In a case illustrating the effective use of a bankruptcy examiner, the examiner appointed by the court in the North General Hospital bankruptcy case has concluded that the hospital made over $3 million in unauthorized post-bankruptcy filing payments to the detriment of unsecured creditors. Prior to its bankruptcy filing, North General Hospital and certain related corporate debtors operated a hospital in the Harlem section of Manhattan.

Pursuant to § 1104 of the United States Bankruptcy Code, the court may appoint a bankruptcy examiner to investigate the debtor with respect to allegations of fraud, dishonesty, incompetence, misconduct or mismanagement. A qualified examiner, with a clearly defined mission, can drastically affect the outcome of the bankruptcy case and directly impact the return to creditors. The difference between a successful financial restructure or liquidation and an investigation yielding little value to the creditors often depends on the approach taken by the examiner and his professionals.

In November of 2010, the trustee for the Circuit City Stores, Inc., liquidating trust filed more than 500 adversary proceedings against creditors seeking the recovery of alleged preferential payments. The extent of the trustee's success in recovering these payments will impact the overall distribution to creditors. Creditors in bankruptcy cases should be aware that preference litigation allows a trustee or debtor-in-possession to recover payments received by a creditor during the period immediately preceding the bankruptcy filing.

With the future of the New York City Off Track Betting Corp. up in the air, the New York Senate returned to the Capitol Tuesday, Dec. 7, to find itself in the middle of a long-standing battle between tracks and OTB corporations in the state.

Officials at the NYCOTB, which is in Chapter 9 bankruptcy protection, vowed to shut down the stateowned betting giant at midnight Dec. 7 if the Senate does not pass a reorganization bill already approved last week by the Assembly.

The U.S. Bankruptcy Code provides for the appointment of a bankruptcy examiner to investigate the debtor with respect to allegations of fraud, dishonesty, incompetence, misconduct or mismanagement. The right examiner, with a clearly defined mission, will have a major influence on the bankruptcy process. The difference between a successful financial restructuring or liquidation-resulting in substantial recoveries for the key constituencies-and a time-consuming (and asset-consuming) meltdown, can depend on the approach of the examiner and the examiner's support team.

In addition to the cases discussed in "Considerations in Terminating an Insolvent Franchisee" in the June 24, 2010, Franchise Alert (available at www.wileyrein.com/insolvent_franchisee), two recently reported decisions have looked at franchisor attempts to gain relief from bankruptcy stays in order to enforce post-termination provisions.

Title II of the Act, designated "Orderly Liquidation Authority" – effective July 21, 2010 – establishes what is intended to be an orderly liquidation process for "financial companies" whose collapse or potential collapse are determined to constitute a risk to the financial system as a whole. Such systemically significant institutions would be liquidated under these new procedures, rather than being treated under existing bankruptcy laws. (The intent of Act is that most-failing financial companies will continue to be administered under existing bankruptcy laws.)

As widely reported, the bankruptcy auction for the Texas Rangers Major League Baseball franchise ended with a winning $593 million bid from an ownership group led by Nolan Ryan.

The United States Bankruptcy Court for the District of Delaware has held that policy proceeds were not part of the insured entity’s bankruptcy estate because previous entity claims were dismissed with prejudice, it was highly speculative that the bankruptcy trustee would approve indemnification of directors and officers and the policy’s priority of payment provision provided that entity coverage was only available after payment of proceeds for direct coverage to insured persons. In re Downey Fin. Corp., 428 B.R. 595 (D. Del. Bankr. May 7, 2010).

With a growing number of projects facing financial difficulty, the importance of maintaining leverage for securing payment is greater than ever. The project itself remains a prime security target for any contractor, subcontractor or supplier for assuring appropriate attention is given to their claims and that payment will be forthcoming in a timely and unencumbered manner. Some very recent developments in the lien realm emphasize the ongoing attention that is being given to lien statutes and the opportunity they provide for maximizing those considerations of security and leverage.