A recent court ruling highlights the need for robust governance practices for nonprofits, particularly those facing financial difficulties.  The Third Circuit Court of Appeals affirmed a jury’s award of $2.25 million in compensatory damages against former directors and officers of a bankrupt nonprofit corporation - personal liability for breach of fiduciary duties and “deepening insolvency.”¹  The court also affirmed punitive damages against the officer defendants, but vacated the award of punitive damages against the director defendants.

In a little-noticed November opinion, the Seventh Circuit greatly expanded the ability of a bankruptcy trustee to avoid a security interest for documentation errors under section 544(a)(1) of the Bankruptcy Code.  See State Bank of Toulon v. Covey (In re Duckworth), 776 F.3d 453 (7th Cir. 2014).

Last week’s Supreme Court arguments on bankruptcy jurisdiction in Wellness Int’l Network Ltd. v. Sharif, No. 13-935 (S.Ct.), are enough to strike fear into the heart of any bankruptcy buff. What emerges from the transcript of the oral arguments is, in a word, confusion. This bodes ill for an early resolution of the upheaval created by the Supreme Court’s decision in Stern v. Marshall, ___ U.S. ___, 131 S.Ct. 2594 (2011), limiting the power of bankruptcy judges to decide certain matters that arise in bankruptcy proceedings.

More than seven years is a long time to wait for a loaned painting to be returned. But after such a long wait, Sandro Botticelli’s Madonna and Child (1485) is being returned to its owner, Kraken Investments Limited (Kraken).   Kraken had consigned the painting to a gallery for sale, but the gallery’s bankruptcy intervened.

Introduction: the New Guidelines in the Context of the State Aid Modernization Program

On Monday, November 17, 2014, the United States Supreme Court agreed to decide a critical issue for mortgage lenders and secondary market investors, whether Section 506(d) of the Bankruptcy Code allows a Chapter 7 debtor to “strip off” a junior mortgage lien when the outstanding senior debt exceeds the current value of the senior lien.  Bank of America, N.A. v. Caulkett, No. 13-1421, 2014 WL 2207208 (U.S. Nov. 17, 2014); Bank of America, N.A. v. Toledo-Cardona, No. 14-163, 2014 WL 3965212 (U.S. Nov. 17, 2014). 

Contexte

En février 2012, la fermeture des hauts fourneaux de Florange divise la classe politique. Le président François Hollande s’engage alors à ce que désormais tout société voulant mettre fin à son activité en France soit soumise à l’obligation de rechercher un repreneur.

Background

In February 2012, following the highly political closing of the Florange site, a steel production plant, President François Hollande vowed that going forward any company wanting to close down its operations in France would have an obligation to first look for a purchaser.

Plans of Adjustment were confirmed recently in each of the landmark Detroit, MI and Stockton, CA bankruptcy cases. Although both cases shared many common legal issues, they took different paths to reach confirmation. Detroit, which resolved its cases by entering into settlements with its major constituents, provides a potential roadmap for future cases but only limited judicial guidance. Stockton provides more judicial precedent. For municipalities and their creditors, however, the lessons learned from the two cases will surely influence future Chapter 9 proceedings.

It’s always risky when the Supreme Court grants certiorari in a bankruptcy case. While the Court’s opinion may bring clarity to the narrow question upon which certiorari was granted, it often creates a host of unintended problems in other areas.