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.
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.
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.
Bankruptcy Rule changes, effective December 1, 2011, require mortgage holders and servicers to include additional documentation supporting proofs of claim filed in individual debtor cases. Mortgage holders and servicers must follow these rules or face sanctions and potential loss of the right to present the omitted documentation as evidence in subsequent proceedings.
On January 19, 2012, the Seventh Circuit in In re River East Plaza, LLC, (No. 11-3263), held in favor of a secured lender further strengthening the rights of secured creditors in bankruptcy cases.
On September 6, 2011, a bankruptcy court approved an agreement between bankrupt bookseller Borders Group, Inc. (“Borders”) and Next Jump, Inc., (“Next Jump”) regarding Next Jump’s alleged trademark infringement and unauthorized use of Borders’ customer information. Next Jump stipulated that it will not communicate with persons on Borders’ customer list, and that it would remove the Borders name and marks from websites that Next Jump owns or operates.
The Second Circuit Court of Appeals Protects Payments Made by Enron to Redeem Commercial Paper Prior to Maturity as “Settlement Payments" Under the Bankruptcy Code's Safe Harbor Provisions.
David Vladeck, Director of the FTC’s Bureau of Consumer Protection, recently sent a letter to creditors of XY Magazine, warning that the creditors’ acquisition of personal information about the debtor’s subscribers and readers in contravention of the debtor’s privacy promises could violate the Federal Trade Commission Act (“FTC Act”).