In determining their preference liability exposure, creditors typically consider whether they have provided any subsequent “new value” to the debtor after they have received an alleged preferential payment. Debtors and trustees frequently take the position that creditors cannot use as a defense any new value that has been repaid to the creditor post-petition through critical vendor payments or pursuant to Section 503(b)(9) of the Bankruptcy Code. Bankruptcy courts have ruled differently on this issue.
Due to inconsistent decisions in the Second Circuit and Third Circuit, there has been some uncertainty as to whether a purchaser of a bankruptcy claim is subject to defenses that a debtor would have against the original creditor. Recently, this issue was settled with respect to cases filed in the Third Circuit.
On October 7, 2013, the United States Supreme Court refused to review a Seventh Circuit decision1 in the Castleton Plaza, LP case, which held that a new value plan proposed by the debtor in which an equity-holder’s spouse would provide a cash infusion to the debtor in exchange for 100 percent of the reorganiz
The U.S. Court of Appeals for the Third Circuit recently confirmed that a channeling injunction pursuant to 11 U.S.C.
When a franchisee files for bankruptcy, a franchisor naturally has concerns over how the process will affect the parties’ relationship. Of particular concern is the possibility that the franchisor will be forced into a relationship with an unacceptable successor as a result of a bankruptcy judge’s decision to authorize assumption and assignment of the franchise agreement over the franchisor’s objection.
The United States District Court for the Northern District of Texas has held that underlying claims that the insureds misused investment funds intended for the purchase of nonperforming mortgages did not allege negligent acts, errors, or omissions in performing “mortgage broker services” within the policy’s definition of “Insured Services.” Axis Surplus Ins. Co. v. Halo Asset Mgmt., LLC, 2013 WL 5416268 (N.D. Tex. Sept. 27, 2013).
The economic impact of forced budget cuts from the sequester and other government funding crises—ranging from a government shutdown to the federal debt limit—and congressional gridlock place disproportionate pressure on smaller- or second tier-government contractors. Business partners of a financially infirm contractor must prepare for when a contract business partner, co-venturer, or teaming partner falls over the fiscal cliff and files for bankruptcy protection. In this article, we will provide an over
The United States Court of Appeals for the Tenth Circuit, applying Oklahoma law, has held that a bankruptcy or insolvency exclusion may bar coverage for the insured broker’s claim, where the broker’s actions were connected to the bankruptcy of its client’s former insurer. C.L. Frates & Co. v. Westchester Fire Ins. Co., 2013 WL 4734093 (10th Cir. Sept. 4, 2013).
On August 27, 2013, in a case of first impression, the Third Circuit rejected an attack on a foreign liquidator’s petition for recognition of an Australian insolvency proceeding under Chapter 15 of the US Bankruptcy Code premised on the argument that the foreign proceeding violated US public policy.