The Supreme Court of Delaware recently held that creditors of insolvent Delaware limited liability companies (LLCs) lack standing to bring derivative suits on behalf of the LLCs.

In March 2010, CML V brought both derivative and direct claims against the present and former managers of JetDirect Aviation Holdings LLC in the Court of Chancery after JetDirect defaulted on its loan obligations to CML. The Vice Chancellor dismissed all the claims, finding that, as a creditor, CML lacked standing to bring derivative claims on behalf of JetDirect, and CML appealed.

The United States Court of Appeals for the Second Circuit found in favor of the trustee (the Trustee) presiding over the liquidation of Bernard L. Madoff Investment Securities (BMIS), affirming the Trustee’s calculation of “net equity” in the BMIS liquidation. The Trustee calculates net equity to determine the value of claims submitted by victims of Madoff’s massive fraud.

On June 28, 2011, the United States Court of Appeals for the Seventh Circuit became the latest circuit to weigh in on the hotly contested question of whether a debtor can deny a secured creditor the right to credit bid as part of a Chapter 11 plan providing for the sale of assets encumbered by the secured creditor’s liens. InIn re River Road Hotel Partners, LLC,1 the Seventh Circuit upheld the right of secured creditors to credit bid, a decision that runs directly contrary to recent opinions in the Third and Fifth Circuits.

In a long awaited action, the Federal Deposit Insurance Corporation (FDIC) issued a final rule on July 6 which addresses the FDIC's rights and powers as receiver of a nonviable systemic financial company under the orderly liquidation authority provisions of Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

The Court of Chancery of Delaware ruled that counsel failed to establish "excusable neglect" when it requested additional time to submit an expert witness report after the deadline for that report—as provided for in the court's previously issued scheduling order—had expired.

A recent Supreme Court judgement has confirmed that where an individual, Mr X, acts as director of company A, and company A is the sole director of company B, that will not necessarily make Mr X a “de facto” director of company B.

The Court decided that the mere fact of acting as a director of a corporate director was not enough to render the individual a de-facto director, “something more” would be required, such as the director holding himself out in correspondence as a director of company B.

Reversing a controversial decision and judgment of the bankruptcy court, the United States District Court for the Southern District of Florida has held that a group of lenders who received payment in settlement of their defaulted debt from the proceeds of new loans secured by the assets of certain subsidiaries of TOUSA, Inc. which were not themselves liable on that debt, did not receive fraudulent transfers.

Rainy Sky SA et al v Kookmin Bank [2010] All ER (D) 255 (May) In our Spring 2010 e-news we reported on the case of Kookmin Bank which dealt with the interpretation of a refund guarantee between Kookmin Bank (the “Bank”) and the customer of an insolvent shipyard. The Bank issued a refund guarantee to secure obligations assumed by its customer Jinse Shipbuilding (the “Builder”). The agreement required the Bank to repay on demand all of the instalments paid by the buyer, Rainy Sky, on the occurrence of a default event under the refund guarantee.

Section 113 of the Housing Grants, Construction & Regeneration Act 1996 (the 1996 Act) outlaws pay when paid provisions, with one exception. It is permissible for a Contractor to use a pay when paid provision to deny payment of outstanding amounts due to its Sub-contractor where the Client at the top of the supply chain has gone bust. The general consensus is of course that this exception is unfair. It is essentially asking the Sub-contractors to act as insurers of both the main Contractor and Client insolvency.

The Board of Directors of the Federal Deposit Insurance Corporation (FDIC) voted on December 18 to approve an interim final rule clarifying how the agency will treat certain creditor claims under the new orderly liquidation authority established under the Dodd-Frank Wall Street Reform and Consumer Protection Act.