A Mississippi Bankruptcy Court recently addressed several employer defenses to liability under the Worker Adjustment and Retraining Notification Act (“WARN Act”), which is noteworthy in the context of the current economy. In re FF Acquisition Corp. d/b/a Flexible Flyer, 423 B.R. 502 (Bankr. N.D. Miss. January 20, 2010).

On March 22, 2010, the United States Court of Appeals for the Third Circuit affirmed a lower court decision which held that secured creditors do not have an absolute right to credit bid at an auction of assets conducted in connection with a bankruptcy reorganization plan. The court ruled that secured creditors are only entitled to the "indubitable equivalent" of their claims under a specific subsection of the Bankruptcy Code. The "indubitable equivalent" could be the cash value of the assets upon which the creditor holds liens as determined through an auction process.

It is a harrowing scenario for any seller of goods: a trading-partner files for bankruptcy and leaves the seller with thousands, even millions of dollars in unpaid invoices. In many instances, some of these goods were delivered only days before the bankruptcy filing. While a creditor may be able to assert reclamation rights, those rights are often difficult to enforce in bankruptcy and may be subordinate to the interests of an all assets lender.

The Bankruptcy Appellate Panel of the Ninth Circuit has affirmed the bankruptcy court’s grant of a motion by a debtor’s sole director to modify the automatic stay to allow payment of defense costs under the A-side coverage of the debtor’s directors and officers liability insurance policy. In re MILA, Inc., 2010 WL 455328 (B.A.P. 9th Cir. Jan. 29, 2010).

In a recent Hunton & Williams client alert, we discussed some of the issues relating to the termination of credit default swap agreements that were pending before the Lehman bankruptcy court, including the enforceability of so-called “flip clauses.” (“Swap Termination and the Subordination of Termination Payments in the Lehman Bankruptcy,” December 2009.) Recently, the court ruled for Lehman on many of these issues. The court’s ruling (Lehman Brothers Special Financing Inc.

The United States District Court for the District of Kansas, applying Kansas law, has held that a D&O policy issued to a bank was not automatically canceled or terminated when the FDIC was appointed as the bank’s receiver but that coverage under the policy ceased. Columbian Fin. Corp. v. BancInsure, Inc., 2009 WL 4508576 (D. Kan. Nov. 30, 2009). The court concluded that although coverage ceased upon the appointment of the FDIC as receiver, the insureds could report claims at any time prior to the expiration of the policy.

Lehman Brothers Holdings Inc.’s September 15, 2008 bankruptcy was an event of default under thousands of derivatives contracts to which a Lehman entity was a party and for which Lehman Brothers Holdings was the guarantor. This default entitled the vast majority of Lehman’s counterparties to terminate these contracts, and almost all were terminated.

There are hundreds of hotel properties in special servicing or foreclosure and even more that are on the brink. When dealing with a distressed hotel property, there are several issues and opportunities to consider.

Receivership

The dispute over the disposition of customer records held by the "Clear" airport traveler program casts a spotlight once again on the handling of consumer personal data when a business falls on hard times. In such circumstances, the desire of the debtor to preserve or maximize the value of its business assets can conflict with legitimate privacy interests of individuals who were customers of the business.

Filing a successful proof of claim is the key to unlocking a creditor's right to recover against a debtor in bankruptcy. Only in limited circumstances may a creditor recover against the debtor's estate without properly filing a proof of claim. This article addresses the various stages of filing, attacking and defending a proof of claim.