As many creditors have unfortunately discovered, the Bankruptcy Code allows a debtor to sue the creditor for certain payments – called preferences – that the creditor received from the debtor prior to the bankruptcy.
On June 28, 2011, in In re Enron Creditors Recovery Corp. v. Alfa,1 the Second Circuit Court of Appeals held that Enron’s redemption of its commercial paper prior to maturity fell within the definition of a “settlement payment” and was protected from avoidance under § 546(e)’s safe harbor provision in Title 11 of the United States Code.2
On June 23, 2011, the Supreme Court handed down a 5-4 decision in the Stern v.
Vendors who sell goods to customers are probably familiar with the issues that arise when the customer later files bankruptcy.
A California federal district court granted temporary injunctive relief, requiring the purchaser of a bankrupt hospital to temporarily recognize and bargain with the union that represented nurses employed by the hospital’s seller, pending the outcome of a National Labor Relations Board (“NLRB”) hearing.
In a welcome bit of good news for lenders, US District Court Judge Gold (Southern District of Florida) reversed the portion of the 2009 bankruptcy court decision in the TOUSA, Inc. bankruptcy cases that had ordered the disgorgement of $403 million plus interest based on the holding that the amounts were received by certain lenders to the TOUSA parent in connection with a pre-petition transaction that constituted a fraudulent transfer.
On February 8, 2011, the Second Circuit Court of Appeals issued an opinion that will have a major impact on Chapter 11 plan confirmation. In consolidated appeals stemming from theIn re DBSD North America, Inc. bankruptcy case, the Second Circuit held that (1) the “gifting” aspect of the debtors’ plan of reorganization violated the absolute priority rule, and (2) the bankruptcy court did not err in designating a secured creditor’s vote as lacking “good faith” and disregarding that vote for purposes of confirmation.
The DBSD Plan
Published in The Deal, January 5, 2011
The recent decision in Bank of America, NA v. Lehman Brothers Holdings, Inc. (In re Lehman Brothers Holdings Inc., et. al.), No. 08-13555, Adv. Pro. No. 08-01753, 2010 Bankr. LEXIS 3867 (Bankr. S.D.N.Y. Nov. 16, 2010) has shone a 10,000-watt spotlight onto the scope of common law set-off in New York.
In an October 19, 2010 opinion arising out of the Scotia Pacific bankruptcy cases, the Fifth Circuit ruled that reorganized Scotia and its affiliate Pacific Lumber Company were obliged – nearly 2½ years after Scotia’s reorganization plan was consummated – to pay Scotia’s former secured lenders approximately $30 million on account of a mistake made by the bankruptcy judge in calculating the amount owed to the secured lenders for the use of their collateral during the bankruptcy cases.
On October 8, 2010, the FDIC approved a Proposed Rule that would implement certain provisions of its authority granted by Congress in Title II of the Dodd-Frank Act (“Title II”) to act as receiver for covered financial companies (failing financial companies that pose significant risks to the financial stability of the United States) when a Bankruptcy Code proceeding is found to be inappropriate. Prior to the enactment of the Dodd‑Frank Act on July 21, 2010, no unified statutory scheme for the orderly liquidation of covered financial companies existed.