In In re Hungry Horse, LLC, Adversary Proceeding No. 16-11222 (Bankr. D. N.M. September 20, 2017) (“Hungry Horse”), the New Mexico Bankruptcy Court reminded us that many U.S. Supreme Court opinions can be limited in scope and do not necessarily dispose of all potential remedies to an issue.
In In re NewPage Corporation, et al., Adversary Proceeding No. 13-52429 (Bankr. D. Del. Feb. 13, 2017), a Delaware Bankruptcy Court applied a unique defense to certain preferential transfers targeted by a liquidating trustee. The defense focuses on a commonly overlooked element of a preferential transfer, section 547(b)(5).
Preference 101
State and federal laws provide numerous protections to secured parties to preserve their interests in collateral. As secured parties well know, however, these protections become more and more limited when the collateral is pledged to multiple secured parties. Issues, like priority of interests and liens, become more prevalent when the collateral at issue falls in value and multiple secured parties are fighting to enforce their interests in order to satisfy their debts.
State and federal laws provide numerous protections to secured parties to preserve their interests in collateral. As secured parties well know, however, these protections become more and more limited when the collateral is pledged to multiple secured parties. Issues, like priority of interests and liens, become more prevalent when the collateral at issue falls in value and multiple secured parties are fighting to enforce their interests in order to satisfy their debts.
In less than a week after its bankruptcy filing, a debtor was able to obtain confirmation of its prepackaged plan of reorganization in the Bankruptcy Court for the Southern District of New York. In allowing the case to be confirmed on a compressed timeframe that was unprecedented for cases filed in the Southern District of New York, the Bankruptcy Court held that the 28-day notice period for confirmation of a chapter 11 plan could run coextensively with the period under which creditor votes on the plan were solicited prior to the commencement of the bankruptcy case.
The law on debt restructurings and liability management is back to where it was. Yesterday, the Second Circuit Court of Appeals reversed the controversial District Court decisions in the Marblegate-Education Management bondholder litigation. The case attracted wide-spread attention in financial markets, and we discussed it in an earlier client alert.
In a June 3, 2016 decision1 , the United States Bankruptcy Court for the District of Delaware (“the Bankruptcy Court”) invalidated, on federal public policy grounds, a provision in the debtorLLC’s operating agreement that it viewed as hindering the LLC’s right to file for bankruptcy. Such provision provided that the consent of all members of the LLC, including a creditor holding a so-called “golden share” received pursuant to a forbearance agreement, was required for the debtor to commence a voluntary bankruptcy case.
In its recently issued decision in Husky International Electronics, Inc. v. Ritz, a 7-1 majority of the Supreme Court has clarified that intentionally fraudulent transfers designed to hinder or defraud creditors can fall within the definition of “actual fraud” under Section 523(a)(2)(A) of the Bankruptcy Code and can sometimes result in corresponding liabilities being non-dischargeable in a personal bankruptcy proceeding.1
In a March 29, 2016 decision,1 the United States Court of Appeals for the Second Circuit (the "Court of Appeals") held that creditors are preempted from asserting state law constructive fraudulent conveyance claims by virtue of the Bankruptcy Code's "safe harbors" that, among other things, exempt transfers made in connection with a contract for the purchase, sale or loan of a security (here, in the context of a leveraged buyout ("LBO")), from being clawed back into the bankruptcy estate for distribution to creditors.
On January 4, 2016, the United States Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”) deviated from SDNY precedent and held that, despite the absence of clear Congressional intent, the avoidance powers provided for under Section 548 of the Bankruptcy Code can be applied extraterritorially. As a result, a fraudulent transfer of property of a debtor’s estate that occurs outside of the United States can be recovered under Section 550 of the Bankruptcy Code.