On April 12th, a federal district court addressed the in pari delicto defense, including the sole actor exception to the adverse interest exception. In the instant case, a litigation trust created in bankruptcy court to pursue the debtor's claims sued Credit Suisse for allegedly assisting the debtor's founders' looting of the debtor's subsidiaries. Credit Suisse sought summary judgment, asserting the in pari delicto defense. The Court agreed, finding that the evidence supported the conclusion that the founders so dominated the subsidiaries that the subsidiaries lacked a separate existence.
May a deceased person who dies in bankruptcy having failed to complete his duties under the Bankruptcy and Insolvency Act be discharged from bankruptcy?
This was the question that the British Columbia Supreme Court wrestled with earlier this year in a reported decision that began by noting that there was no jurisdiction on point.
Re Gyro-Trac (USA) Inc. (“Gyro-Trac””) is the first appellate decision to consider the centre of main interests (COMI) of a corporate group. In that case, the Quebec Court Appeal upheld the lower court’s decision to recognize proceedings under Chapter 11 of the United States Bankruptcy Code (“Chapter 11”) and to stay Canadian bankruptcy proceedings against Canadian members of a corporate group.
Pursuant to section 38 of theBankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 (the “BIA”) a creditor of the bankrupt estate can obtain the trustee’s right to pursue estate litigation where the trustee refuses or fails to pursue such litigation. In a recent Ontario case, Indcondo Building Corp. v. Sloan [2010], CarswellOnt 9785, the Court of Appeal was asked to determine whether the limitation period for the assigned litigation commences with the trustee’s knowledge of the facts giving rise to the claim or the assignee’s knowledge of those facts.
On March 15th, the FDIC published for comment a proposed rule that would establish the priority of payments to creditors when the FDIC acts as liquidator for a failed non-bank financial institution. The proposal also would establish the procedures for filing a claim with the receiver and clarifies the receiver's clawback authority. Comments should be submitted within 60 days after publication in the Federal Register, which is expected during the week of March 21.
FDIC Proposes Rules for the Recoupment of Compensation from Executives of Failed Financial Institutions I hope this does not apply to any of you, but on Tuesday, the Board of Directors of the Federal Deposit Insurance Corporation (FDIC) approved a Notice of Proposed Rulemaking (NPR) to clarify application of the orderly liquidation authority contained in Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act, "Orderly Liquidation Authority" (OLA).
On February 22nd, the Bankruptcy Court overseeing the liquidation of Lehman Brothers' broker-dealer business denied motions seeking to modify the order approving the sale of the business to Barclays Capital. The Court noted the extraordinary circumstances surrounding the sale, the affirmance of that sale order, and movants' failure to challenge the order for one year. The court held that even if the evidence presented here were known in 2008, the result would have been the same, i.e., the sale would have been approved.
On February 16th, the Third Circuit addressed an issue of first impression and held that the discounted cash flow method was the proper measure of damages under Bankruptcy Code Section 562 when a market price cannot be determined. The parties had entered into a $1.2 billion repurchase agreement for a portfolio of home mortgages. On the day the debtor defaulted, the distressed state of the credit markets made it commercially unreasonable for the purchaser to sell the portfolio and the market price would not reflect the asset's worth.
The United States District Court for the Southern District of Florida has reversed a bankruptcy court order that had required a group of lenders (“Transeastern Lenders”) to disgorge, as a fraudulent transfer, approximately $421 million paid to them by a joint venture partner (“TOUSA”) in satisfaction of their legitimate, uncontested loans to the joint venture that TOUSA had guaranteed. Together with pre-judgment interest, the total amount to be paid by the Transeastern Lenders was in excess of $480 million.
On February 8th, the CFTC published for comment proposed regulations that would set forth parameters for the inclusion of an orderly liquidation termination provision in the swap trading relationship documentation for swap dealers and major swap participants. Comments should be submitted on or before April 11, 2011. 76 FR 6708.