“Federal law does not prevent a bona fide shareholder from exercising its right to vote against a bankruptcy petition just because it is also an unsecured creditor,” held the U.S. Court of Appeals for the Fifth Circuit on May 22, 2018. In re Franchise Services of North America Inc., 2018 WL 2325909, *1 (5th Cir. May 22, 2018). According to the court, applicable Delaware law would not “nullify the shareholder’s right to vote against the bankruptcy petition.” Id.
Relevance
Garrison Keillor once said, “Sometimes I look reality straight in the eye and deny it.”[1] Being that the case arose in Minnesota, perhaps Circuit Judge Michael Melloy channeled Keillor, one of that state’s great humorists, when he authored the opinion in The Official Commit
LEXISNEXIS A.S. PRATT
APRIL/MAY 2018
EDITOR'S NOTE: COMPARATIVE LAW Steven A. Meyerowitz
WHAT'S PAST IS PROLOGUE: THE EUROPEAN MOVEMENT TOWARD HARMONIZED PRE-INSOLVENCY BUSINESS RESTRUCTURINGS CONTRASTED WITH THE AMERICAN PREFERENCE FOR GOING-CONCERN ASSET SALES Harry Rajak, Patrick E. Mears, and Edward O. Mears
LANDMARK COURT OPINION INCREASES LIABILITY RISK PROFILE FOR GERMAN PORTFOLIO COMPANY MANAGEMENT Bernd Meyer-Lwy and Carl Pickerill
SPLIT FIRST CIRCUIT PREVENTS NON-DEBTOR LICENSEE FROM USING REJECTED TRADEMARK LICENSE Michael L. Cook
A bankruptcy trustee could not “avoid [a] debtor’s transfer” of encumbered asset sale proceeds when the debtor holds the funds “as a mere disbursing agent [under] a contract that” restricted its use, held the U.S. Court of Appeals for the First Circuit on April 18, 2018. Keach v. Wheeling & Lake Erie Railway Co. (In re Montreal, Me. & Atl. Ry.), 2018 U.S. App. LEXIS 9772 *14 (1st Cir. Apr. 18, 2018).
In In re Palmaz Scientific Inc., the bankruptcy court for the Western District of Texas determined that a confirmed plan of reorganization would not stop a group of investors from pursuing direct (non-derivative) claims against directors and officers of the debtor companies because plan injunction language only covered claims against the debtors. 2018 WL 1036780, at *5 (Bankr. W.D.
Following a number of corporate governance failures in situations of insolvency, the Government has published a consultation paper (located here) aimed at cracking down on directors and employers behaving irresponsibly.
A bankruptcy court properly denied a bank’s motion to compel arbitration of a debtor’s asserted violation of the court’s discharge injunction, held the U.S. Court of Appeals for the Second Circuit on March 7, 2018. In re Anderson, 2018 U.S. App. LEXIS 5703, *20 (2d Cir. March 7, 2018).
Providing an exception to the axiom that no good deed goes unpunished, a Texas bankruptcy court recently declared nondischargeable a debt owed to a guarantor who had been forced to pay the debtor’s defaulted student loan.
Fifth Circuit Rejects Breach of Fiduciary Duty and Fraudulent Transfer Claims
By Michael L. Cook*
THE BANKING LAW JOURNAL
First Circuit Affirms Dismissal of Fraudulent Transfer and Fiduciary Duty Claims
Michael L. Cook* This article discusses a recent U.S. Court of Appeals for the First Circuit decision holding that the debt-financed purchase of a business was not a fraudulent transfer and did not violate the fiduciary duty of the company's directors.