Pillar Denton Ltd & others v Jervis & others [2014] EWCA 180 (“Game Station”)

The outcome of this appeal has been awaited with a high degree of interest.  The issue was the extent to which rent should be payable as an expense of an administration or liquidation; if it is payable as an expense, it sits near the top of the priority order for the distribution of the tenant’s assets, and will usually be paid in full.  Otherwise, it is among the unsecured debts, and the landlord will have to wait for whatever dividend is ultimately payable.

On January 17, 2014 the Bankruptcy Court for the District of Delaware issued a ruling in Fisker Automotive Holdings, Inc., et. al., Case No. 13-13087 (KG), which highlights potential risks to both secured creditors and purchasers of claims in bankruptcy section 363 sales. The facts in Fisker are straightforward. Fisker was founded in 2007 to make high-end electric cars and was financed principally with federal and state government loans secured by some, but not all, of Fisker’s assets.

In In re KB Toys,¹ a recent decision by the Third Circuit Court of Appeals, the Court held that a claim that is disallowable under § 502(d)² if held by the original claimant is also disallowable in the hands of a purchaser or subsequent transferee. In other words, if a creditor sells or assigns its claim to a claims trader and the creditor later becomes liable on a preference or fraudulent transfer,³ the claim may be disallowed in the hands of the claims trader if the creditor fails to pay the amount it owes to the estate.

An employer that sponsors a single-employer defined benefit pension plan was acquired by a Japanese parent.  The employer entered into bankruptcy and, as part of the proceedings, the Pension Benefit Guaranty Corporation (the “PBGC”) terminated the pension plan.  The PBGC then sought in federal court to recover the amount of the unfunded liability from the Japanese parent.  The PBGC also sought payment of the termination premium designed to be payable when a reorganizing company emerges from bankruptcy and to collect that premium from the parent.  The pare

On July 24, 2013 the First Circuit Court of Appeals, applying an “investment plus” test, concluded that a Sun Capital private equity investment fund was engaged in a “trade or business” for purposes of determining whether the fund could be jointly and severally liable under ERISA for the unfunded pension withdrawal liability of the portfolio company.¹ Two Sun Capital investment funds, conveniently named Sun Capital Partners III, LP (“Fund III”) and Sun Capital Partners IV, LP, (“Fund IV”) (the “Sun Funds”) collectively owned 100 percent of Scott Brass, Inc.

The absolute priority rule ordinarily prevents a Chapter 11 debtor from distributing any money or property to junior creditors and old equity investors unless all senior creditors have first been paid in full. See 11 U.S.C. § 1129(b)(2)(B)(ii). Nevertheless, old equity investors may attempt to receive new equity in the reorganized debtor in consideration for providing new (post-bankruptcy) investments in the debtor.

The EU Court of Justice held that Directive 2008/94/EC of the European Parliament and of the Council of 22 October 2008 (“Directive 2008/94”) applies to pension benefits under a supplementary pension scheme, regardless of the cause of the employer’s insolvency, and without taking into account state pension benefits. Directive 2008/94 provides that member states must protect the pension interests of retirees when an employer becomes insolvent.

The European Court of Justice (the “ECJ”) this morning delivered its ruling in the case of Hogan and Others v Minister for Social and Family Affairs, Ireland, Attorney General (the “Waterford Crystal case”). The Court held that Ireland has failed to fulfil its obligations under Article 8 of Directive 2008/94 EC (the “Directive”) on the protection of employees in the event of the insolvency of their employer.

Digital Satellite Warranty Cover Limited (“DSWC”) and Michael Sullivan and Bernard Freeman (trading as ‘Satellite Services’) v Financial Services Authority

Summary

The U.S. Supreme Court recently denied a petition for writ of certiorari by United Healthcare Insurance Company (“UHC”), which had requested judicial review of a ruling by the U.S. Court of Appeals for the Fifth Circuit, whose jurisdiction includes the State of Texas. The Fifth Circuit’s opinion had held that ERISA did not preempt state claims brought by Access Mediquip (“Access”), a medical device provider, against UHC for negligent misrepresentation, promissory estoppel, and violations of the Texas Insurance Code (see Access Mediquip L.L.C. v. UnitedHealthcare Insurance Co., No.