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.
The effects of the recent fi nancial crisis and the ensuing recession continue to take their toll on municipalities in the United States, which are struggling with reduced revenues at the same time their residents have an increased need for government services.
The Second
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.
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.
"Does an insurance broker, after procuring an insurance policy for a developer on a construction project, owe a duty to apprise a subcontractor that was later added as an insured under that policy of the insurance company's subsequent insolvency?"
In this issue of first impression in California, the Fourth District Court of Appeals said "no." Pacific Rim Mechanical Contractors, Inc. v. Aon Risk Insurance Services West, Inc. --- Cal.Rptr.3d ----,2012 WL 621346 (Cal.App.4 Dist.).
On May 29, 2012, the United States Supreme Court issued its decision in RadLAX Gateway Hotel, LLC v. Amalgamated Bank, 566 U.S. ___ (2012), which affirmed that secured creditors have the right to use their claims to credit bid in auctions of their collateral conducted under bankruptcy reorganization plans. The decision is a victory for secured lenders because these credit bid rights ensure that, in the context of a collateral sale, secured lenders will be able to use their claims to purchase their collateral if they are not being repaid in full.
In the recent case of RadLAX Gateway Hotel, LLC v. Amalgamated Bank, 2012 WL 1912197 (May 29, 2012), the Supreme Court in a unanimous 8-0 opinion, delivered by Justice Scalia, held that the Bankruptcy Code statutory scheme mandates that secured creditors must be allowed to credit-bid in 363 sales of assets where the sale is incorporated into a plan of reorganization.
On May 15, 2012, the Eleventh Circuit Court of Appeals issued a fraudulent transfer ruling in TOUSA, Inc.'s chapter 11 case with wide-ranging implications for the financing community. As discussed herein, this decision weakens protections for secured lenders, especially when extending credit to distressed borrowers.
Litigation arising from the Tousa, Inc. fraudulent transfer claims has been working its way through the legal system since 2009, and the recent decision issued by the 11th Circuit Court of Appeals (the “11th Circuit”), has significant ramifications for any party holding debt, whether that debt is secured, unsecured, original issue or purchased on the secondary market. Regardless of the type of debt, or its source, Tousa illustrates that lenders must heighten their due diligence efforts to protect themselves from the risk of a lawsuit alleging fraudulent transfer liability.