On December 16, 2010, the Supreme Court of Canada determined that in Companies’ Creditors Arrangement Act (“CCAA”) reorganization proceedings, the Crown enjoys no super-priority status in relation to its claims for unremitted sales taxes arising under the Goods and Services Tax (the “GST”) or similar provincial sales taxes.

The aggregate costs associated with a formal court-supervised insolvency proceeding can be substantial. In Canada, the obligation to pay these restructuring costs are typically secured by court-ordered charges over all of the property of the debtor and can rank in priority to the liens of secured creditors in the same collateral. As a result, these costs can have a material impact on the ultimate net recovery received by creditors. But how is the burden of these costs shared among secured creditors?

In the recent decision in Re Xerium Technologies Inc.1, the Ontario Superior Court of Justice recognized an order made by the U.S. Bankruptcy Court for the District of Delaware that confirmed the debtor’s pre-packaged Chapter 11 plan of reorganization. The decision provides useful guidance on how the Ontario Court may consider similar applications in the future. Many will take comfort from the fact that the decision revisits a number of relevant factors established in case law that pre-dates the current formulation of the cross-border provisions that make up Part IV of the CCA A.

Recently, the United States Bankruptcy Appellate Panel of the Eighth Circuit decided In re EDM Corp.,[1] affirming that a creditor’s priority in collateral may be sacrificed if the debtor’s exact legal name is not exclusively used in the financing statement.

Perhaps prompted by revelations that one or more Connecticut-based insurers failed to notify individuals or report known data security incidents or breaches until weeks, or even months, after the data had been lost or stolen, the state's Insurance Commissioner has issued stringent new reporting obligations applicable to all entities regulated by the Connecticut Department of Insurance (CDI), including, for example, insurers, agents, brokers, adjusters, health maintenance organizations, preferred provider networks, discount health plans and certain consultants and utilization review companie

Cow Harbour Construction Ltd1

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The 2009 amendments to the Companies’ Creditors Arrangement Act (Canada) (the “CCAA”) and the Bankruptcy and Insolvency Act (Canada) codified with some modifications judge made law giving a court authority to grant super-priority priming liens to secure interim financing (or debtorin- possession financing).

An increasing number of restructuring cases involve several creditors with security over varied assets or asset classes. In such cases there is often a dispute over allocation of the costs of the reorganization. This is particularly true in failed restructurings where costs are high and realizations are low.

A group of creditors learned the hard way that there may be no excuse for a late claim. U.S. Bankruptcy Judge James Peck of the Southern District of New York recently disallowed seven proofs of claim that had been filed late in the Lehman bankruptcies. Judge Peck held that the reasons cited by the parties for the late filing did not rise to the level of “excusable neglect” and he was thus disallowing their claims. This is of particular interest as it comes out of the Southern District of New York, which has one of the largest bankruptcy dockets in the country.

Ontario Court Stays Retaliatory Action brought against Bank

Financial institutions seeking to enforce a debt or guarantee through bankruptcy or other court proceedings are sometimes faced with meritless retaliatory court actions brought by debtors attempting to frustrate or further delay payment. In general, Ontario courts will not compel parties to litigate the same dispute on multiple fronts. Instead, one proceeding will be temporarily stayed pending resolution of the other where the same core issues are raised in both.

The Eleventh Circuit recently affirmed the avoidance of nearly $2 million in postpetition payments made by debtor Delco Oil, Inc. (the "Debtor") to its petroleum supplier Marathon Petroleum Company, LLC ("Marathon").[1] The Eleventh Circuit held that funds received by Marathon from the Debtor constituted cash collateral that the Debtor had spent without the permission of either its secured lender, CapitalSource Finance ("CapitalSource"), or the bankruptcy court and, therefore, could be avoided under sections 549(a) and 363(c)(2) of the Bankruptcy Code.