On May 11, 2021, the United States Bankruptcy Court for the Northern District of Texas (“Court”) issued a decision[1] dismissing the chapter 11 cases of the National Rifle Association of America and its affiliate (“NRA”) for cause pursuant to section 1112(b) of the Bankruptcy Code.
Chapter 11 plans commonly protect a debtor’s key stakeholders that participate in the chapter 11 process from claims arising in connection with the bankruptcy case. The Office of the United States Trustee (the “US Trustee”), the branch of the Department of Justice tasked with monitoring bankruptcy cases, has recently taken aim at limiting the use and scope of these “exculpation” provisions in large restructuring cases across the country.
Background and Standards
On April 19, 2021, the United States Supreme Court denied a petition for certiorari from the Second Circuit’s decision in In re Tribune Company Fraudulent Conveyance Litigation (“Tribune II”),[1] leaving intact the Second Circuit’s decision upholding the safe harbor defense to avoidance actions und
“The discharge of claims in bankruptcy applies with no less force to claims that are meritorious, sympathetic, or diligently pursued. Though the result may chafe one’s innate sense of fairness, not all unfairness represents a violation of due process.”
On March 19, 2021, the United States Court of Appeals for the Third Circuit issued a unanimous decision[1] affirming that the mutuality requirement of section 553(a) of the Bankruptcy Code must be strictly construed and, therefore, that triangular setoffs are not permissible in bankruptcy.
The English Court has, for the first time, handed down judgment on whether the liquidation stay prevents the Financial Conduct Authority (the "FCA") from issuing a Warning Notice under sections 92 and 126 of the Financial Services and Markets Act 2000 ("FSMA") without first seeking leave from the Court.
The English courts are known for being pro-arbitration. In the recent case of Riverrock Securities Limited v International Bank of St Petersburg (Joint Stock Company) [2020] EWHC 2483 (Comm) the English High Court has granted an anti-suit injunction in relation to claims being made in foreign bankruptcy proceedings, where the underlying agreements included arbitration provisions with a London seat.
The parties
InTelnic Ltd v Knipp Medien und Kommunikation GmbH [2020] EWHC 2075 (Ch), Sir Geoffrey Vos sitting in the English High Court ruled that where a debt is governed by an arbitration agreement, it is appropriate for the Court to stay or dismiss a winding up petition without investigating whether the debt is disputed in good faith and on substantial grounds.
This case provides guidance on the high threshold a creditor will have to cross in order to be able to present a winding up petition for sums due under an agreement with an arbitration clause.
In a decision arising out of Tribune’s 2008 bankruptcy, the United States Court of Appeals for the Third Circuit recently issued a decision affirming confirmation of the media conglomerate’s chapter 11 plan over objections raised by senior noteholders who contended that the plan violated their rights under the Bankruptcy Code by not according them the full benefit of their prepetition subordination agreements with other creditors.
The U.S. Supreme Court held today in Mission Product Holdings, Inc. v. Tempnology, LLC that a trademark licensee may retain certain rights under a trademark licensing agreement even if the licensor enters bankruptcy and rejects the licensing agreement at issue. Relying on the language of section 365(g) of the Bankruptcy Code, the Supreme Court emphasized that a debtor’s rejection of an executory contract has the “same effect as a breach of that contract outside bankruptcy” and that rejection “cannot rescind rights that the contract previously granted.”