In a widely followed dispute, the Fifth Circuit Court of Appeals will soon render a decision on the appeal of a Texas Bankruptcy Court’s refusal to recognize non-debtor third party releases in the Mexican reorganization proceeding (concurso mercantil) of Mexican glass manufacturer Vitro SAB de CV. Wall Street and the capital markets will be watching this appeal closely as a reversal of the Bankruptcy Court would likely make lenders and bondholders extremely nervous about extending future credit to Mexican corporations.

A recent decision of the Ontario Superior Court of Justice (Commercial List) in 9-Ball Interests Inc v Traditional Life Sciences considered the evidence required from applicants seeking the appointment of a receiver and the approval of a 'quick-flip' sale of a debtor company's assets in circumstances where the debtor, secured party and proposed purchaser are related parties.

In Deephaven Distressed Opportunities Tradings, Ltd. v. 3V Capital Master Fund Ltd., Index No. 600610/08 (Sup. Ct., NY County, Jun. 26, 2012), Judge Melvin L. Schweitzer denied the plaintiffs’ motion for summary judgment on its damages claims. The case arose from a dispute over the trade of distressed claims in the Sea Container, Inc. bankruptcy. Deephaven and 3V Capital executed trade confirmations that would convey “allowed” claims to 3V Capital subject to a negotiated assignment agreement. The parties signed confirmations on three trades, two of which led to this dispute.

In Skov v. U.S. Bank N.A., 2102 WL 2549811 (June 8, 2012), the Court of Appeal reversed the trial court’s decision to sustain a demurrer against plaintiff Andrea Skov’s second amended complaint, holding that she had stated a claim for violation of Civil Code Section 2923.5, which requires a lender to contact a defaulted borrower to discuss alternatives to foreclosure before starting a nonjudicial foreclosure by recording a notice of default.

On June 28, 2012, Stockton, California became the most recent municipality to file for bankruptcy under chapter 9, after having concluded a mandatory mediation process with its creditors. See, In re City of Stockton, California, Case No. 12-32118 (Bankr. E.D. Cal.). Many parties affected by a potential filing by other similarly situated California public entities are seeking to understand the process that precedes a Chapter 9 filing and how to plan for a possible filing.

On May 29, 2012, the Supreme Court ruled 8-0 that a debtor could not confirm a plan over a secured creditor’s objection if the plan provided for the sale of the secured creditor’s collateral free and clear of liens, but did not provide the secured creditor with the option of credit-bidding at the sale. RadLAX Gateway Hotel, LLC v. Amalgamated Bank, No. 11-166, 2012 U.S. LEXIS 3944 (U.S. May 29, 2012). Such a plan, the Supreme Court held, does not meet the statutory requirements for “fair and equitable” treatment of an objecting secured class in 11 U.S.C. § 1129(b)(2)(A).

Introduction
Facts
Decision


Introduction

In the recent matter Wilmington Trust Natl. Assn. v. Vitro Automotriz, Index No. 652303/11 (N.Y. Sup. Dec. 5, 2011), Justice Bernard J. Fried of the Commercial Division addressed the obligations of guarantors of indentured notes. Regardless that the issuer of the notes had declared bankruptcy in Mexico, the guarantors, none of whom were co-debtors, were not relieved of their obligations under the notes.

In Wells Fargo Bank Northwest v. US Airways, Inc., 2011 NY Slip Op 52188(U) (Sup. Ct. N.Y. County Dec. 1, 2011), Justice Bernard J. Fried held that a liquidated damages provision requiring payment of a holdover fee equal to twice the monthly rent was reasonable and did not function as a penalty under New York contract law. The case arose from three aircraft sale and leaseback transactions, pursuant to which Defendant US Airways, Inc. (“US Airways”), sold to Plaintiff Wells Fargo Bank Northwest (“Wells Fargo”), and Wells Fargo leased back to US Airways, three Boeing 737 aircraft.

In my recent blog posting, I discussed the factors that courts will consider before setting aside an elected condominium board of directors to impose a court-appointed administrator.

Below are some examples where the courts have intervened and appointed an administrator. They include situations where: