The Sixth Circuit Court of Appeals in its recent decision in Town Center Flats, LLC v. ECP Commercial II LLC (In re Town Center Flats LLC), Case No. 16-1812 (6th Cir. May 2, 2017), reinforces an option that commercial lenders in certain states have as a defensive strategy in anticipation of a single-asset real estate bankruptcy involving a defaulted multi-family or hotel loans. The decision is dependent on state law regarding the effect of an absolute assignment of rents and the exercise of the lender’s rights under such an assignment clause.

The Missouri Commercial Receivership Act (MCRA), passed by the Missouri legislature and just signed into law by Governor Nixon, becomes effective Aug. 28, 2016. It expands, clarifies and fleshes out the existing minimal receivership statute. The MCRA (Sections 515.500 through 515.665 of MO Senate Bill No. 578) outlines a new standardized system for receivership administration under the auspices of the Missouri courts.

InGrayson Consulting, Inc. v. Wachovia Securities, LLC (In re Derivium Capital LLC), 716 F.3d 355 (4th Cir. 2013), the U.S. Court of Appeals for the Fourth Circuit examined whether certain securities transferred and payments made during the course of a Ponzi scheme could be avoided as fraudulent transfers under sections 544 and 548 of the Bankruptcy Code. The court upheld a judgment denying avoidance of pre-bankruptcy transfers of securities because the debtor did not have an “interest” in the securities at the time of the transfers.

On January 10, 2012, a Florida bankruptcy court ruled in In re Pearlman, 462 B.R. 849 (Bankr. M.D. Fla. 2012), that substantive consolidation is purely a bankruptcy remedy and that it accordingly did not have the power to consolidate the estate of a debtor in bankruptcy with the assets and affairs of a nondebtor. In so ruling, the court staked out a position on a contentious issue that has created a widening rift among bankruptcy and appellate courts regarding the scope of a bankruptcy court’s jurisdiction over nondebtor entities.