A recent decision out of the District Court for the Southern District of New York may bring greater certainty to the interpretation of what constitutes a “financial institution” in connection with the safe harbor in section 546(e) of the bankruptcy code. The decision, In re Tribune Fraudulent Conveyance Litig., 2019 U.S. Dist. Lexis 69081 (S.D.N.Y. Apr.

Merit Management

Sutton 58 Associates LLC v. Pilevsky et al., is a New York case which gets to the heart of the enforceability of classic single-purpose entity restrictions in commercial real estate lending. At issue is how far a third-party may go to cause a violation of a borrower’s SPE covenants, and whether those covenants are enforceable at all.

A Defaulted Construction Loan and Frustrated Attempts to Foreclose:

In Mission Products Holdings, Inc. v. Tempnology, LLC, the U.S. Supreme Court resolved a question that vexed the lower courts and resulted in a circuit split: does the rejection by a debtor-licensor of a trademark license agreement terminate the licensee’s rights under the rejected license?

On April 29, New Jersey’s governor signed into law bill A4997, known as the Mortgage Servicers Licensing Act. As the title indicates, the Act creates a licensing regime for servicers of residential mortgage loans secured by real property within New Jersey. As with many state licensing regimes, the Act exempts most banks and credit unions from licensing.

Even under the most sympathetic of circumstances, courts are charged with respecting the integrity of deadlines and employing a cool, impartial approach to everyone, including the most desperate of late claimants.

On May 1, 2019, FERC denied Pacific Gas and Electric Company’s (“PG&E”) requests for rehearing of two prior orders in which FERC held that it and the bankruptcy courts have concurrent jurisdiction to review and address the disposition of wholesale power contracts sought to be rejected through bankruptcy. FERC’s order comes as the PG&E bankruptcy proceedings in the United States Bankruptcy Court for the Northern District of California (“Bankruptcy Court”) remain ongoing.

In a win for lenders, on March 18, the U.S. Bankruptcy Court for the Southern District of New York held that an unambiguous make-whole provision in a loan contract was enforceable under New York law, despite the fact that the lender had accelerated the loan. In re 1141 Realty Owner LLC, 2019 WL 1270818 (Bankr. S.D.N.Y. Mar. 18, 2019).

Background

It is a well-established principle of bankruptcy law that claims generally crystallize as of the bankruptcy petition date. Of course, section 506(b) of the bankruptcy code allows over-secured, secured creditors to recover post-petition interest and costs, including reasonable legal fees, if their documentation provides them with the right to recover these costs. But what about unsecured creditors – are post-petition legal fees incurred by an unsecured creditor whose contract with the debtor provides for reimbursement of legal fees allowed or not?

Last year, a California Bankruptcy Court wiped out $10.2 million in default interest (“DRI”) when it ruled that a 5% DRI was an unenforceable penalty in a Chapter 11 bankruptcy case where the construction lender fully recovered principal, interest, and other costs of collection.