What Is the "Rule in Gibbs"?

The rule in Gibbs is a long-established common law principle in which the Court of Appeal determined that a debt governed by English law cannot be discharged or compromised by a foreign insolvency proceeding(Anthony Gibbs and Sons v La Société Industrielle et Commerciale des Métaux (1890) 25 QBD 399). The rule in Gibbs remains a fundamental tenet of English insolvency law.

Why Does the Rule in Gibbs Matter?

In a brief but significant opinion, the United States District Court for the District of Delaware reversed a decision by the United States Bankruptcy Court for the District of Delaware and allowed more than $30 million in unsecured, post-petition fees incurred by an indenture trustee ("Indenture Trustee").1 In reversing, the District Court relied upon a uniform body of Court of Appeals opinions issued on the subject.

Last week, the United States District Court for the District of Delaware (the “Court”) reversed a 2015 decision by the Delaware Bankruptcy Court (the “Bankruptcy Court”) disallowing the portion of an unsecured claim filed by appellant Wilmington Trust Company (“WTC”) for postpetition attorneys’ fees and costs incurred under an indenture in connection with the In re Tribune Media Co. chapter 11 cases.

Indenture trustees and agents participate in the administration of chapter 11 cases in a number of ways, including by protecting holders’ rights, ensuring compliance with the applicable indenture and other agreements, and fulfilling their duties and responsibilities under applicable law.

In a recent opinion, United States Bankruptcy Judge Martin Glenn of the Southern District of New York held that Bankruptcy Courts may enter final default judgments against non-US defendants who fail to respond to a properly served summons and complaint.

In so holding, the Court sanctioned the lender’s motive of purchasing claims to block the plan for the purpose of protecting its own existing claim. The Court held that the relevant bad faith inquiry under 11 USC § 1126(e) requires a motive which is ulterior to the purpose of protecting a creditor’s economic interest in a bankruptcy proceeding.

Background

The lender held a senior lien fully secured by the debtor’s real property. The debtor’s proposed “cramdown” plan sought to extend and modify the terms of the mortgage without the lender’s consent.

Honorable Martin Glenn, United States Bankruptcy Judge in the United States Bankruptcy Court for the Southern District of New York (“Bankruptcy Court”) granted Avanti Communications Group PLC’s (“Avanti”) request to recognize the UK court-sanctioned scheme of arrangement and enforce the guarantee releases provided by Avanti’s affiliates on certain debt.[1]

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Introduction

Understanding the Issues, Causes, Tools for Distressed Retail Situations & What Lies Ahead for 2018

On October 20, 2017, in In re MPM Silicones, LLC ("Momentive"), Nos. 15-1682, 15-1771, 15-1824, the Second Circuit Court of Appeals, considering the Supreme Court's opinion in Till v. SCS Credit Corp., 541 U.S. 465 (2004), adopted the Sixth Circuit's two-step approach to determining an appropriate cramdown interest rate that, in certain circumstances, results in the application of a market rate of interest. In doing so, the Second Circuit reversed the bankruptcy and district court holdings on the cramdown interest rate issue.