A bankruptcy court recently held that in order for a supplier of goods on credit to establish an administrative claim under Bankruptcy Code section 503(b)(9) in the bankruptcy case of its buyer, the supplier will need to show that its buyer "physically" received the goods within 20 days prior to the buyer's bankruptcy filing, regardless of when title to the goods passed. In Re Circuit City Stores, Inc., et al., Case No. 08-35653, No. 7149 (Bankr. E.D. VA April 8, 2010).

One's Crisis is Another's Opportunity: Section 363 Sales With the increasing numbers of companies which were once thought to be giants of industry filing for bankruptcy, more opportunities to purchase major assets are becoming available to savvy buyers looking to expand their business or asset base. The Bankruptcy Code provides debtors with the ability to liquidate all or a part of their assets through court-supervised sales and buyers with the ability to obtain those assets at more favorable prices than they would pay if the sale were consummated outside of a bankruptcy.

In a recent opinion issued in the case In re Philadelphia Newspapers, LLC, et al., Case No. 09-4266 (3rd Cir. 2010), the United States Court of Appeals for the Third Circuit held that secured lenders do not have an absolute right to credit bid on all asset sales under section 1129(b)(2)(A) of the Bankruptcy Code. This opinion could have a profound effect on the manner in which debtors seek approval of a sale pursuant to a plan of reorganization and, potentially, a chilling effect on the willingness of lenders to extend credit in the future.

In a majority opinion dated December 15, 2009, the Ninth Circuit Bankruptcy Appellate Panel held that a chapter 11 debtor may not equitably subordinate a creditor's claim and transfer the lien securing that claim, when such creditor is, itself, in bankruptcy, before first obtaining relief from the automatic stay under section 362 of the U.S. Bankruptcy Code in such creditor's bankruptcy case. Lehman Commercial Paper v. Palmdale Hills Prop. (In re Palmdale Hills Prop., LLC), 2009 Bankr. LEXIS 4294 (B.A.P. 9th Cir. Dec. 15, 2009).

Although 2010 is still young, the bankruptcy courts have been busy interpreting Rule 2019 of the Federal Rules of Bankruptcy Procedure as it applies to ad hoc groups of creditors in bankruptcy cases. A ruling issued on February 4, 2010, in In re Philadelphia Newspapers, LL, Case No. 09- 11204 (Bankr. E.D.Pa.) found Rule 2019 does not apply to ad hoc groups. The score is now tied at three to three.

PETER J. SOLOMON COMPANY, L.P., v. ONEIDA, LTD., CASE NO. 09-CIV-2229, 2010 WL 234827 (S.D.N.Y. JAN. 22, 2010)

The term “stalking horse” originally referred to a horse or type of screen a hunter used to conceal his position from intended prey. Today the term takes a new meaning altogether thanks to its application in the bankruptcy context. A modern day “stalking horse” is an interested buyer of a debtor’s assets who is offered incentives for being the first to announce its intent. As the initial bidder, the stalking horse sets the minimum purchase price and other terms of the transaction.

Directors of California corporations have, for years, struggled to understand the scope of their fiduciary duties when a corporation is insolvent versus when a corporation is in the “zone of insolvency.” While other states (particularly Delaware) have provided some recent guidance in this area[1], the California Court of Appeal recently provided some much needed clarification – including providing comfort to the decision making processes of directors who are considering various alternatives when a corporation enters into a zone of insolvency.

There is something for everyone in the suitably named Worker, Homeownership, and Business Assistance Act of 2009–including potential recoveries for unsecured creditors of a debtor reorganizing or liquidating pursuant to the United States Bankruptcy Code.

Background

The Supreme Court declines to review a circuit court decision in Oneida Ltd., which held that a debtor cannot discharge in bankruptcy, as a prepetition claim, premiums it owes to the Pension Benefit Guaranty Corporation in connection with the termination of a pension plan.

Introduction