Congress enacted the ordinary course of business defense to the avoidance of preferential transfers to protect recurring, customary transactions in order to encourage the continuation of business with and the extension of credit to a financially distressed customer.

Bankruptcy Code Section 503(b)(9) litigations have sometimes yield "shocking results". There is no pun intended here. This article discusses a recent case where the United States Bankruptcy Court for the District of Montana waded into the spine tingling issue of whether electricity is a good that is subject to Section 503(b)(9) administrative priority status.

Large businesses and organizations that self-insure their legally mandated insurance requirements often use “fronting” policies in which the policyholder must reimburse insurers for all losses and expenses paid on the policyholder’s behalf. These policyholders must furnish substantial collateral to secure repayment, typically, enough to pay many years’ worth of actual and anticipated claims. This can amount to hundreds of millions of dollars, and typically exacerbates cash flow and balance sheet problems for policyholders under financial stress.

Under Section 436 of the Internal Revenue Code, a single employer defined benefit plan sponsored by a company in bankruptcy cannot pay any “prohibited payments” (e.g., lump sums, Social Security level income annuity payments) if the plan is less than 100% funded. In June 2012, the IRS issued proposed regulations permitting such a defined benefit plan to be amended to eliminate prohibited payment forms without violating the anti-cutback requirements of Internal Revenue Code Section 411(d)(6) if certain conditions are satisfied.

On July 25, 2012, the Third Circuit issued its decision in In re American Capital Equipment LLC and Skinner Engine Co., 688 F.3d 145 (3rd Cir. 2012), becoming the first circuit court to align itself with numerous district courts that have allowed bankruptcy courts to reject a Chapter 11 plan prior to a confirmation hearing.

In two recent decisions,² the United States Bankruptcy Court for the Southern District of New York denied motions by large chapter 11 debtors to approve executive bonus plans designated as key employee incentive plans ("KEIP"), finding that the proposed KEIPs actually were disguised and impermissible retention or "pay to stay" bonus plans for insiders. These are the first opinions to reject so-called KEIPs following a recent line of cases that have approved KEIPs for insiders.

On July 9, 2012, the U.S. Court of Appeals for the Seventh Circuit issued its decision in Sunbeam Products, Inc. v. Chicago American Manufacturing, LLC (“Sunbeam”). It is a landmark opinion for trademark licensees whose licenses are rejected in bankruptcy by trademark owners.

On July 2, 2012, the Illinois Department of Insurance (IDOI) entered an Agreed Order of Rehabilitation against Lumbermens Mutual Casualty Company and American Manufacturers Mutual Insurance Company, which is the part of the Lumbermens Mutual Group formerly known as Kemper (collectively, “Lumbermens”). Under the order, IDOI’s Director will serve as Lumbermens’ Rehabilitator with powers to restructure Lumbermens’ insurance business. From this point forward, Lumbermens will no longer take on any new insurance obligations, issue any new policies, or renew any existing policies.

In a recent decision¹ involving Global Aviation Holdings, Inc.