The American bankruptcy process is geared towards providing (a) financially distressed businesses and individuals with a “fresh start” and (b) their creditors a fair opportunity to address their claims. Much of that process takes place in bankruptcy courts all over the country on a daily basis. So, what effect does a pandemic, such as the novel coronavirus (and its attendant disease, COVID-19), have on the administration of bankruptcy cases in the U.S.? Of course, the federal, state and local restrictions on public gatherings create a challenge for U.S.

The question of does a lien exist without a debt for it to secure is a complicated issue that unfortunately does not have a universal answer. This post will use two recent cases to explore concerns that counsel should examine if presented with this question.

A divided Sixth Circuit Court of Appeals panel ruled in the case of In re FirstEnergy Solutions Corp. on Dec. 12, 2019. The panel decided that the U.S. Bankruptcy Court and the Federal Energy Regulatory Commission (FERC) share jurisdiction when a Chapter 11 debtor moves to reject a power purchase and sale contract over which the FERC has jurisdiction (Power Contract). However, the Sixth Circuit noted that such jurisdiction is not equal; declaring the bankruptcy court’s authority as primary and superior to that of the FERC.

Loan servicers’ employees are human beings. Loan servicing employees use systems designed by other human beings. We all know this and so should anticipate that there will be mistakes in loan servicing operations. Recently, the Seventh Circuit Court of Appeals reminded us that how loan servicers plan for and react to inevitable mistakes is important. The case also has some good reminders for litigation counsel and planning tips for loan servicers.

On November 12, 2019, the United States Court of Appeals for the First Circuit reversed a decision of the Bankruptcy Court for the District of Massachusetts in a case that illustrates fraudulent transfer risk for colleges and universities that receive tuition payments from a student’s insolvent parents.

Constructive Fraudulent Transfer Claims and College Tuition Payments

Lenders and their counsel know that it is important to properly describe the collateral on which a lien (mortgage or security interest) is being granted. The purpose of this post is to discuss some recent decisions contrary to what many corporate counsel thought they knew concerning collateral descriptions in security agreements and UCC financing statements.

On May 20, 2019, the U.S. Supreme Court issued an 8-1 ruling in the case of Mission Product Holdings, Inc. v. Tempnology, LLC. The decision resolves a circuit split, holding that a licensee may retain its right to use licensed trademarks, notwithstanding the debtor-licensor’s rejection of the contract in bankruptcy. The Supreme Court’s decision has potentially far-reaching implications.

In normal circumstances, a director’s primary duty (owed to the company, not the company’s shareholders or the corporate group) is to promote the success of the company for the benefit of its shareholders as a whole. When a company enters a period of financial distress (the so-called “zone of insolvency”) there is a shift of emphasis in the duties of the directors: directors must consider the interests of the company’s creditors and, depending on the extent of the financial distress, may need to prioritise such interests over those of its members.

When a company enters a period of financial distress, directors must consider the interests of the company’s creditors and, depending on the extent of the financial distress, may need to prioritise such interests over those of its members. In such distressed situations, the key current heads of liability directors may face (for which they may potentially incur personal liabilities) include wrongful trading, fraudulent trading, misfeasance and breach of duty.

On April 23, 2019, Ropes & Gray, representing a large group of shareholder defendants, won a decision in the U.S. District Court for the Southern District of New York that provides potential fraudulent transfer protection for payments made to shareholders in leveraged buyouts, stock redemptions and other securities transactions.

Constructive Fraudulent Transfer Claims and the Securities Safe Harbor