On May 29, Patriot Coal (Patriot) became the third major debtor in the last year to receive court approval to modify union benefits or reject a CBA under sections 1113 and 1114 of the Bankruptcy Code. Following similar rulings in the Hostess and AMR Corporation bankruptcies, Judge Kathy Surratt-States granted Patriot authorization to modify certain benefits and reject collective bargaining agreements.
The United States District Court for the Northern District of Georgia, applying Georgia law, has held that a default judgment against an insured in a rescission action precluded any subsequent recovery under the policy by a judgment creditor of the insured. Old Republic Nat’l Title Ins. Co. v. Hartford Accident & Indem. Co., 2013 WL 1943427 (N.D. Ga. May 9, 2013).
On April 29, 2013, the Supreme Court of the United States declined to hear an appeal of the Second Circuit's decision dismissing, as equitably moot, appeals arising out of the bankruptcy of Charter Communications and let stand the opinion in In re Charter Communications, Inc., 691 F.3d 476 (2d Cir. 2012). As a result, the application of the equitable mootness doctrine, as it applies to bankruptcy appeals, will continue to vary among jurisdictions.
On April 15, Freddie Mac issued Bulletin Number 2013-6, which announces numerous revisions to servicing requirements. The bulletin updates the allowable amounts for attorney fees for default-related legal services and details changes to the reimbursement process for such fees. Freddie Mac also reminds servicers about changes to foreclosure sale bidding on first lien mortgages.
On April 19, the Second Circuit ruled that a lawsuit brought by American International Group (AIG) against several Bank of America entities involving alleged fraud in connection with $28 billion in RMBS had been improperly removed from state to federal court.
Applying Minnesota law, a federal district court has held that, where an entity’s principal shareholder was insolvent, but the entity was not, the individual’s insolvency could not be attributed to the entity for purposes of establishing Side A coverage for “Non-Indemnifiable Loss.” Zayed v. Arch Ins. Co., 2013 WL 1183952 (D. Minn. Mar. 20, 2013). The court further held that allegations of fraudulent inducement did not trigger an exclusion for claims “arising from” contractual liability, but that the claim was uninsurable as matter of law.
The United States District Court for the District of Connecticut has held that a settlement agreement between the claimant and policyholder satisfies Connecticut’s direct action statute’s requirement regarding the need for an unsatisfied judgment. Tucker v. American International Group, Inc., No. 3:09-cv-1499, 2013 WL 1294476 (D. Conn. Mar. 28, 2013). Accordingly, the court permitted the claimant’s suit against the carrier to proceed.
On March 1, the Court of Appeals of Maryland, answering a question of law certified to it by the U.S. Court of Appeals for the Fourth Circuit, held that the sale of repossessed automobiles at an auction where individuals had to pay a refundable $1,000 cash deposit was a "private sale", and not a "public auction," under the provisions of Maryland's Creditor Grantor Closed End Credit Act (CLEC). Gardner v. Ally Fin. Inc., Misc. No. 10, 2013 WL 765013 (Md. Mar. 1, 2013).
Official committees of unsecured creditors (Committees) serve a vital role in protecting the rights of the general unsecured creditors during a chapter 11 bankruptcy case.
The United States Bankruptcy Court for the Eastern District of New York held that it had subject matter jurisdiction over a bankruptcy trustee’s adversary proceeding against the bankrupt entity’s insurer because the policy and policy proceeds were part of the policyholder’s bankruptcy estate. EMS Financial Services, LLC. v. Federal Ins. Co., 2013 WL 64755 (Bankr. E.D.N.Y. Jan. 4, 2013).