On May 3, 2021, Judge Marvin Isgur of the United States Bankruptcy Court for the Southern District of Texas held that indenture trustees must satisfy the “substantial contribution” standard to obtain administrative expense status for their fees and expenses incurred in a chapter 11 case. In his ruling, Judge Isgur expressly rejected the indenture trustee’s argument that it could obtain administrative expense status upon a showing that its fees and expenses were an actual, necessary cost of preserving the debtor’s estate.

On May 11, 2021, the United States Bankruptcy Court for the Northern District of Texas (“Court”) issued a decision[1] dismissing the chapter 11 cases of the National Rifle Association of America and its affiliate (“NRA”) for cause pursuant to section 1112(b) of the Bankruptcy Code.

Chapter 11 plans commonly protect a debtor’s key stakeholders that participate in the chapter 11 process from claims arising in connection with the bankruptcy case. The Office of the United States Trustee (the “US Trustee”), the branch of the Department of Justice tasked with monitoring bankruptcy cases, has recently taken aim at limiting the use and scope of these “exculpation” provisions in large restructuring cases across the country.

Background and Standards

On April 19, 2021, the United States Supreme Court denied a petition for certiorari from the Second Circuit’s decision in In re Tribune Company Fraudulent Conveyance Litigation (“Tribune II”),[1] leaving intact the Second Circuit’s decision upholding the safe harbor defense to avoidance actions und

“The discharge of claims in bankruptcy applies with no less force to claims that are meritorious, sympathetic, or diligently pursued. Though the result may chafe one’s innate sense of fairness, not all unfairness represents a violation of due process.”

On March 19, 2021, the United States Court of Appeals for the Third Circuit issued a unanimous decision[1] affirming that the mutuality requirement of section 553(a) of the Bankruptcy Code must be strictly construed and, therefore, that triangular setoffs are not permissible in bankruptcy.

Adjudication by insolvent parties is an issue that has greatly occupied the Courts of late. Much consideration has been given to the arguable conflict between set-off under the Insolvency Rules 2016 on the one hand, and the adjudication process on the other.

In a decision arising out of Tribune’s 2008 bankruptcy, the United States Court of Appeals for the Third Circuit recently issued a decision affirming confirmation of the media conglomerate’s chapter 11 plan over objections raised by senior noteholders who contended that the plan violated their rights under the Bankruptcy Code by not according them the full benefit of their prepetition subordination agreements with other creditors.

We are frequently approached by architects looking to wind down their practices, because either (i) they want to retire, (ii) they want to close down because of economic uncertainty, or (iii) they simply do not want to carry on with their practice and they will gain little value in selling it. However, in winding down a practice, we recommend the following key issues are considered:

1. Your contractual and professional obligations as an architect to maintain professional indemnity insurance run-off cover; and

The Government has announced they will be relaxing the law for companies undergoing a rescue or restructure process, giving them breathing space that could help avoid insolvency.