In a departure from prior precedent in the United States Bankruptcy Court for the Southern District of New York (SDNY), a recent opinion by Judge Michael E. Wiles in In re Cortlandt Liquidating LLC,[1] effectively lowered the Bankruptcy Code section 502(b)(6) cap on rejection damages that a commercial real estate landlord may claim, by holding that the cap should be calculated using the “Time Approach,” rather than the “Rent Approach.”

Calculation of Lease Rejection Damages

The March 2023 banking crisis has been an unexpected “stress test” for dealing with liquidity issues.

When state regulators closed Silicon Valley Bank this past Friday, many startups understandably faced severe liquidity issues triggered by the sudden and unexpected loss of access to their deposits.

On January 4, 2023, Judge Glenn of the United States Bankruptcy Court for the Southern District of New York issued a much-awaited decision in the Celsius Network LLC (along with its affiliated debtors, “Celsius” or the “Debtors”) chapter 11 cases relating to the ownership of crypto assets deposited by customers in the Celsius “Earn” rewards program accounts.

Over the span of two weeks in July 2022, two of the largest retail-facing cryptocurrency platforms, Celsius and Voyager, filed for chapter 11 bankruptcy protection.

In New York, it is a standard practice to name all tenants residing in a building when foreclosing upon the property.

The reality of a bankruptcy proceeding is that creditors often receive less than a full distribution on their claims, forcing them to absorb such losses or look for new avenues to make themselves whole. The “bankruptcy haircut” is more often the case for general unsecured creditors and occurs less often for secured creditors (when they are not undersecured) and lessors (when they are not underwater on their lease). Sometimes creditors have the luxury of looking to guarantors to mitigate their losses when the guarantors are not insolvent or otherwise judgment proof.

The Bankruptcy Code gives a bankruptcy trustee, or the debtor in possession, the power to “avoid” certain transfers made by the debtor at various times before filing for bankruptcy relief.

In order to secure a real property owner’s payment obligation, contractors, mechanics, materialmen, and other workmen are often granted a lien referred to by a variety of names including, materialmen’s liens, workmen’s liens, and mechanic’s liens. While the parlance varies by jurisdiction, they are generally referred to as mechanic’s liens in Texas—even in the context of real property.

Undersecured creditors face unique challenges because they are neither fully secured nor fully unsecured. Beyond the obviously undesirable issue of being upside-down on their deal, undersecured creditors often are exposed to preference liability for those payments they received in the 90 days prior to the debtor filing bankruptcy. This is especially true where an aggressive trustee is looking to create value or where an opportunistic trustee sees a chance to make a quick buck.

Globalization has led to a marked increase in international components to insolvency proceedings. Cross-border issues add a new layer of complexity to what is often a situation already fraught with obstacles. Courts and practitioners alike face additional difficulties communicating with other courts, resolving issues consistently in jurisdictions with different laws and policy objectives, and enforcing rulings and implementing orders adjudicated extraterritorially.