In 2012, the Ontario Ministry of the Environment issued a clean-up order against 13 former directors of Northstar Aerospace Canada. Northstar was bankrupt and the directors had to pay millions because the company’s D&O policy excluded pollution. A recent article by Greg Meckbach in Canadian Underwriter examines the effect that order has had on the commercial insurance industry in Canada.
Since the Delaware Supreme Court held in CML V, LLC v. Bax that creditors of a Delaware LLC lack standing to pursue derivative breach-of-fiduciary-duty claims, even if the LLC is insolvent or near insolvent, bankruptcy courts have decided a number of Bax-related issues in cases involving Delaware LLCs.
In a unanimous decision in Merit Mgmt. Grp., LP v. FTI Consulting, Inc., the U.S. Supreme Court addressed the scope of a Bankruptcy Code exception to the “avoiding powers” of a bankruptcy trustee or Chapter 11 debtor-in-possession that permit invalidation (i.e., avoidance and clawback) of a limited category of transfers of property by a debtor or of a debtor’s interest in property.
In U.S. Bank N.A. v. Village at Lakeridge, LLC, the U.S. Supreme Court issued an important decision on standards of appellate review, holding that appellate courts should review a bankruptcy court’s determination of whether a particular creditor is a “nonstatutory insider” for purposes of the Bankruptcy Code under the highly deferential “clearly erroneous” standard of review.
Background
Continuing low interest rates and generally improved economic conditions in the U.S. and worldwide during 2017 have reduced financial distress and the need for business bankruptcies in most sectors. However, out-of-court financial restructurings and Chapter 11 bankruptcies will continue in 2018 due to significant market changes in the energy, retail and health care industries that have developed over the past several years.
On August 10, 2017, the U.S. Supreme Court rescinded the grant of certiorari in PEM Entities LLC v. Levin on the grounds that review had been “improvidently granted.” The case seemingly provided a perfect vehicle to resolve the circuit split on whether federal or state law governs debt recharacterization in bankruptcy, and less than two months after the Court first agreed to hear the case, its dismissal came as a surprise.
In recent years, courts have become increasingly critical of the doctrine of equitable mootness, a judicially created abstention doctrine that allows appellate courts to dismiss appeals from a bankruptcy court’s confirmation order in certain circumstances. Although the doctrine is meant to be applied only sparingly, to avoid unscrambling complex reorganizations on appeal, it has been invoked in noncomplex cases or where limited relief is practicable. As a result, some circuit courts have urged a more limited application of the doctrine.
In this Update
- on April 24, 2017, the Alberta Court of Appeal affirmed the Alberta Court of Queen’s Bench’s decision in Redwater Energy Corporation (Re), 2016 ABQB 278 (Redwater)
- reasons for the Redwater decision
- the issues in Redwater raise various important policy concerns regarding land owners, the public at large and the oil and gas industry
- background and significant implications of Redwater
Introduction
In Caetano v Quality Meat Packers, 2017 ONSC 1199, Justice Belobaba of the Ontario Superior Court recently had opportunity to consider whether two representative proceedings commenced on behalf of two separate groups of employees against an insolvent employer ought to be struck because, despite the actions having been commenced within the applicable two year limitation period, the plaintiffs in those two actions had failed to obtain the necessary representation orders within the two year period.