On March 1, 2013, the Fifth Circuit Court of Appeals issued an opinion in Wells Fargo Bank N.A. v. Texas Grand Prairie Hotel Realty, L.L.C. et al, (Inre Texas Grand Prairie Hotel Realty, L.L.C.)¹ (“Texas Grand Prairie”) affirming an order of the bankruptcy court confirming a debtor’s plan of reorganization over the objection the secured creditor that argued that the interest rate proposed by the plan to be paid to the secured creditor was too low in violation of 11 U.S.C. §1129(b).

On February 26, 2013, the Fifth Circuit Court of Appeals issued an opinion in Western Real Estate Equities, L.L.C. v. Village at Camp Bowie I, L.P.¹ (“Camp Bowie”). The bankruptcy court confirmed a debtor’s plan of reorganization over the objection of the secured creditor that argued the impaired accepting class of the cramdown plan was “artificially” impaired and that the plan was not proposed in good faith.

On February 14, 2013, the United States Court of Appeals for the Seventh Circuit in In re Castleton Plaza, LP,¹ became the first court of appeals to consider whether a competitive auction is required when a debtor’s plan of reorganization provides an “insider” that does not hold an equity interest in the debtor with an exclusive option to purchase equity in exchange for new value since the Supreme Court’s landmark decision in 203 N. LaSalle² more than a decade ago.

On January 17, 2013, the United States Bankruptcy Appellate Panel for the First Circuit (the “First Circuit BAP”) rendered its opinion in Massachusetts Department of Unemployment Assistance v. OPK Biotech, LLC (In re PBBPC, Inc.), BAP No. MB 12-042 (B.A.P. 1st Cir. Jan.

Under Section 436 of the Internal Revenue Code, a single employer defined benefit plan sponsored by a company in bankruptcy cannot pay any “prohibited payments” (e.g., lump sums, Social Security level income annuity payments) if the plan is less than 100% funded. In June 2012, the IRS issued proposed regulations permitting such a defined benefit plan to be amended to eliminate prohibited payment forms without violating the anti-cutback requirements of Internal Revenue Code Section 411(d)(6) if certain conditions are satisfied.

The Second

On July 25, 2012, the Third Circuit issued its decision in In re American Capital Equipment LLC and Skinner Engine Co., 688 F.3d 145 (3rd Cir. 2012), becoming the first circuit court to align itself with numerous district courts that have allowed bankruptcy courts to reject a Chapter 11 plan prior to a confirmation hearing.

On August 2, 2012, the United States Court of Appeals for the Fifth Circuit issued its decision in Lightfoot v. MXEnergy Elec., Inc. (In re MBS Mgmt. Servs., Inc.), Case No. 11-30553 (5th Cir. 2012), holding that a real estate management company’s electricity supply contract qualified as a “forward contract”, payments on account of which are protected from avoidance as preferential transfers under the Bankruptcy Code’s “safe harbor” provisions.

On July 9, 2012, the U.S. Court of Appeals for the Seventh Circuit issued its decision in Sunbeam Products, Inc. v. Chicago American Manufacturing, LLC (“Sunbeam”). It is a landmark opinion for trademark licensees whose licenses are rejected in bankruptcy by trademark owners.

The Second Circuit recently issued its opinion in the DBSD N.A., Inc. bankruptcy case addressing several bankruptcy issues that have received wide-spread reporting, including the validity of the "gifting” doctrine and the standing of an "out of the money" creditor to object to confirmation of a chapter 11 plan. A lesser publicized issue addressed in the decision, but one that should signal a warning to claim purchaser’s of bankrupt companies, was the designation of a vote of DISH Network Inc. on DBSD's plan under section 1126(e) of the Bankruptcy Code.