion explained the court’s previous two-page summary ruling of Dec.

USA, Insolvency & Restructuring, Litigation, Schulte Roth & Zabel LLP, Share (finance), Bankruptcy, Shareholder, Debtor, Unsecured debt, Interest, Debt, Standing (law), Unsecured creditor, Sprint Corporation, Second Circuit, United States bankruptcy court, US District Court for the Southern District of New York
Fifth Circuit corrects undervaluation of secured lender’s priority claim more than two years after consummation of reorganization plan

The U.S. Court of Appeals for the Fifth Circuit, on Oct. 19, 2010, corrected a bankruptcy court’s calculation of a secured lender group’s superpriority administrative claim more than two years after consummation of the debtor’s Chapter 11 reorganization plan. In re SCOPAC et al., F.3d__, 2010 WL 4069525, at *2-3, *5-6 (5th Cir. Oct. 19, 2010) (Jones, Ch.J.) [“Pacific Lumber II”]; see alsoIn re Pacific Lumber Co., 584 F.3d 229, 242 (5th Cir. 2009) [“Pacific Lumber I”] (plan “substantially consummated within weeks of confirmation”).

USA, Insolvency & Restructuring, Litigation, Schulte Roth & Zabel LLP, Debtor, Collateral (finance), Federal Reporter, Foreclosure, Secured creditor, Valuation (finance), United States bankruptcy court, Fifth Circuit
Delaware Bankruptcy Court grants Chapter 15 protection over U.S. assets of Cayman Islands fund in liquidation

In a recent decision, the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”) granted protection over the U.S. assets of a Cayman Islands exempted company in liquidation. See Revised Order Recognizing Foreign Proceeding (the “Order”), In re Saad Investments Finance Company (No.5) Limited (“SIFCO5”), Case No. 09-13985 (KG) (Bankr. D. Del. Dec. 17, 2009) (Docket No. 47). The company, SIFCO5, is subject to official liquidation proceedings in the Cayman Islands, which the Bankruptcy Court found was eligible for relief under chapter 15 of the U.S.

Cayman Islands, USA, Delaware, Insolvency & Restructuring, Litigation, Private Client & Offshore Services, Schulte Roth & Zabel LLP, Debtor, Privately held company, Hedge funds, Limited partnership, Liquidation, Investment company, Liquidator (law), Barclays, Bear Stearns, US Code, Title 11 of the US Code, United States bankruptcy court, US District Court for District of Delaware, US District Court for the Southern District of New York