The “safe harbor” provisions of the Bankruptcy Code protect firms that trade derivatives, and other participants in financial and commodity markets, from the rigidity that bankruptcy law imposes on most parties. Since their inception in 1982, the safe harbor statutes have gradually grown broader, to reflect a Congressional intent of protecting against secondary shocks reverberating through those markets after a major bankruptcy. The liberalizing of safe harbors traces – and may well be explained by – the rapidly expanding use of derivatives contracts generally.

Unsecured creditors in chapter 11 cases face the prospect of two financial blows: the possibility of not receiving full payment of their claims and the cost of attorney's fees for defending their interests. But these creditors may be able to take comfort in a small but growing trend -- the ability to have the attorney's fees paid from the debtor's assets under the debtor's chapter 11 plan. This outcome occurs in only a small number of cases, and unsecured creditors would be advised to not assume their attorney's fees will be reimbursed by the debtor.

The "WARN Act" (Worker Adjustment and Retraining Notification Act) requires that larger employers provide 60 days' notice in advance of plant closings or other mass layoffs. This has long been in conflict with bankruptcy practice. A recent Fifth Circuit decision, In re Flexible Flyer Liquidating Trust, 2013 WL 586823, at *1 (5th Cir. Feb. 11, 2013), confirms that exceptions to the WARN Act apply in bankruptcy and interprets these exceptions more broadly than previous decisions.

In bankruptcy proceedings, is a class action superior to the claims administration process as a vehicle for resolving claims under the federal and New York State Workers Adjustment and Retraining Notification Act (the “WARN Act”)?  In Schuman v. The Connaught Grp., Ltd. (In re The Connaught Grp., Ltd.), Case No. 12-01051, Slip Op. (Apr.

As the American economy continues to slog through the ongoing Great Recession, even financially sound companies face challenges due to the continued economic malaise. In particular, a company that works with suppliers, customers and other business partners facing financial troubles needs to be prepared to handle the consequences of others' fiscal problems. Being attuned to signs of distress and taking defensive actions early can help strong companies avoid problems and be better positioned in the case of a significant event, such as a business partner filing for bankruptcy.

Oregon’s $29 million corporate excise tax claim against the taxpayers’ parent company was held to violate both the Due Process and Commerce Clauses of the U.S. Constitution by the U.S. Bankruptcy Court for the District of Delaware. Oregon claimed that Washington Mutual, Inc. (WMI) was liable for its subsidiaries’ tax because WMI had (as the parent corporation) filed consolidated corporate tax returns on behalf of itself and its subsidiaries and therefore could be held jointly and severally liable for the tax due.

Can an equity investor who directs an insider to contribute "new value" to a debtor under a plan of reorganization, so as to retain his interest in the company, avoid an express market test for that new equity? The answer to that question is a resounding "no," according to Chief Judge Easterbrook of the Seventh Circuit Court of Appeals in In re Castleton Plaza, LP, Case No. 12 Civ. 2639, 2013 WL 537269 (7th Cir. Feb. 14, 2013).

On January 4, 2013, the U.S. District Court for the Northern District of Illinois issued an opinion that strikes a significant blow against the rights of futures customers that might otherwise enjoy the Bankruptcy Code’s safe harbor protections. The opinion, arising out of the Chapter 11 bankruptcy case of Sentinel Management Group, Inc. (Sentinel), fashions a new exception to the safe harbor protections in the event of distributions or redemptions to customers of a failed futures commission merchant (FCM).

Is a bankrupt pledgor legally bound to fulfill its promise to pledge a gift; or will a nonprofit have a successful claim against a pledgor if there is a subsequent failure to make payment because of a bankruptcy filing? A district court in Arizona recently held that St. Joseph's, a nonprofit hospital, did not have an enforceable claim in Bashas' Inc.'s bankruptcy for Bashas' $50,000 charitable pledge because of Bashas' bankruptcy. In re Bashas' Inc., 2012 WL 5289501 (D. Ariz. Oct. 25, 2012).

One of the most powerful tools a chapter 11 debtor has is the ability to assume or reject executory contracts under section 365 of the Bankruptcy Code.  In bankruptcy parlance, when a debtor “rejects” an executory contract, it is considered as though the debtor breached the agreement as of the date it filed for bankruptcy and sheds the debtor’s obligation to perform under the rejected contract.  The non-debtor party receives a claim for damages arising from the debtor’s breach; however, in many cases, it will be worth only pennies on the dollar.  The converse of rejection is