On April 7, 2011, the Ontario Court of Appeal released its long-awaited decision in Re Indalex Limited 1. In a unanimous decision, the Court of Appeal overturned the decision of the Ontario Superior Court of Justice dated February 18, 2010, and allowed the appeals of the United Steelworkers and a certain group of retired executives. The Court of Appeal ordered FTI Consulting Canada ULC (the Monitor) to pay from the reserve fund (the Reserve Fund) held by the Monitor from the sale of Indalex Limited, Indalex Holdings (B.C.) Ltd., 6326765 Canada Inc. and Novar Inc.

A recent decision of the Ontario Court of Appeal illustrates that secured creditors should address their priority position relative to all other creditors of their borrower in order to achieve a complete subordination of competing security. Failure to do so in this case resulted in circular priorities that the Court was left to resolve. In light of the Court of Appeal’s decision, secured creditors should ensure they are a party to all subordination agreements with the debtor in order to achieve their expected result.

The Facts and Agreements

On March 16, 2011, plaintiffs in ABN Amro Bank, et al. v. MBIA Inc., et al. filed their opening brief in the New York Court of Appeals. Plaintiffs are appealing the 3-to-2 decision of an intermediate appellate court dismissing their suit challenging the "fraudulent restructuring" of monoline insurer MBIA. The case, brought by a group of banks that are beneficiaries of MBIA's structured finance-related policies, claims that MBIA transferred $5 billion in assets from MBIA Insurance Corporation (a failing subsidiary) to MBIA Illinois (a stronger subsidiary).

On February 28, Fitch addressed questions that have arisen related to the orderly liquidation authority under the Dodd-Frank Act and the securitization safe harbor. Fitch stated that clarifications from the FDIC provide comfort that the rights of investors can be determined at the outset of a securitization and that the ratings assigned to the transaction can be de-linked from those of the sponsoring entity.

On February 16, 2011, the Third Circuit affirmed a Delaware bankruptcy court's order determining the value of mortgage loans in the context of a 2006 repurchase agreement. Buyer Calyon argued that the mortgage loan portfolio sold to it by American Home Mortgage had a market price of only $670 million, as compared to its $1.15 billion contractual repurchase price, and that American Home Mortgage was required to pay Calyon the $480 million difference under a repo agreement.

On December 21, ISDA announced that it sought and was granted permission to intervene in the Lehman Brothers International Europe case in order to ensure that the arguments reflecting the market's interpretation of Section 2(a)(iii) of the ISDA Master Agreement were made before the court. The court agreed with ISDA that Section 2(a)(iii) is "suspensive" in effect. ISDA Release.

On December 29, 2010, the Honorable Mariana R. Pfaelzer denied a motion by Stichting Pensioenfonds ABP ("Plaintiff") to remand its claims against Countrywide and others to state court. Judge Pfaelzer concluded that the case was sufficiently related to a bankruptcy case to confer federal jurisdiction in light of contractual indemnification obligations of a bankrupt originator, American Home Mortgage Corp., to Countrywide. The Court also concluded that there were no equitable grounds meriting remand.

In May of 2010, we reported on the decision of the British Columbia Court of Appeal in Ted Leroy Trucking v. Century Services Inc. In that decision, the Court of Appeal upheld a decision of the B.C.

Last month, I appeared before the federal government’s Standing Committee on Industry, Science and Technology to convey our concerns regarding Bill C-501,An Act to amend the Bankruptcy and Insolvency Act and other Acts (pension protection), which if passed will alter the status of

On November 17th, Lehman Brothers Special Financing Inc. ("LBSF") and its official unsecured creditors' committee filed a joint motion to stay BNY Corporate Trustee Services Limited's ("BNY") appeal for 90 days in the "Dante" matter, pending final settlement of the dispute between LBSF and Perpetual Trustee Company Limited ("Perpetual").