A bankruptcy court lacks subject matter jurisdiction to determine a tax refund claim under Section 505(a)(2)(B) of the Bankruptcy Code where the refund was requested by a liquidating trustee appointed pursuant to a plan, as opposed to a pre-confirmation bankruptcy trustee or debtor-in-possession, the Second Circuit held in United States v. Bond, Docket No. 12-4803 (2nd Cir. Aug. 13, 2014).
On June 12, 2014, the U.S. Supreme Court unanimously held in Clark v. Ramekerthat an inherited individual retirement account (IRA) does not qualify for the “retirement funds” exemption in the Bankruptcy Code and is not excluded from a bankruptcy estate on that basis.
As noted in a previous Sutherland Legal Alert, the American Bankruptcy Institute has formed a Commission to Study the Reform of Chapter 11 (the Commission). To further its goal of proposing changes to modernize the Bankruptcy Code, the Commission formed a number of advisory committees, including one named the Financial Contracts, Derivatives and Safe Harbors Committee (the Committee).
Hopes that certain severance payments paid by companies to terminated employees could escape application of the Federal Insurance Contributions Act (FICA) tax were dashed when a unanimous U.S. Supreme Court ruled on March 25th that such payments, when not tied to state unemployment benefits, were “wages,” and thus taxable. The ruling for the government will allow the IRS to disallow protective refund claims that numerous companies filed after a federal circuit court held that termination payments were not subject to FICA tax.
On March 4, 2014, a unanimous United States Supreme Court decided Law v. Siegel1 and clarified that exercising statutory or inherent powers, a bankruptcy court may not contravene specific statutory authority. Law will likely have broad implications for business bankruptcy cases even though it directly involved the exercise of a bankruptcy judge’s authority under section 105(a) to create a pragmatic solution to the actions of a bad actor in a consumer bankruptcy case.
A recent decision of the Second Circuit Court of Appeals has added an additional eligibility requirement for the filing of Chapter 15 cases. In Drawbridge Special Opportunities Fund LP v. Barnet (In re Barnet), ___ F.3d ___, 2013 WL 6482499 (2d Cir.
One of the effects of commercial globalization is that the bankruptcy filing of a debtor with transnational business relationships will sometimes result in a clash between the substantive bankruptcy laws of different countries. A frequent question is whether the bankruptcy laws of a foreign country should be brought to bear upon creditors located in the United States, even where foreign bankruptcy law is at odds with the laws of the United States.
In a decision that demonstrates the potentially broad impact of the forthcoming Supreme Court decision in Bellingham, the Fifth Circuit held that bankruptcy judges may not “determine” non-core matters even where the parties consent. BP RE, L.P. v. RML Waxahachie Dodge, L.L.C. (In re BP RE, L.P.), No. 12-51270 (5th Cir. Nov. 11, 2013), see Executive Benefits Ins. Agency v. Arkinson (In re Bellingham Ins. Agency), 702 F.3d 553 (9th Cir. 2012), cert. granted 133 S.Ct. 2880 (2013) (set for oral argument January 14, 2014).
Adding to the split of authority that has developed since the Supreme Court’s decision in Stern v. Marshall, 131 S.Ct. 2594 (2011), in Wellness Int’l Network Ltd. v. Sharif, No. 12-1349 (Aug. 21, 2013), the 7th Circuit aligned with the 6th Circuit’s decision in Waldman v. Stone, 698 F.3d 910 (6th Cir. 2012), to hold that a party may not consent or waive objection to the limited Constitutional authority of an Article I bankruptcy court.
The “safe harbor” provisions of the Bankruptcy Code protect firms that trade derivatives, and other participants in financial and commodity markets, from the rigidity that bankruptcy law imposes on most parties. Since their inception in 1982, the safe harbor statutes have gradually grown broader, to reflect a Congressional intent of protecting against secondary shocks reverberating through those markets after a major bankruptcy. The liberalizing of safe harbors traces – and may well be explained by – the rapidly expanding use of derivatives contracts generally.