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.

Over the last 6 months, the Debt Recovery team has seen an increase in their monitoring of debtor companies and notification for proposals for striking off action. The team are actively reviewing and objecting to any such proposals with Companies House to allow their clients to continue to chase their debts.

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

IN THE NEWS

Government lifts (in part) the temporary insolvency measures

On 9 September 2021, the government announced that the temporary restrictions introduced by the Corporate Insolvency and Governance Act 2020 (CIGA 2020) which were put in place to protect companies during the pandemic are being lifted, and will be replaced from 1 October 2021 with new temporary measures, which include the introduction of a temporary revised debt limit for presenting winding up petitions.

What have we been up to?

Aside from our collective (but not wholly unexpected) disappointment that the lifting of the remaining Covid restrictions has been pushed back to 19 July, the team continue to advise on a wide range of insolvency related matters, amongst the recent highlights being:

From 1 October 2021, those restrictions will be replaced by new measures brought about under the Corporate Insolvency and Governance Act 2020 (Coronavirus) (Amendment of Schedule 10 Regulations 2021) (the “Regulations”).

Under the Regulations, which are to be temporary and due to last until 31 March 2022, a creditor will be able to present a winding up petition against a corporate debtor where:-

(i) The debt is for a liquidated amount, which has fallen due and is not an ‘excluded debt’ (see below) (Condition A)

The Government has announced that it will be bringing an end (of sorts) to the temporary restrictions surrounding a creditor’s ability to present a statutory demand and winding up petition against a corporate debtor. Those restrictions, which were introduced under the Corporate Insolvency and Governance Act 2020 in a response to the Covid 19 pandemic, have been in place since June 2020 and were set to expire on 30 September 2021.

A Chapter 11 corporate debtor’s monetary penalty obligation owed to the Federal Communications Commission (“FCC”), resulting from “fraud on consumers,” survived the debtor’s reorganization plan discharge, even when the FCC “was not a victim of the fraud,” held the U.S. District Court for the Southern District of New York on Sept. 2, 2021. In re Fusion Connect Inc., 2021 WL 3932346, *1 (S.D.N.Y. Sept. 2, 2021).