On April 23, 2024, the American Bankruptcy Institute’s Subchapter V Task Force issued its Final Report.

This article is the first in a series that summarizes and condenses the Task Force’s Final Report into “a nutshell.” This article:

• provides background information and data on Subchapter V.[Fn. 1]

Overall

Debtor’s Chapter 11 counsel cannot be compensated for services performed after a trustee is appointed and the debtor removed from possession.

• That’s the rule of law in the Fifth Circuit and in a not-for-publication decision of the Ninth Circuit’s Bankruptcy Appellate Panel, based on a U.S. Supreme Court ruling.

So . . . the question is, what about Subchapter V? Does that same no-compensation rule apply in Subchapter V when the debtor is removed from possession?

Ninth Circuit BAP Opinion

The UK National Security and Investment Act came into force on 4 January 2022, significantly extending the UK Government’s power to investigate and intervene in transactions which pose, or could pose, threats to the UK’s national security.

Bankruptcies with large tort claims are common:

• some involve a limited number of claimants (e.g., a drunk driver hits a bus or a restaurant serves bad food one evening); and
• others have large numbers of claimants, some of whom won’t even be known for at least another decade (e.g., asbestos cases).

Often in tort bankruptcies, the total amount of claims overwhelms the debtor’s ability to pay: i.e., existing assets, insurance coverages and projected future income streams are, simply, insufficient.

On 17 April 2024 the UK Jurisdiction Taskforce (theUKJT), chaired by Sir Geoffrey Vos published its Legal Statement on Digital Assets and English Insolvency Law.

The opinion is Bruce v. Citigroup Inc., Case No. 22-1000, decided August 2, 2023, by the U.S. Second Circuit Court of Appeals.

The opinion addresses this question:

You don’t see this very often: a dispute over the confidentiality of mediation communications.

But such a dispute recently happened in In re Barretts Minerals, Inc., Case No. 23-90794, Southern Texas Bankruptcy Court. And the result is this: mediation confidentiality remains alive and well.

In re Barretts Minerals is a mass-tort asbestos case. And Debtor is pursuing confirmation of a bankruptcy plan under § 524(6). Mediation efforts are in progress.

Prompted by the EU Restructuring Directive and accelerated by the pandemic, jurisdictions all across Europe have completely transformed their restructuring regimes in recent years. This is part of a global trend towards more debtor-friendly, rescue-orientated restructuring regimes, inspired by US Chapter 11.

The existence of a bankruptcy option is a good thing for any debtor-creditor situation that is highly stressed—whether the bankruptcy option is used or not.

This is especially true in mass-tort cases where a potential exists for (i) hugely-disparate results for similarly situated plaintiffs, and (ii) debilitating delays in the progress of litigation.

Following a series of important decisions in England and across Europe, it is now beyond doubt that court-based restructuring processes should be approached from the outset as pieces of litigation.

We have seen increasingly sophisticated challenges to restructurings, which the courts are willing to accommodate. In appropriate cases, the courts have also refused to sanction restructurings.