Just hours after the United States Bankruptcy Court for the District of New Jersey entered an order dismissing the Chapter 11 Case of Johnson & Johnson subsidiary, LTL Management, as a bad faith filing, LTL filed for Chapter 11 protection again in the same Bankruptcy Court.

Delaware Judge Brendan Shannon has joined calls for reforming Section 546(e) of the bankruptcy code, echoing concerns that the section’s safe harbor from fraudulent transfer liability has allowed investors to “loot privately held companies to the detriment of their non-insider creditors with effective impunity.”[1]

In a decision that once again evidences the Fifth Circuit’s strong stance on the finality of asset sales in bankruptcy absent a stay of the applicable order, on March 8, 2023 the United States District Court for the Southern District of Texas published a memorandum opinion and order affirming a bankruptcy court’s exercise of Bankruptcy Code provisions to strip subrogation rights of certain sureties (the “Sureties”) against an asset purchaser.

Dispute Resolution analysis: Following a liability trial, an unfair prejudice petition under section 994 of the Companies Act 2006 has been dismissed. None of the alleged instances of unfair prejudice directed against the Respondents was made out.

Pickering v Hughes and ors [2022] EWHC 3359 (Ch)

What are the practical implications of this case?

Dispute Resolution analysis: When the owners and controllers of a company refused to identify the recipient of payments made out of the company during the course of arbitration proceedings, their defence to a claim under section 423 of the Insolvency Act 1986 was struck out and judgment was entered against them.

Integral Petroleum SA v Pretrogat FZE and ors [2023] EWHC 44 (Comm)

What are the practical implications of this case?

Dispute Resolution analysis: A Court, cost-managing a claim under s423 of the Insolvency Act 1986 has strongly criticised the level of anticipated costs reflected in cost budgets and have made an order reflecting the view formed.

Lemos and ors v Church Bay Trust Company Limited [2023] EWHC 157 (Ch)

What are the practical implications of this case?

In a decision that may provide much-needed boundaries around the permissibility of debtors created from “out-of-the-box” prepetition corporate transactions, on January 30, 2023, the United States Court of Appeals for the Third Circuit issued a unanimous opinion dismissing Johnson & Johnson subsidiary LTL Management, LLC’s (“LTL”) chapter 11 case pending in the United States Bankruptcy Court for the District of New Jersey as not being filed in good faith.¹

In late December, the U.S. District Court for the District of Delaware issued an opinion in In re: Mallinckrodt PLC affirming the Mallinckrodt bankruptcy court's November 2021 decision that the debtor could discharge certain post-petition, post-confirmation royalty obligations for the sale of the company's Acthar gel.

The district court's affirmation serves as a reminder to holders of intellectual property that a debtor's fresh start under the U.S. Bankruptcy Code could trump royalty obligations that are found to be contingent claims arising as of the time of the transaction.

In a January 5, 2023 opinion from the United States Court of Appeals for the Fifth Circuit, the panel held the Just Energy bankruptcy court erred in exercising jurisdiction over the debtor’s suit to recover Winter Storm Uri payments made to ERCOT. The Fifth Circuit found the underlying issue—i.e., the propriety of ERCOT and PUCT’s pricing—to be precisely the type of controversy that should be decided in the manner carefully prescribed by the Texas legislature, and not be second-guessed by the bankruptcy court.

Cryptocurrency in Celsius’ Earn Accounts belongs to the bankruptcy estate, and not to the depositors who placed it there, according to a January 4 memorandum opinion from Judge Martin Glenn of the U.S. Bankruptcy Court in the Southern District of New York.