On August 22nd, the Federal Reserve Board proposed a two-year phase-in period for most savings and loan holding companies ("SLHCs") to file Federal Reserve regulatory reports with the Board and an exemption for some SLHCs from initially filing Federal Reserve regulatory reports. Under the Dodd-Frank Act, supervisory and rulemaking authority for SLHCs and their non-depository subsidiaries was transferred from the OTS to the Board. The Board previously sought comment on whether to require SLHCs to submit the same reports as bank holding companies.

On August 24th, the Third Circuit issued an opinion warning lawyers of the hazards posed by over-reliance upon automated, computerized communications between counsel and client. In doing so, it reinstated an order sanctioning a lawyer and her law firm for making false filings with the bankruptcy court. In re: Niles C. Taylor.  

On June 28th, the Bankruptcy Court overseeing the liquidation of Bernard Madoff's broker-dealer ruled that investors in funds that in turn invested with Madoff are not claimants within the meaning of the Securities Investor Protection Act. SIPC v. Bernard L. Madoff Investment Securities LLC. See also Reuters.

On June 28th, the Second Circuit held that payments made by Enron to redeem its commercial paper prior to maturity were not avoidable under the Bankruptcy Code. In doing so, the Court answers in the affirmative an issue of first impression among the appellate courts: whether the Bankruptcy Code's safe harbor, 11 U.S.C. Sec. 546(e), which shields settlement payments from avoidance in bankruptcy, extends to an issuer's payments to redeem its commercial paper prior to maturity.

The United States Court of Appeals for the First Circuit upheld a bankruptcy court’s ruling that, where subordination agreements lacked explicit provisions addressing the payment of post-petition interest on senior unsecured debt, the agreements were ambiguous, and an inquiry into the parties’ intent was required. After probing the facts and analyzing New York law, the bankruptcy court determined that the contracting parties did not intend to subordinate the junior unsecured debt to post-petition interest on the senior debt.

Background

On June 23rd, the First Circuit addressed the priority of claims asserted by senior noteholders and junior noteholders of debt issued by an insolvent bank. It affirmed the bankruptcy court's finding that the parties did not intend for the senior noteholders to receive post-petition interest payments prior to the junior noteholders receiving a distribution. In re: Bank of New England Corporation, Debtor.  

On June 7th, Bloomberg reported that the FDIC, as receiver for Downey Savings & Loan Association, has sued Amerifund Financial Inc., a mortgage broker. The FDIC alleges that Amerifund altered or misstated borrowers' financial information while processing mortgage applications for Downey. Lawsuit.  

On June 7th, the Eleventh Circuit affirmed the entry of summary judgment dismissing Chapter 13 debtors' claims against Wells Fargo, which holds debtors' mortgages. Debtors alleged that Wells Fargo violated the Bankruptcy Code's automatic stay provisions by recording in its internal records the fees it incurred to file its proof of claim. The Eleventh Circuit held that Wells Fargo did not violate the automatic stay because it had not collected or attempt to collect those fees. Similarly, a claim based on Wells Fargo's failure to disclose the fees was not yet ripe for action.

On April 18th, the FDIC released a report examining how it could have structured an orderly resolution of Lehman Brothers Holdings Inc. under the orderly liquidation authority of the Dodd-Frank Act had that law been in effect at the time.

On April 21st, the Federal Reserve Board requested comment on two bankruptcy-related studies. The Dodd-Frank Act requires the Federal Reserve Board to study the resolution of financial companies under Chapter 7 or Chapter 11 of the U.S. Bankruptcy Code. The Dodd-Frank Act also requires the Federal Reserve Board to study international coordination of the resolution of systemically important financial companies under the Bankruptcy Code and applicable foreign law.