On June 19, 2019, the Ontario Court of Appeal released its decision in Third Eye Capital Corporation v. Ressources Dianor Inc./Dianor Resources Inc. [1], addressing the following issues:
This ThinkHouse TUPE Club Q&A deals with our Top 10 questions on:
- the key employment issues in Administrations and Liquidations; and
- how TUPE applies when there is an insolvency situation.
Q1. What is the effect of insolvency on contracts of employment?
There are various types of insolvency proceedings and these are designed to achieve various different end results. The different types of insolvency also have different consequences for the entity and employees.
Administration
A recent decision out of the District Court for the Southern District of New York may bring greater certainty to the interpretation of what constitutes a “financial institution” in connection with the safe harbor in section 546(e) of the bankruptcy code. The decision, In re Tribune Fraudulent Conveyance Litig., 2019 U.S. Dist. Lexis 69081 (S.D.N.Y. Apr.
Merit Management
Sutton 58 Associates LLC v. Pilevsky et al., is a New York case which gets to the heart of the enforceability of classic single-purpose entity restrictions in commercial real estate lending. At issue is how far a third-party may go to cause a violation of a borrower’s SPE covenants, and whether those covenants are enforceable at all.
A Defaulted Construction Loan and Frustrated Attempts to Foreclose:
In Mission Products Holdings, Inc. v. Tempnology, LLC, the U.S. Supreme Court resolved a question that vexed the lower courts and resulted in a circuit split: does the rejection by a debtor-licensor of a trademark license agreement terminate the licensee’s rights under the rejected license?
A strata wind-up is an excellent way to realize the economic potential of a multi-unit residential property ("strata") by leveraging the value of each strata unit in the strata as a whole to a developer that may want to develop on the strata's property. However, the wind-up process is complex, involving the intersection of real estate, condominium law ("strata property law"), and the law of restructuring.
Winding up of a strata corporation
Two priority issues arise between creditors of a common debtor:
It is a well-established principle of bankruptcy law that claims generally crystallize as of the bankruptcy petition date. Of course, section 506(b) of the bankruptcy code allows over-secured, secured creditors to recover post-petition interest and costs, including reasonable legal fees, if their documentation provides them with the right to recover these costs. But what about unsecured creditors – are post-petition legal fees incurred by an unsecured creditor whose contract with the debtor provides for reimbursement of legal fees allowed or not?
Last year, a California Bankruptcy Court wiped out $10.2 million in default interest (“DRI”) when it ruled that a 5% DRI was an unenforceable penalty in a Chapter 11 bankruptcy case where the construction lender fully recovered principal, interest, and other costs of collection.