As we have recently noted, the federal banking agencies have worked together to expand the pool of investors eligible to bid to acquire failing depository institutions. See our 21st Century Money, Banking & Commerce Alert entitled “OCC Approves Shelf Charter for National Banks to Encourage New Investment” (Nov. 25, 2008). The Federal Deposit Insurance Corporation (“FDIC”) has recently modified the receivership process in less obvious ways that also may have important ramifications for investors. 

California Coastal Commission, etc., et al. v. Michael A. Allen, ___ Cal. App. 4th ___ (Oct. 1, 2008, Case No. B197974)

In Burkhart v. Coleman, (In re Tippett) --- F.3d ---, 2008 WL 4070690 (9th Cir. Sept. 4, 2008), the Ninth Circuit held that an unauthorized post-petition sale of real property may be upheld where: 1) the bankruptcy trustee failed to record the bankruptcy petition with the county recorder; and 2) a bona fide purchaser thereafter bought and recorded title in the property.

On July 28, 2008, the Federal Deposit Insurance Corporation (“FDIC”) published for comment a proposed rule that would require certain troubled depository institutions to maintain records of their qualified financial contracts (“QFCs”) in order to provide the FDIC with basic information when the agency is appointed as receiver. 73 Fed. Reg. 43635. Comments on the proposed rule must be received by the FDIC by September 26, 2008.

In a recent decision, the United States Supreme Court resolved a circuit split regarding the meaning of the statutory phrase "under a plan confirmed under [Chapter 11] of the bankruptcy Code," as codified in 11 U.S.C. § 1146(a). The case arose from the bankruptcy of Piccadilly Cafeterias, Inc. At one time among the nation's most successful cafeteria chains, Piccadilly had fallen on hard financial times. In 2003, Piccadilly filed for Chapter 11 bankruptcy protection in the Southern District of Florida.

In the case of Florida Dept. of Revenue v. Piccadilly Cafeterias, Inc.,¹ the United States Supreme Court ruled that the exemption from the payment of stamp taxes or similar taxes on transfers of property of a Chapter 11 debtor’s estate, contained in section 1146(a) of the Bankruptcy Code,² does not apply to transfers of property made before a Chapter 11 plan is confirmed.

By Order, dated January 14, 2008, United States Bankruptcy Judge Martin Glenn for the United States Bankruptcy Court for the Southern District of New York, granted the motion (the "Motion") filed by a group of creditors seeking transfer of venue of the Dunmore Homes, Inc. (the "Debtor") bankruptcy case from the United States Bankruptcy Court for the Southern District of New York (the "Court") to the Eastern District of California, Sacramento Division. A number of other creditors and the Official Unsecured Creditors Committee joined in the Motion.

In 1991, a decision of the Delaware Chancery Court helped popularize the term "zone of insolvency.”[1] In the intervening 16 years, numerous courts and commentators have cited this decision as standing for the proposition that the directors of a Delaware corporation that is either insolvent or in the zone of insolvency owe fiduciary duties to the creditors, as well as to the shareholders, of the corporation.

The hurdles for KERP programs have been raised too high, causing debtors to lose critical personnel to the detriment of post-petition operations, say Frost Brown Todd’s Ronald Gold and Doug Lutz in our series of chats with high-profile bankruptcy lawyers.

Q. What’s the most challenging bankruptcy you’ve worked on, and why?

In a decision in In re Enron Corp., et al., 2007 U.S. Dist. LEXIS 63129, No. 05-01025 (S.D.N.Y. August 27, 2007), the Honorable Shira Scheindlin, United States District Judge for the Southern District of New York, held that the sale of a claim that is subject to equitable subordination under section 510(c) or disallowance under section 502(d) of the Bankruptcy Code may insulate the claim from subordination and disallowance when asserted against the buyer of the claim. At first blush the decision may be, and has been, read by some to offer relief and clarity to distressed debt investors.