In re Madoff Securities Extends Morrison Framework to Prevent Avoidance of Purely Foreign Transfers under SIPA and the Bankruptcy Code

As bankruptcy practitioners will recall, the Supreme Court held in Stern v. Marshall, 564 U.S., 131 S.Ct. 2594, 2620 (2011) that bankruptcy courts, as non-Article III courts, “lack[] the constitutional authority to enter a final judgment on a state law counterclaim that is not resolved in the process of ruling on a creditor’s proof of claim,” even though Congress had classified these types of proceedings as core – and thus authorized federal bankruptcy courts to hear and decide them.

Frank Grell is a partner at Latham & Watkins who chairs the firm’s German Restructuring and Insolvency Practice. In this interview, he reflects on several successful applications of the German Insolvency Act (Insolvenzordnung) since the law was passed in 2012 and the continued shift towards a restructuring-based approach to large corporate insolvencies.

In 2014, the Chilean Legislature enacted legislation that substantially overhauls its prior insolvency law, liberalizing that law as it pertains to business insolvency cases commenced in Chile. As explained below, this new law incorporates a number of provisions that permit the reorganization of financially troubled businesses.

A lingering misperception among American businesspersons and some commercial lawyers is that it is a fool’s errand to commence an insolvency case seeking reorganization in a European nation because those national laws prescribe liquidation rather than rehabilitation. These business leaders often dismiss out-of-hand insolvency relief on the continent for a troubled European subsidiary and elect to wind up the company’s affairs outside the judicial system.

Latham & Watkins operates worldwide as a limited liability partnership organized under the laws of the State of Delaware (USA) with affiliated limited liability partnerships conducting the practice in the United
Kingdom, France, Italy and Singapore and as affiliated partnerships conducting the practice in Hong Kong and Japan. Latham & Watkins practices in Saudi Arabia in association with the Law Office of Salman M.

Luxembourg court decisions allow secured lenders to enforce Gecina share pledge.

A controversial insolvency dispute winding its way through courts in Spain and Luxembourg may reinforce the rights of secured lenders to enforce financial collateral within an insolvency proceeding. While the recent Luxembourg Tribunal decision enforcing a financial collateral pledge for payment default appears to favor the secured lenders, a potentially contradictory decision from the Spanish Commercial Courts throws the issue into uncertain territory.

The United States Bankruptcy Court for the District of Delaware recently limited the ability of a secured creditor to credit bid for substantially all of the debtors’ assets because (i) the credit bid would chill, or even freeze, the bidding process, (ii) the proposed expedited private sale pursuant to a credit bid would be inconsistent with notions of fairness in the bankruptcy process, and (iii) the amount of the secured claim was uncertain. In re Fisker Automotive Holdings, Inc., Case No. 13-13087 (Bankr. D. Del. Jan. 17, 2014).

Section 1111(b) of the United States Bankruptcy Code (the “Code”) is one of its least understood provisions, primarily due to its somewhat opaque language. This Code subsection is divided into two distinct but related parts. The first part, section 1111(b)(1), provides that a nonrecourse secured claim in a Chapter 11 case will be treated “as if such holder had recourse against the debtor on account of such claim, whether or not such holder has such recourse” subject to two exceptions.

Reliance Insurance Company was placed in liquidation on Oct. 3, 2001 by Order of the Commonwealth Court of Pennsylvania. The Reliance liquidation was, and still is, one of the largest insurance company liquidations in U.S. history. Reliance has been in the process of marshaling assets and paying its liabilities for the past 12 years through a court-appointed Liquidator, namely the Insurance Commissioner of Pennsylvania.