In Radlax Gateway Hotel, LLC v.

A recent opinion from the United States Bankruptcy Court for the Western District of New York shows that even the best laid strategies can return to haunt the insiders of a debtor.  In Wallach v.

Prepayment provisions are intended, in part, to protect lenders in a depressed market from losses resulting from the costs of replacing their loans sooner than expected and having to relend at rates lower than those originally charged.  A New York federal district court recently upheld a bankruptcy judge's ruling denying a lender's claim for a $7.5 million prepayment premium against a borrower-debtor.¹ The lender must have been both surprised and disappointed to learn from the courts' decisions that this result could have been avoided had the lender's loan documents included

Senior lenders often insist that subordinate lenders assign to them, under subordination and intercreditor agreements, their right to vote on a plan of reorganization proposed for the borrower should it end up in chapter 11.  The intention of such assignments is to prevent junior lenders from facilitating or preventing confirmation of bankruptcy plans contrary to the desires of senior lenders.  Lenders should be aware, however, that courts disagree whether such plan voting rights assignments are enforceable.  In fact, the United States Bankruptcy Court for the District of Mas

Introduction

In a decision that was not surprising but nevertheless disappointing, the U.S. Court of Appeals for the Second Circuit recently affirmed the order of the U.S. Bankruptcy Court concluding that the “net equity” calculation for distributions back to Madoff victims should be based on the Net Investment Method, the total of actual deposits and withdrawals, and not the last statement amount listed on the final brokerage account statement. As a result, claw back law suits against the inaptly named “net winners” are sure to continue unabated.

Background

The U.S. Bankruptcy Court for the District of Delaware ruled that an affiliate that held an indirect ownership interest in, and was a lender to, an employer could be liable for severance payments under the Federal WARN Act. In order for liability to apply to the affiliate, the affiliate and employer need to be found to constitute a "single employer" for Federal WARN Act purposes.

Lenders and mortgage holders may be surprised to learn that a New York bankruptcy court voided the foreclosure sale of non-debtor property where the debtor filed for bankruptcy with no legitimate intent to reorganize. In a case of first impression, In re Ebadi1 addresses a common scenario: a foreclosure action against multiple parties, including a borrower not in bankruptcy and a guarantor in bankruptcy.

A Delaware bankruptcy judge recently held that a landlord's right of first refusal to purchase a debtor/tenant's liquor license (the "Option") was unenforceable since the debtor rejected the lease containing the Option1. Disagreeing with a ruling of the First Circuit Court of Appeals2, the Delaware court held that the Option provision was a non-severable part of an executory contract that was not subject to specific performance.

The Facts

Representing a mortgagee holding liens on 37 unsold condominium units, Herrick, Feinstein successfully blocked a debtor's effort to confirm a chapter 11 plan of reorganization via cramdown. The plan envisioned sales of 27 unsold units over five years, deferred payments to the mortgagee at the rate of 4.75%, and scheduled principal pay downs from the sale of units.