Companies in the healthcare industry face many unique challenges when undergoing a bankruptcy, including challenges arising due to the federal and state law framework governing the use and disclosure of medical information. In February 2018, the U.S. Department of Health and Human Services (HHS) announced that it had reached a settlement with the receiver appointed to liquidate the assets of Filefax, Inc., a medical record storage and transportation company, resolving claims against Filefax for potential violations of the Health Insurance Portability and Accountability Act (HIPAA).

The Changwon District Court in South Korea has this afternoon (23 March 2018) issued a comprehensive prohibition order (CPO) following the application of Sungdong Shipbuilding and Marine Engineering Co. Ltd (Sungdong) to enter Chapter 11 Rehabilitation filed earlier this month.

The effect of the CPO is to provisionally prohibit all creditors of the yard from taking legal action in South Korea to secure and enforce their claims by attachment, arrest or foreclosing of their security interests.

In a noteworthy decision, the Bankruptcy Appellate Panel for the Ninth Circuit overturned a dismissal of a bankruptcy case, which the lower court had dismissed based on its belief that the landlord debtor was receiving rental income from a marijuana dispensary. The decision is significant because it holds that a bankruptcy cannot be dismissed simply because of the mere presence of a marijuana business or related proceeds in the case.

Is your guaranty restricted or continuing? A continuing guaranty gives rise to divisible individual transactions, while a restricted guaranty—one that concerns a contemplated and specified extension of credit—arises upon execution of the guaranty. In bankruptcy, as in life, timing is everything. A debtor’s liability under a prepetition guaranty agreement for a post-petition advance of credit may depend on the distinction between restricted and continuing, and the distinction may be subtle.

Context

As we described in our client alert dated September 14, 2016, in the aftermath of the real estate downturn from 1989 to 1993, when real estate mortgage lenders began to contemplate making new mortgage loans, they sought to create new legal structures to prevent their prospective borrowers from filing for Chapter 11, and to ameliorate the adverse consequences, if such a filing were to occur.

In our client alert dated September 14, 2016, we discussed the decision of the United States Bankruptcy Court for the District of Delaware in In re Intervention Energy Holdings, LLC, which refused to invalidate a bankruptcy filing made without the consent of its lender who held a “Golden Share” as void against federal public policy.

Sixth Circuit Determines that an Absolute Assignment of Rents Perfected Under Michigan State Law Takes Property out of a Bankruptcy Estate (In Re Town Center Flats, LLC, Case No. 16-1812 — Decided May 2, 2017)

On March 30, the Third Circuit Court of Appeals filed an opinion regarding whether the filing of a mechanic’s lien after the commencement of a bankruptcy case violates the automatic stay. Given the frequent involvement of many companies in Delaware bankruptcy cases, you should be aware of the Third Circuit’s ruling.

Seyfarth Synopsis: A bankruptcy court overseeing an employer’s Chapter 11 bankruptcy proceeding allowed the employer to pay certain unsecured creditors before paying Worker Adjustment And Retraining Notification Act (“WARN”) creditors – workers who had sued the company – monies owed pursuant to a judgment, even though the bulk of the WARN monies owed were for back wages that hold priority over other unsecured claims under the Bankruptcy Code.