In another judicial decision springing from Lehman Brothers, as a result of the likely surplus in the estate of Lehman Brothers International (Europe) (in administration) (LBIE) after all the provable debts have been paid, Mr Justice Richards has issued a ‘statement of conclusions’ in what is called the Waterfall Application. A more detailed judgement is expected in late March 2014. We summarise the conclusions below.

Ranking and Contributions of Shareholders of Inlimited Companies

A recent decision from the Bankruptcy Court in the Southern District of Texas concludes that directors of a non-debtor general partner may owe fiduciary duties to a limited partnership debtor in bankruptcy whether or not such duties exist (or have been disclaimed) under the debtor's and general partner's organizational documents or applicable state law.[1]  In deciding whether to dismiss an involuntary petition filed against Houston Regional Sports Network, L.P.

On April 9, 2013, Ambac Financial Group, Inc. (“Ambac”) submitted a proposed settlement with the United States to the U.S. Bankruptcy Court for the Southern District of New York. If approved, the proposed settlement would resolve more than two years of litigation concerning the tax treatment of losses sustained by Ambac in connection with credit default swap contracts entered into during the 2008 financial crisis. The settlement would result in a payment by Ambac to the Government of $101.9 million, as well as possible future additional payments of up to $14.9 million.

In another recent private letter ruling,¹⁹ the IRS ruled that an ownership change pursuant to a bankruptcy reorganization plan qualified for an exception to the general rule limiting net operating loss ("NOL") carryforwards under Section 382(a).

On August 2, 2012, in the case ofIn re MBS Management Services, Inc.,¹ the Court of Appeals for the Fifth Circuit ruled that a retail electricity agreement with a real estate management company constituted a forward contract protected by the “safe harbor” provisions of the U.S. Bankruptcy Code (“Bankruptcy Code”).

In a decision further defining when US public policy restricts the relief a court may grant in aid of a foreign restructuring or insolvency proceeding, the Bankruptcy Court in the Chapter 15 case of Vitro, S.A.B. de C.V. v. ACP Master, Ltd. (In re Vitro, S.A.B. de C.V.), Ch. 15 Case No. 11-33335-HDH-15, 2012 WL 2138112 (Bankr. N.D. Tex. Jun. 13, 2012) refused to a enforce a Mexican restructuring plan that novated and extinguished the guaranty obligations of the Mexican debtor’s non-debtor subsidiary guarantors.

Whether a secured creditor has an absolute right to credit bid at a sale under a chapter 11 plan has been the subject of conflicting decisions rendered by the Third, Fifth and Seventh Circuits.¹ The United States Supreme Court has resolved these inconsistent rulings with its decision in RadLAX Gateway Hotel, LLC, et al., v. Amalgamated Bank, ² which affirmed the Seventh Circuit’s holding that a secured creditor has an absolute right to credit bid in a sale under a chapter 11 plan.

On May 29, 2012, the United States Supreme Court resolved a split among the federal courts of appeals on an important bankruptcy issue, agreeing with arguments Morrison & Foerster advanced on behalf of Amalgamated Bank. In a unanimous opinion in RadLAX Gateway Hotel, LLC v. Amalgamated Bank,¹ the Court held that a Chapter 11 plan of reorganization that provides for a sale of a secured creditor’s collateral free and clear of liens must afford that secured creditor the right to credit bid.

Section 541(a) of the Bankruptcy Code creates a worldwide estate comprising all of the legal or equitable interests of the debtor, “wherever located,” held by the debtor as of the filing date.¹ The Bankruptcy Code’s automatic stay, in turn, applies “to all entities” and protects the debtor’s property and the bankruptcy court’s jurisdiction by barring “any act to obtain possession of property of the estate . . .