The United States Court of Appeals for the Second Circuit recently articulated a standard to determine what claims may be barred against a purchaser of assets "free and clear" of claims pursuant to section 363(f) of the Bankruptcy Code and highlighted procedural due process concerns with respect to enforcement.¹  The decision arose out of litigation regarding certain defects, including the well-known "ignition switch defect," affecting certain GM vehicles.  GM's successor (which acquired GM's assets in a section 363 sale in 2009) asserted that a "free and clear" provisi

Puerto Rico’s financial woes have recently been front and center in financial news. Although a recent decision by the U.S. Supreme Court curtailed Puerto Rico’s ability to enact its own legislation to address its debt situation, late last month President Obama signed into law legislation designed to allow Puerto Rico to restructure its vast public debt, giving new hope to the Commonwealth’s financially strapped public utilities.

On March 29, 2016, the Second Circuit addressed the breadth and application of the Bankruptcy Code's safe harbor provisions in an opinion that applied to two cases before it.  The court analyzed whether: (i) the Bankruptcy Code's safe harbor provisions preempt individual creditors' state law fraudulent conveyance claims; and (ii) the automatic stay bars creditors from asserting such claims while the trustee is actively pursuing similar claims under the Bankruptcy Code.  In In re Tribune Co.

The District Court for the Central District of California recently held that an assignee that acquired rights to a terminated swap agreement was not a "swap participant" under the Bankruptcy Code and, therefore, could not invoke safe harbors based on that status to foreclose on collateral in the face of the automatic stay. ^[1] The court ruled that the assignee acquired only a right to collect payment under the swap agreement, not the assignor's rights under the Bankruptcy Code to exercise remedies without first seeking court approval.

Background

On May 21, 2015, the United States Court of Appeals for the Third Circuit (the "Third Circuit") held that in rare instances a bankruptcy court may approve a "structured dismissal"- that is, a dismissal "that winds up the bankruptcy with certain conditions attached instead of simply dismissing the case and restoring the status quo ante" - that deviates from the Bankruptcy Code's priority scheme. See Official Committee of Unsecured Creditors v. CIT Group/Business Credit Inc. (In re Jevic Holding Corp.), Case No.

Congress rarely accomplishes anything these days, but the need to reform Chapter 11 of the Bankruptcy Code seems to have “crossed over the aisle.” When the Bankruptcy Code was enacted in 1978, America boasted the world’s dominant manufacturing economy. Corporate debt was mostly unsecured trade debt. Secured loans provided tangible asset financing for property, plant, and equipment.

On October 31, 2014, Bankruptcy Judge Kaplan of the District of New Jersey addressed two issues critically important to intellectual property licensees and purchasers: (i) can a trademark  licensee use section 365(n) of the Bankruptcy Code to keep licensed marks following a  debtor-licensor’s rejection of a license agreement?; and (ii) can a “free and clear” sale of  intellectual property eliminate any rights retained by a licensee? In re Crumbs Bake Shop, Inc., et  al., 2014 WL 5508177 (Bankr. D.N.J. Oct. 31, 2014).

Earlier this year, we reported on a decision limiting a secured creditor's right to credit bid purchased debt (capping the credit bid at the discounted price paid for the debt) to facilitate an auction in Fisker Automotive Holdings' chapter 11 case.¹ In the weeks that followed, the debtor held a competitive (nineteen-round) auction and ultimately selected Wanxiang America Corporation, rather than the secured creditor, as the w

Oftentimes in bankruptcy, when one entity files for bankruptcy relief, the subsidiaries or affiliates also file. Sometimes these entities are "substantively consolidated" for bankruptcy purposes, thus combining the assets and liabilities into a single pool and attributing them to a single entity. Substantive consolidation has been permitted when, for example, debtors have abused corporate formalities or creditors have treated the separate entities as a single economic unit and their affairs were hopelessly entangled.

Recently, the United States Bankruptcy Appellate Panel of the Eighth Circuit decided In re EDM Corp.,[1] affirming that a creditor’s priority in collateral may be sacrificed if the debtor’s exact legal name is not exclusively used in the financing statement.