In a May 4, 2015 opinion1 , the United States Supreme Court held that a bankruptcy court order denying confirmation of a chapter 13 repayment plan is not a final order subject to immediate appeal. The Supreme Court found that, in contrast to an order confirming a plan or dismissing a case, an order denying confirmation of a plan neither alters the status quo nor fixes the rights and obligations of the parties. Although the decision arose in the context of a chapter 13 plan, it should apply with equal force to chapter 11 cases.
On May 21, 2015, the United States Court of Appeals for the Third Circuit affirmed a decision of the United States Bankruptcy Court for the District of Delaware, which had approved the structured dismissal of the Chapter 11 cases of Jevic Holding Corp., et al. The Court of Appeals first held that structured dismissals are not prohibited by the Bankruptcy Code, and then upheld the structured dismissal in the Jevic case, despite the fact that the settlement embodied in the structured dismissal order deviated from the Bankruptcy Code’s priority scheme.
In a memorandum decision dated May 4, 2015, Judge Vincent L. Briccetti of the United States District Court for the Southern District of New York affirmed the September 2014 decision of Judge Robert D. Drain of the United States Bankruptcy Court for the Southern District of New York, confirming the joint plans of reorganization (the “Plan”) in the Chapter 11 cases of MPM Silicones LLC and its affiliates (“Momentive”). Appeals were taken on three separate parts of Judge Drain’s confirmation decision, each of which ultimately was affirmed by the district court:
Key Points:
Courts will remove liquidators where there's apparent bias even where it might cause significant inconvenience and expense to the liquidation.
The Full Court of the Federal Court has found that a conflict of interest arose in circumstances where liquidators were required to investigate transactions with an entity that also refers work to the liquidators (ASIC v Franklin; Re Walton Construction Pty Ltd [2014] FCAFC 85).
Dealing a major blow to the trustee’s efforts to recover fraudulent transfers on behalf of the bankruptcy estate of the company run by Bernard Madoff, Judge Jed S. Rakoff of the United States District Court for the Southern District of New York held in SIPC v. Bernard L. Madoff Investment Securities LLC1 that the Bankruptcy Code cannot be used to recover fraudulent transfers of funds that occur entirely outside the United States.
Key Points:
For a company to be entitled to subrogation under section 560, it must ensure that it meets the strict requirements of section 560 and does not pay entitlements directly to the relevant company's employees.
Six month extensions to convening periods should not be seen as a fait accompli, particularly if the administrator's application is opposed.
There is a commonly held belief that courts will readily grant an administrator's application for an extension to the convening period. This might have been true once, but it is fast turning into an urban myth, judging by two recent decisions in the Federal Court.
Justice Jacobson's unwillingness to depart from the interests of the majority in relation to Nine Entertainment should give parties confidence that Schemes remain an effective way to effect debt for equity swaps or similar transactions.
Key Points:
There are various issues of which a secured creditor must be aware in seeking to either comply with its obligations or take steps to enforce a mortgage under the Act.
Victoria's new Farm Debt Mediation Act 2011 (Vic) commenced operation on 1 December 2011 and is largely modelled on the equivalent New South Wales legislation, the Farm Debt Mediation Act 1994 (NSW).
Key Points:
What the protracted negotiations surrounding Nine Entertainment have demonstrated is the importance of an interested party being able to assert they have an economic interest in the company.