In November, members of our Bankruptcy & Creditors’ Rights group gave a presentation concerning the Midland Funding, LLC v. Johnson case then pending before the U.S. Supreme Court. The Supreme Court recently decided the case, holding that a debt collector who files a claim that is “obviously” barred by the statute of limitations has not engaged in false, deceptive, misleading, unconscionable or unfair conduct and thus does not violate the federal Fair Debt Collection Practices Act (FDCPA). Writing the opinion for the majority in favor of the debt collector, Justice Stephen G.

The U.S. Supreme Court (SCOTUS) has denied certiorari to petitioners alleging that Aaroma Holdings LLC is liable for personal injury claims stemming from the use of diacetyl by Emoral Inc., which declared bankruptcy in 2011 after Aaroma bought its assets in 2010. Diacetyl Plaintiffs v. Aaroma Holdings LLC, No. 14-71 (U.S., cert. denied November 3, 2014). The petitioners had argued that freeing Aaroma from liability would create a loophole for companies looking to avoid tort liability by encouraging them to sell assets before filing for bankruptcy.

A divided Third Circuit Court of Appeals panel has reversed a district court ruling dismissing a shareholder’s lawsuit against individuals and a liquidating trustee involved in the dissolution of a biotechnology company and the liquidation of its assets. Schmidt v. Skolas, No. 13-3750 (3d Cir., decided October 17, 2014).

In a petition for a writ of certiorari, plaintiffs alleging harm by exposure to the flavoring agent diacetyl have argued that the Third Circuit erred in ruling that Aaroma Holdings cannot be held liable for the actions of diacetyl producer Emoral Inc., which Aaroma purchased following the alleged exposures. Diacetyl Plaintiffs v. Aaroma Holdings, No. 14-71 (U.S., petition for writ of certiorari filed July 18, 2014).

A trustee has filed a motion requesting court approval of a bankruptcy plan that would require New England Compounding Pharmacy owners and executives to establish a $100-million settlement fund for the benefit of creditors and individuals allegedly harmed by a 2012 fungal meningitis outbreak linked to the company’s steroid injections. In re New Eng. Compounding Pharm., Inc., No. 12-19882 (Bankr. D. Mass., motion filed May 6, 2014).

Finds Bankruptcy Court to be Proper Forum for Claim Objection Despite Forum Selection Clauses in Investor Agreements

The Southern District of New York recently reiterated the critical difference between creditor claims and equity interests in the bankruptcy context.  In a recent opinion arising out of the Arcapita Bank bankruptcy case, the Court was faced with an objection to a proof of claim filed by an investor, Captain Hani Alsohaibi, who characterized his right to recovery against the debtors as being based on a “corporate investment.”

On June 4, 2014, the New York Court of Appeals will hear arguments arising from the bankruptcies of two law firms—Thelen and Coudert Brothers—as to whether the former partners of the bankrupt law firms must turn over profits earned on billable-hour client matters they brought to their new firms.

Following recall notices for its ignition switches in February 2014, General Motors, LLC (“New GM”) has been hit with at least 50 class actions and two individual suits in not less than 20 federal and two state courts asserting claims against New GM for defective vehicles and parts sold by Motors Liquidation Company, formerly known as General Motors Corporation (“Old GM”).

On April 17, 2014, the United States Bankruptcy Judge Sean H. Lane issued an opinion in the Waterford Wedgwood bankruptcy discussing at length one of the defenses available to preference defendants.  The opinion turns upon the scope of “ordinary business terms,” the objective prong of the ordinary course of business defense.

A recent opinion out of the United States Bankruptcy Court for the Eastern District of Virginia (Richmond Division) serves as a reminder to secured creditors to steer clear of conduct that a bankruptcy court may deem inequitable and provide the court with cause to limit the secured creditor’s credit bid rights.  In In re The Free Lance-Star Publishing Co.