R (on the application of Global Knafaim Leasing Ltd and another) v. Civil Aviation Authority and another

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.

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.

Many of us in the construction industry seem to be hearing the same old bed time story over and over again: A instructs B to do the work; B does the work; A does not pay B; for months the parties dispute the level of payment due; B becomes fed up waiting for payment and takes steps to wind up A.

Is this the most appropriate way to deal with a disputed debt?

The European Commission has proposed measures to protect independent travellers from financial loss if their airline collapses. Current rules provide tourists who book package holidays with protection covering brochure information, rights to cancel without penalty and airline or tour operator insolvency. However, 23% of travellers in the EU now book independently.  

We sent to you earlier this week an Alert on "Chrysler Bankruptcy Filing and Preliminary Impact on Suppliers." As we promised, below is an update based upon our review of the case and observations at the hearings.

Essential Supplier Motion

The Court approved treatment of essential suppliers on a temporary basis. Here is a summary of the Interim Order:

Chrysler's bankruptcy filing, which occurred on April 30, has generated considerable activity already. Baker Hostetler has been monitoring closely the Chrysler activity for our supplier clients. We attended the hearing on the first day filings, which were generally ministerial in nature. The court approved joint administration, maintenance of cash management/business forms, enforcement of automatic stay, payment of wages, and honoring of all warranties.

The Sixth Circuit recently held that section 2-702(3) of the Uniform Commercial Code (the "UCC"), which permits good faith purchasers to defeat a valid right to reclaim, does not allow a secured creditor to defeat that right.[1] The Sixth Circuit found that the security interest held by a DIP lender could not be used to defeat the right of a reclaiming creditor under the UCC or pre-BAPCPA section 546(c) of the Bankruptcy Code. This decision may impact the way bankruptcy courts consider reclamation claims under revised section 546(c) of the Bankruptcy Code.

In the very early hours on September 20, 2008, the United States Bankruptcy Court for the Southern District of New York (the "Bankruptcy Court") entered an order (the "Sale Order") approving the sale of substantially all of the assets of Lehman Brothers Holdings, Inc. ("Lehman"), LB 745 LLC and Lehman Brothers, Inc. (collectively, the "Lehman Sellers") to Barclays Capital, Inc. free and clear of all liens claims, encumbrances and other interests.

As has been widely reported, on September 15, 2008, Lehman Brothers Holdings, Inc. ("Lehman") filed for protection under chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the Southern District of New York (the "Bankruptcy Court"). Except for LB 745 LLC which is the Lehman entity that was formed to own Lehman's headquarters in New York, the other subsidiaries (the "Lehman Subsidiaries") of Lehman have not filed for bankruptcy protection as of the time of publication of this Alert.