Chapter 15 of the Bankruptcy Code provides a procedure to obtain recognition in the United States of a "foreign proceeding," which includes a foreign bankruptcy, insolvency, liquidation, or

On June 26, 2013, US Bankruptcy Judge Martin Glenn, overseeing the chapter 11 case of Residential Capital, LLC (ResCap), unsealed a 1,900-page report produced by court-appointed examiner, Arthur J. Gonzalez, and his professionals, Chadbourne & Parke LLP and Mesirow Financial Consulting, LLC. The Examiner Report was the culmination of a ten-month investigation that identified amyriad of causes of action, potentially worth billions of dollars, arising fromdozens of transactions involving ResCap's parent, Ally Financial Inc., its subsidiary Ally Bank, and Cerberus.

Buyers of assets through the bankruptcy court process seek comfort and solace in the entry of a sale order providing for the transfer of assets “free and clear” of all liabilities. Except for those liabilities expressly assumed by the buyer and new owner, the bankruptcy court order typically includes exacting and precise language transferring those assets, under the imprimatur of the United States Bankruptcy Court, free and clear of all liabilities.

The United States District Court for the Middle District of Pennsylvania has held that an E&O policy issued to a now-bankrupt credit counseling company did not cover claims arising under unfair trade practices statutes, but did cover claims arising under fair debt collection statutes. Hrobuchak v. Fed. Ins. Co., 2013 WL 2291875 (M.D. Pa. May 24, 2013). The court also held that carve-outs from the policy’s definition of loss did not preclude coverage for statutory damages or damages representing the return of fees paid to the insured.

The United States District Court for the Northern District of Georgia, applying Georgia law, has held that a default judgment against an insured in a rescission action precluded any subsequent recovery under the policy by a judgment creditor of the insured. Old Republic Nat’l Title Ins. Co. v. Hartford Accident & Indem. Co., 2013 WL 1943427 (N.D. Ga. May 9, 2013).

On April 29, 2013, the Supreme Court of the United States declined to hear an appeal of the Second Circuit's decision dismissing, as equitably moot, appeals arising out of the bankruptcy of Charter Communications and let stand the opinion in In re Charter Communications, Inc., 691 F.3d 476 (2d Cir. 2012). As a result, the application of the equitable mootness doctrine, as it applies to bankruptcy appeals, will continue to vary among jurisdictions.

Applying Minnesota law, a federal district court has held that, where an entity’s principal shareholder was insolvent, but the entity was not, the individual’s insolvency could not be attributed to the entity for purposes of establishing Side A coverage for “Non-Indemnifiable Loss.” Zayed v. Arch Ins. Co., 2013 WL 1183952 (D. Minn. Mar. 20, 2013). The court further held that allegations of fraudulent inducement did not trigger an exclusion for claims “arising from” contractual liability, but that the claim was uninsurable as matter of law.

The United States District Court for the District of Connecticut has held that a settlement agreement between the claimant and policyholder satisfies Connecticut’s direct action statute’s requirement regarding the need for an unsatisfied judgment. Tucker v. American International Group, Inc., No. 3:09-cv-1499, 2013 WL 1294476 (D. Conn. Mar. 28, 2013). Accordingly, the court permitted the claimant’s suit against the carrier to proceed.

Over the last several years, the number of Chapter 15 filings has continued to grow. One of the most prominent of these bankruptcy filings is the Vitro S.A.B. de C.V. case. When last we reported on theVitro case, the Texas bankruptcy court administering the Chapter 15 case had denied recognition to the Mexican restructuring plan of Vitro because the plan provided third party releases to non-debtors. See Vitro, S.A.B.: Bankruptcy Court Refuses to Recognize Mexican Concurso That Releases Claims Against Non-Debtors” (November 2012).

Last Fall, the United States Court of Appeals for the Second Circuit issued a decision in the Charter Communications bankruptcy case which will create additional significant challenges for those seeking to appeal confirmation of plans of reorganization that have been implemented. See 691 F.3d 476. Upon implementation (or “substantial consummation”) of the plan, the Second Circuit presumes that the appeal of such plan is equitably moot. Appellants bear the burden of overcoming that presumption.