The Trustee overseeing the liquidation under the Securities Investor Protection Act (“SIPA”) of Lehman Brothers Inc. (“Lehman”) in the U.S. and the Joint Administrator of Lehman Brothers International (Europe) (“LB Europe”) in the U.K. have reached an agreement in principle to resolve $38 billion in asserted claims among Lehman, LB Europe and subsidiaries and affiliates. The agreement is subject to definitive documentation and approval by the Bankruptcy Court in New York and the English High Court. The parties set December 15, 2012 as the deadline to reach a final agreement.
In the Summer 2009 issue of the Legal Canvas, we wrote about the wisdom of filing a UCC financing statement when art work is consigned to a gallery. Specifically, we said that the filing of a financing statement that reflects the consignor’s interest in the work provides protection against the gallery’s creditors. Financing statements take no time to prepare and cost less than $50 to file.
It could be money well spent.
U.S. bankruptcy law permits debtors-in-possession and trustees to sell assets free and clear of claims, liens and other interests. But a federal judge in New York ruled recently that a purchaser does not necessarily buy free and clear when a product manufactured pre-bankruptcy causes injury after a sale closes. Morgan Olson L.L.C. v. Frederico (In re Grumman Olson Indus., Inc.), No. 11 Civ. 2291, 2012 U.S. Dist. LEXIS 44314 (S.D.N.Y. Mar. 29, 2012) (JPO). In this situation, the purchaser can remain liable for injuries caused by the asset purchased from the debtor.
LEHMAN BANKRUPTCY
In re: Lehman Brothers Holdings, Inc., et al., No. 08-13555
On March 6, 2012, Lehman Brothers Holdings Inc. and its affiliated debtors announced that their Modified Third Amended Joint Chapter 11 Plan, which had been confirmed by the United States Bankruptcy Court for the Southern District of New York on December 6, 2011, had become effective. Distributions under the Plan will begin on April 17, 2012.
Earlier today AMR Corporation, its subsidiary American Airlines, Inc., and 18 other affiliates ("Debtors") filed petitions under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the Southern District of New York in Manhattan.1 The case was assigned to Bankruptcy Judge Sean H. Lane. The Debtors have asked the Court to consolidate all 20 cases for procedural purposes under the captionIn re: AMR Corporation, Case No. 11-15463.
On August 30, 2011, the United States Bankruptcy Court for the Southern District of New York approved the Disclosure Statement for the Revised Second Amended Joint Chapter 11 Plan of Lehman Brothers Holdings, Inc. and its affiliated debtors (collectively, the "Debtors"). The Bankruptcy Court's approval of the Disclosure Statement will permit the Debtors to begin soliciting votes to accept the Plan and is a significant step forward in the Debtors' efforts to achieve resolution of the nation's largest-ever bankruptcy.
Our October 2010 DechertOnPoint “FDIC Begins Action on Its Super-Resolution Rules for Covered Financial Companies” discussed how systemi-cally significant non-bank financial companies (“covered financial compa-nies”) may find themselves in unknown territory if the FDIC is appointed re-ceiver for them.
Industry observers have been waiting to see when bank failures arising out of the recent financial crisis would produce a wave of Federal Deposit Insurance Corporation (“FDIC”) litigation similar to that seen in the early 1990s after the savings and loan crisis. With its second suit in recent months, the FDIC has shown that it will aggressively pursue claims against directors and officers in connection with failed depository institutions.
Title II of the Dodd-Frank Act establishes a new non-judicial receivership al-ternative for resolving troubled financial companies that could threaten the stability of the U.S. financial system (“Covered Financial Companies”), as described further below. The Federal Deposit Insurance Corporation (“FDIC”), on October 12, 2010, issued a notice of proposed rulemaking (the “Proposal”) to begin to implement the provisions of Title II.
The next few years will see the “redevelopment” of the law in two critical areas involving bank failures where the Federal Deposit Insurance Corpora-tion (“FDIC”) is appointed receiver: (i) the relative rights and claims of creditors of a bank or savings and loan holding company, including the FDIC; and (ii) D&O and professional liability. Significant decisions are be-ginning to be issued with regard to the former.