In In re Purdue Pharma, L.P., 1 U.S. District Court Judge Colleen McMahon of 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, which owns Purdue.

A bankruptcy court gave "unnecessary and likely incorrect" reasoning to support its "excessively broad proposition that sales free and clear under [Bankruptcy Code ("Code")] Section 363 override, and essentially render nugatory, the critical lessee protections against a debtor-lessor under [Code] 365(h)," said the U.S. Court of Appeals for the Fifth Circuit on Feb. 16, 2022. In re Royal Bistro, LLC, 2022 WL 499938, *1-*2 (5th Cir. Feb. 16, 2022).

“Good-faith purchasers enjoy strong protection under [Bankruptcy Code (“Code”)] § 363(m),” but the silent asset buyer (“B”) with “actual and constructive knowledge of a competing interest” lacks “good faith,” held the U.S. Court of Appeals for the Seventh Circuit on April 4, 2022. Archer-Daniels-Midland Co. (“ADM”) v. Country Visions Cooperative, 2022 WL 998984 (7th Cir. Apr. 4, 2022).

A bankruptcy court gave “unnecessary and unlikely incorrect” reasoning to support its “excessively broad proposition that sales free and clear under [Bankruptcy Code (“Code”)] Section 363 override, and essentially render nugatory, the critical lessee protections against a debtor-lessor under [Code] 365(h),” said the U.S. Court of Appeals for the Fifth Circuit on Feb. 16, 2022. In re Royal Bistro, LLC, 2022 WL 499938, *1-*2 (5th Cir. Feb. 16, 2022).

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.

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.

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