The Supreme Court recently addressed two bankruptcy issues. In its opinion, the Court resolved a circuit split regarding the breadth of the safe harbor provision which protects certain transfers by financial institutions in connection with a securities contract. In Village at Lakeridge, the Court weighed in on the scope of appellate review and whether a bankruptcy court’s factual determination should be reviewed for clear error or de novo. These decisions are notable because they provide guidance on previously murky issues of bankruptcy law.
The U.S. Supreme Court recently scrutinized the proper application of the safe harbor found in Section 546(e) of the U.S. Bankruptcy Code1 in Merit Management Group, LP v. FTI Consulting Inc.2 While the Supreme Court's decision narrowed the reach of the safe harbor, it did little to change the landscape for the multi-billion dollar U.S. structured finance industry, including warehouse lending.
On February 27, 2018, the United States Supreme Court in a significant ruling held in Merit Management Group, LP v. FTI Consulting, Inc. that transfers of property of a debtor in which financial institutions are mere conduits or intermediaries may be avoidable. The Court ruled that the safe harbor provisions of section 546(e) of the Bankruptcy Code do not protect such transfers from avoidance.
Judge Swain’s decision in the PROMESA Title III bankruptcy proceeding of the Puerto Rico Highways and Transportation Authority (“PRHTA”) that a federal bankruptcy court cannot compel a municipal debtor to apply special revenues to post-petition debt service payments on special revenue bonds has generated controversy and caused some market participants to question whether, if the decision is upheld by the First Circuit on appeal, the perception that special revenue bonds have special rights in bankruptcy remains justified.
Last week, President Trump unveiled his proposal to fix our nation’s aging infrastructure. While the proposal lauded $1.5 trillion in new spending, it only included $200 billion in federal funding. To bridge this sizable gap, the plan largely relies on public private partnerships (often referred to as P3s) that can use tax-exempt bond financing.
Last week, President Trump unveiled his proposal to fix our nation’s aging infrastructure. While the proposal lauded $1.5 trillion in new spending, it only included $200 billion in federal funding. To bridge this sizable gap, the plan largely relies on public private partnerships (often referred to as P3s) that can use tax-exempt bond financing.
In the recently decided case, Mission Product Holdings, Inc. v. Tempnology, LLC, the United States Court of Appeals for the First Circuit took a hardline position that trademark license rights are not protected in bankruptcy. Bankruptcy Code section 365(n) permits a licensee to continue to use intellectual property even if the debtor rejects the license agreement.
InIn Re Lexington Hospitality Group, LLC, the United States Bankruptcy Court for the Eastern District of Kentucky thwarted a lender’s efforts to control whether its borrower could file bankruptcy. As a condition to the loan, the lender mandated that the borrower’s operating agreement have certain provisions that require the affirmative vote of an “Independent Manager” and 75% of the members to authorize a bankruptcy.
The Bankruptcy Code prohibits a chapter 13 debtor from modifying a mortgage lien on the debtor's principal residence. Even in situations in which a secured creditor fails to file a proof of claim or otherwise participate in the bankruptcy proceeding, the Bankruptcy Code allows a secured creditor's lien on a primary residence to pass through the bankruptcy unaffected. However, a recent decision from a bankruptcy court in Texas illustrates the risks to secured creditors of blind reliance on these statutory protections.
In March of this year, consumer electronics and home appliance retailer Gregg Appliances, Inc., better known as H.H. Gregg, filed for Chapter 11 bankruptcy in Indianapolis, Indiana. H.H. Gregg, which took over many of the retail spaces previously occupied by Circuit City, is one of many big-box retailers that have sought Chapter 11 bankruptcy over the past several years. Like Circuit City, H.H. Gregg was unsuccessful in reorganizing in bankruptcy and is now seeking to recover payments made to vendors and other creditors within 90 days prior to the bankruptcy filing.