Fulltext Search
Eighth Circuit Rejects Ponzi Scheme Presumption To Protect Legitimate Loan Repayments

“… Ponzi scheme payments to satisfy legitimate antecedent debts to defendant banks could not be avoided” by a bankruptcy trustee “absent transaction-specific proof of actual intent to defraud or the statutory elements of constructive fraud – transfer by an insolvent debtor who did not receive reasonably equivalent value in exchange,” held the U.S. Court of Appeals for the Eighth Circuit on Nov. 20, 2018. Stoebner v. Opportunity Finance LLC, 2018 WL 6055636 at *4 (8th Cir. Nov. 20, 2018), citing Finn v. Alliance Bank, 860 N.W. 2d 638, 653-56 (Minn. 2015).

USA, Minnesota, Texas, Banking, Insolvency & Restructuring, Litigation, White Collar Crime, Schulte Roth & Zabel LLP, Eighth Circuit, Minnesota Supreme Court, U.S. Court of Appeals
SDNY District Court Holds That Bankruptcy Courts Have Core Jurisdiction and Constitutional Adjudicatory Authority over Involuntary Third-Party Releases

The Bottom Line

USA, New York, Capital Markets, Corporate Finance/M&A, Insolvency & Restructuring, Litigation, Kramer Levin Naftalis & Frankel LLP, Bankruptcy, Res judicata and issue estoppel, US District Court for the Southern District of New York
Fifth Circuit Holds Executory Contract Not Listed on Bankruptcy Schedules Is Automatically Rejected Upon Expiration of 60-Day Period in Chapter 7 and Not Capable of Being Sold

The Bottom Line

The Fifth Circuit recently held in RPD Holdings, L.L.C. v. Tech Pharmacy Services (In re Provider Meds, L.L.C.), No. 17-1113 (5th Cir. Oct. 29, 2018), that a patent license that was not specifically listed on the debtors’ bankruptcy schedules was automatically deemed rejected where it was not assumed within 60 days of the cases’ conversion from Chapter 11 to Chapter 7.

What Happened?

USA, Texas, Insolvency & Restructuring, Litigation, Patents, Kramer Levin Naftalis & Frankel LLP, Bankruptcy, Fifth Circuit
Third Circuit Remands W.R. Grace Decision Concerning Plan Channeling Injunction and Insurance Providers, Providing Additional Insights for Third Parties and Claimants

The Bottom Line

USA, Insolvency & Restructuring, Insurance, Litigation, Kramer Levin Naftalis & Frankel LLP, Third Circuit
Fifth Circuit Holds Asset Purchaser Unable To Acquire Rejected License Agreement

A license agreement “deemed rejected by operation of law” could not be acquired under a court-approved asset purchase agreement, held the U.S. Court of Appeals for the Fifth Circuit on Oct. 29, 2018. In re Provider Meds LLC, 2018 WL 5317445, *2 (5th Cir. Oct. 29, 2018). Although the acquirer claimed “that it purchased a patent license from [the] debtors in bankruptcy sales of their estates,” the court explained that “a rejected executory contract … could not have been transferred by the bankruptcy sales in question … .” Id., at *1.

USA, Connecticut, Insolvency & Restructuring, Litigation, Patents, Schulte Roth & Zabel LLP, National Labor Relations Board (USA), Fifth Circuit, First Circuit
Two Circuits Limit Creditors’ Setoff Rights in Bankruptcy Cases

“The right of setoff … allows entities to apply their mutual debts against each other to avoid the pointless exercise of ‘making A pay B when B owes A.’” held the Seventh Circuit on Aug. 17, 2018. Berg v. Social Security Administration, 900 F.3d 864, 868 (7th Cir. 2018). But the Bankruptcy Code (“Code”) limits “a creditor’s right of setoff during the ninety-day period prior to the” date of bankruptcy, said the court. Id.

USA, Banking, Insolvency & Restructuring, Litigation, Schulte Roth & Zabel LLP, Bankruptcy, Internal Revenue Service (USA), Third Circuit, Seventh Circuit
Horizontal Gifting Upheld in Chapter 11 Plan in the Third Circuit

The Bottom Line

USA, Insolvency & Restructuring, Litigation, Kramer Levin Naftalis & Frankel LLP
Fourth Circuit Upholds Requirement That Appellant Have an Economic Stake in Outcome of Appeal to Be a ‘Person Aggrieved’ and Boots Moot Appeal Too

The Bottom Line

USA, Insolvency & Restructuring, Litigation, Kramer Levin Naftalis & Frankel LLP, Fourth Circuit
Eleventh Circuit Narrows Circuit Split Holding New Value Not Required to Remain Unpaid

The Bottom Line

USA, Insolvency & Restructuring, Litigation, Kramer Levin Naftalis & Frankel LLP, Eleventh Circuit
Eleventh Circuit Strengthens Creditor's Defense to Preference Claim

A defendant creditor in a preference suit may offset (a) the amount of later “new value” (i.e., additional goods) it gave the Chapter 11 debtor against (b) the debtor’s earlier preferential payment to the creditor, held the U.S. Court of Appeals for the Eleventh Circuit on Aug. 14, 2018. In re BFW Liquidation LLC, 2018 WL 3850101 (11th Cir. Aug. 14, 2018). Even when the creditor was paid for the new goods, stressed the court, Bankruptcy Code (“Code”) “§ 547(c)(4) does not require new value to remain unpaid.” Id., at *5.

USA, Insolvency & Restructuring, Litigation, Schulte Roth & Zabel LLP