“Puerto Rico’s Recovery Act is barred by § 903(1) … of the Bankruptcy Code,” held the U.S. Supreme Court on June 13, 2016. Commonwealth of Puerto Rico v. Franklin California Tax-Free Trust, 2016 WL 3221517, *11 (U.S. June 13, 2016) (5-2). Affirming the First Circuit, the court reasoned that Code § 903(i) “preempts state bankruptcy laws [enabling] insolvent municipalities to restructure their debts over the objections of creditors [and] instead requires municipalities to restructure [their] debts under Chapter 9 of the Code.” Id., at *2.

Key Notes:

My spouse and I visited Chicago years ago, and confusedly started driving the wrong way down a one-way street.  We were promptly pulled over by one of the Windy City’s finest.  I gave him my best smile, and said, “Sorry, officer, we’re from out of town.”  He grunted, “Don’t they have one-way streets where you come from?”  But he didn’t give us a ticket.  A recent disciplinary opinion out of Oklahoma, involving a tech-challenged bankruptcy lawyer, brings the story to mind.

E-filing woes bring bankruptcy court discipline

“Reasonably equivalent value” as a defense to a fraudulent transfer suit “can be satisfied with evidence that the transferee (1) fully performed under a lawful, arm’s-length contract for fair market value, (2) provided consideration that had objective value at the time of the transaction, and (3) made the exchange in the ordinary course of the transferee’s business,” held the Supreme Court of Texas on April 1, 2016, in response to a certified question from the U.S. Court of Appeals for the Fifth Circuit. Janvey v. Golf Channel, ___ S.W.3d ___, 2016 WL 1268188, at *2 (Tex.

The U.S. Court of Appeals for the Second Circuit recently ruled that constructive fraudulent conveyance claims arising under state law are preempted by the U.S. Bankruptcy Code, 11 U.S.C. § 101 et seq. (Code), where the transfers were made by or to financial intermediaries effectuating settlement payments in securities transactions or made in connection with a securities contract, irrespective of whether the plaintiff is a debtor in possession, bankruptcy trustee or other creditors’ representative.

A corporation’s asset sale “was structured [by its insiders] so as to fraudulently transfer assets in order to avoid paying [a major creditor] what it was owed,” held the U.S. Court of Appeals for the Seventh Circuit on March 22, 2016. Continental Casualty Co. v. Symons, 2016 WL 1118566, at *6 (7th Cir., March 22, 2016).

Creditors of a Chapter 11 debtor asserting “state law, constructive fraudulent [transfer] claims … are preempted by Bankruptcy Code Section 546(e),” held the U.S. Court of Appeals for the Second Circuit on March 29, 2016. In re Tribune Company Fraudulent Conveyance Litigation, 2016 WL ____, at *1 (2d Cir. March 29, 2016), as corrected.

A Chapter 11 debtor’s pre-bankruptcy “surrender of [two] … leases to [its landlord] could be regarded as a preferential transfer,” held the U.S. Court of Appeals for the Seventh Circuit on March 11, 2016. In re Great Lakes Quick Lube LP, 2016 WL 930298, at *2 (7th Cir. March 11, 2016).

While a recent federal bankruptcy court ruling provides some clarity as to how midstream gathering agreements may be treated in Chapter 11 cases involving oil and gas exploration and production companies (“E&Ps”), there are still many questions that remain. This Alert analyzes and answers 10 important questions raised by the In re Sabine Oil & Gas Corporation decision of March 8, 2016.[1]

The release provisions in a corporate debtor’s Chapter 11 plan were “not sufficiently specific to release” a plaintiff’s Fair Labor Standards Act (“FLSA”) claim against the debtor’s president (“P”), held the U.S. Court of Appeals for the Fifth Circuit on Jan. 6, 2016. Hernandez v. Larry Miller Roofing, Inc., 2016 WL 67217, at *4 (5th Cir. Jan. 6, 2016).