For the second time in four weeks, a U.S. district court questioned the authority of bankruptcy courts to issue nonconsensual third-party releases as part of a plan of reorganization.

Welcome to the first edition of Restructuring Watch from the Akin Gump financial restructuring team in London. These editions will provide short and accessible updates on key legal developments in the European restructuring and insolvency world. 

For the second time in four weeks, a U.S. District Court has questioned the authority of bankruptcy courts to issue non-consensual third-party releases as part of a plan of reorganization. On Jan. 13, 2022, the Eastern District of Virginia vacated the confirmation order in the Mahwah Bergen Retail Group, Inc. (f/k/a Ascena Retail Group, Inc.) chapter 11 cases on the grounds that the plan contained impermissible non-consensual third-party releases. Patterson, et al. v. Mahwah Bergen Retail Group, Inc., Civ. No. 3:21cv167 (DJN) (E.D. Va. Jan. 13, 2022).

Appeals from bankruptcy court orders continue to play a key role in bankruptcy practice. The relevant sections of the Judicial Code and the Federal Bankruptcy Rules arguably cover all the relevant issues in a straightforward manner. Recent cases, however, show that neither Congress nor the Rules Committees could ever address the myriad issues raised by imaginative lawyers. The appellate courts continue to wrestle with standing, jurisdiction, mootness, excusable neglect, and finality, among other things.

Happy 2022, everyone! It seems fitting to kick off our Make (Whole) a Minute Update series in 2022 with an alert on make-whole. On December 22, 2021, the Bankruptcy Court for the District of Delaware ruled in favor of the Debtor-Hertz on a Motion to Dismiss filed by Debtor-Hertz with respect to make-whole claims and post-petition interest claims filed by public bondholders, with respect to four different series of bonds. In keeping with our theme that it takes about a minute to read our updates, here are the takeaways on the Hertz decision for institutional investors:

A “federal [fraudulent transfer claim under Bankruptcy Code § 548] is independent of [a] state-court [foreclosure] judgment,” held the U.S. Court of Appeals for the Sixth Circuit on Dec. 27, 2021. In reLowry, 2021 WL 6112972, *1 (6th Cir. Dec. 27, 2021). Reversing the lower courts’ approval of a Michigan tax foreclosure sale, the Sixth Circuit reasoned that “the amount paid on foreclosure bore no relation at all to the value of the property, thus precluding the … argument that the sale was for ‘a reasonably equivalent value’ under the rule of BFP v.

On Dec. 16, 2021, U.S. District Court Judge Colleen McMahon in the Southern District of New York vacated Purdue Pharma’s confirmed plan of reorganization after finding that the Bankruptcy Court below did not have statutory authority to issue a confirmation order granting non-consensual third-party releases — namely for the benefit of the Sackler family who owns Purdue. In re Purdue Pharma, L.P., Case No. 7:21-cv-08566 (S.D.N.Y. Dec. 16, 2021).

On Nov. 11, 2021, U.S. Bankruptcy Judge Craig Whitley in Charlotte, North Carolina ordered to move LTL Management LLC’s chapter 11 bankruptcy case to New Jersey after finding that LTL Management had used the “Texas Two-Step” to manufacture jurisdiction in North Carolina improperly. LTL Management is a subsidiary of Johnson & Johnson and a defendant in thousands of talc-related tort claim lawsuits. In re LTL Mgmt. LLC, No. 21-30589, 2021 BL 439798 (Bankr. D.N.J. Nov. 16, 2021).

Key Points

SU M M ER 2 02 1 | I F LR .C O M | 1 T he Hong Kong Companies Court has made a number of rulings concerning mainland Chinese corporate groups listed in Hong Kong SAR which illustrate the evolving landscape of cross-border insolvency law.These cases may, in some instances, cause creditors and debtors to re-evaluate some of the enforcement and defensive strategies traditionally used in the insolvencies of such companies.

1 Contact Information If you have any questions concerning this update, please contact: Naomi Moore Partner [email protected] Hong Kong +852 3694.3050 Abid Qureshi Partner [email protected] New York +1 212.872.8027 Liz Osborne Partner