On July 11, California Governor Jerry Brown signed into law SB 233, the Fair Debt Buyers Practices Act, which establishes numerous new rules related to the purchase and collection of consumer debts, including five key protections for debtors.

On July 9, the joint official liquidators of Bear Stearns & Co. Inc. filed suit against three rating agencies – Standard & Poors, Moody's and Fitch – in New York state court over the agencies' allegedly fraudulent investment ratings of RMBS and CDOs. The plaintiffs allege that the defendant rating agencies knowingly misrepresented information as to the independence and accuracy of their ratings, while purposefully omitting material information from their credit rating analyses.

On June 11, Southern District of New York Judge Jed Rakoff dismissed the complaint of the Trustee for the SemGroup estate seeking to avoid a novation made to Barclays pre-bankruptcy under a swap agreement. The Court held that the pre-bankruptcy transaction constituted a safe harbored transfer made in connection with a swap agreement and thus could not be avoided by the estate. This case is one of a number in recent years that treats the safe harbors, and particularly the section 546 safe harbors, as broadly protective of non-debtor transferees in financial transactions.

On June 10, the Second Circuit Court of Appeals held in the Quebecor World (USA) Inc. bankruptcy that payments made by a company in purchasing notes issued by an affiliate constituted transfers made in connection with a securities contract. Therefore, the payments were protected from avoidance by a "safe harbor" under section 546(e) of the Bankruptcy Code. Orrick covered the Quebecor decision in depth in the linked client memo.

Pre-financial crisis, interest rate derivatives were widely recognized as a valuable part of the municipal issuer’s financial toolkit. Post-crisis, they have been a thorn in the side of many issuers, resulting in expensive litigation with failed swap providers – most notably the Lehman and Ambac derivatives trading subsidiaries – and public criticism of municipal issuers said to have fallen prey to more sophisticated providers.

Patriot Coal became the third major debtor in the last year to modify benefits or reject a CBA under sections 1113 and 1114 of the Bankruptcy Code. Following similar rulings in the Hostess and AMR Corporation bankruptcies, Bankruptcy Judge Kathy Surratt-States on May 29, 2013, granted Patriot authorization to modify agreements with the United Mine Workers of America and reject union CBAs.

On May 28, Freddie Mac issued Bulletin 2013-9, which extends for two months the date by which servicers must adhere to certain new requirements related to the management of law firms for default servicing, bankruptcies, and related litigation.

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.

Government bonds were long considered a safe investment that offered the potential for high returns. However, after Argentina announced in 2002 that it would no longer service its bond debt and after Greece restructured its sovereign debt in March and December 2012, the question arises as to what investors can do to avoid the significant losses of capital (up to 70% in case of Argentina and over 80% in case of Greece) which almost always accompany sovereign debt restructurings.

The Federal Court of Justice (BGH) continued with its extensive interpretation of the rules for contesting transactions under insolvency law in a judgment dated 21 February 2013 (BGH IX ZR 32/12). In the case before the court, direct shareholder A in company T sold a claim under a loan to B at below par value. Following assignment, T repaid the loan to B at the nominal amount plus interest. Insolvency proceedings were opened around two months later in relation to T’s assets. The BGH’s decision covers three aspects: