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

On August 28, 2010, Compañía Mexicana de Aviación (“Mexicana”), the third oldest airline in the world and one of the most important airlines in Latin America, stopped flying.

Section 507(b) of the Bankruptcy Code provides that if a secured creditor receives “adequate protection” for its interest in collateral held by a debtor, but that adequate protection ultimately proves insufficient, then the creditor is entitled to a “superpriority” administrative expense claim sufficient to cover any uncompensated diminution in the value of that collateral.

In Bank of America, N.A. v. Lehman Brothers Holdings Inc., Case No. 08-01753 (Bankr. S.D.N.Y. Nov. 16, 2010), the Bankruptcy Court of the Southern District of New York was called on to decide whether Bank of America, N.A. (“BOA”) effectuated an improper setoff of $500 million shortly after Lehman Brother Holdings Inc. (“Lehman” or “LBHI”) filed its petition on September 15, 2008 (the “Petition Date”), and whether the setoff violated the automatic stay.

In a recent opinion, JELD-WEN, Inc. v. Van Brunt (In re Grossman’s Inc.), 607 F.3d 114 (3d Cir. 2010), the United States Court of Appeals for the Third Circuit overruled its prior decision in Avellino & Bienes v. M. Frenville Co. (In re Frenville Co.), 744 F.2d 332 (3d Cir. 1984), which adopted the accrual test, a standard for determining the existence of a “claim” under the Bankruptcy Code.

In the last eighteen months, two Major League Baseball teams, the Chicago Cubs and the Texas Rangers, were sold in bankruptcy. Although both teams engaged in very similar processes leading up to their respective bankruptcy filings, the bankruptcy cases took very divergent paths.

In a decision that may come as a surprise to many, the Court of Chancery of the State of Delaware (the “Court”) recently dismissed a derivative suit brought by a creditor on behalf of an insolvent limited liability company. See CML V, LLC v. Bax et al., 6 A.3d 238 (Del. Ch. 2010)(JetDirect Aviation Holdings, LLC, Nominal Defendant).

It is well established that the automatic stay imposed under section 362 of the United States Bankruptcy Code (the “Bankruptcy Code”) in a typical bankruptcy case applies extraterritorially. Thus, creditors of a Chapter 11 debtor are generally prohibited from exercising any remedies against a debtor or its assets anywhere in the world. Up until recently, no court had addressed the scope of the stay applicable in a Chapter 15 case.

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.