In a judgment handed down last week, the Court of Appeal upheld the decision of Mr Justice Blackburne (previously reported here) that the English courts have no jurisdiction to sanction the proposed scheme of arrangement for Lehman Brothers International Europe (LBIE) insofar as it purports to extinguish rights of beneficiaries under trusts.

Following up on our previous blog on Lord Glennie's controversial decision in the Scottish Lion solvent scheme of arrangement we can now report that last week the scheme was formally dismissed.

Ernst & Young ("E&Y") has settled the Akai Holdings ("Akai") case with Akai’s liquidator, Borrelli Walsh. In this case, E&Y was accused of negligence for failing to avert Akai’s collapse in 2004.

E&Y had been Akai’s auditor prior to the collapse, which remains Hong Kong’s biggest ever insolvency. The terms of the settlement are confidential.

On 24 September 2009, the South China Morning Post reported that new evidence had come to light which suggested that E&Y’s staff had tampered with or faked hundreds of documents relating to its audit of Akai.

Everyday, most of us in the United States encounter evidence of relentless economic globalization. Gone are the days when American-brand automobiles dominated our roads. As a result of NAFTA, fresh Mexican produce fills the shelves of our local supermarkets. You are perhaps just as likely to fly overseas on Japan Air Lines, Aer Lingus or Lufthansa as on Northwest-Delta, American or United.

As the automotive industry continues to restructure, whether through self-liquidation or government intervention, suppliers will inevitably be confronted with many of the same issues prevalent 4-5 years ago, including a supplier’s obligation to continue to provide goods post-petition and the supplier’s rights to adequate assurance as a condition to such shipment.

On August 28, 2009, Delta Financial Corp. (“Delta”) filed a Notice of Appeal to the United States Court of Appeals for the Third Circuit seeking to overturn the dismissal of its coverage action against Westchester Surplus Lines Insurance Co. (“Westchester”) and United States Fire Insurance Co. (“USFI”). The coverage action, which was filed as a part of an adversary proceeding with the United States Bankruptcy Court for the District of Delaware, sought coverage under two D&O policies issued by Westchester and USFI respectively.

On August 11, a United States bankruptcy judge denied motions to dismiss the Chapter 11 cases of 21 special purpose entity (“SPE”) subsidiaries (the “Subject Debtors”) of General Growth Properties, Inc. (“GGP”). A final order denying the motions was entered on August 28. The decision raises a number of issues, primarily with respect to the role of independent managers, that are of particular interest to the commercial mortgage-backed securities (“CMBS”) industry.

Lessons from the GGP Cases

The administrators of Lehman Brothers International (Europe) have been intending to propose a scheme of arrangement under the English Companies Act to enable them to distribute several billions of dollars of assets held on trust by the company in the face of difficulties in establishing who was entitled to the trust assets; in particular, they had not received responses from all potentially interested clients, could not rely on the accuracy of the company's records and had not received all the information requested from sub-custodians and other intermediaries.

In Josef Syska (Administrator of Elektrim SA (in bankruptcy) and Elektrim SA (in bankruptcy) v Vivendi Universal SA & Others [2009] EWCA Civ 677 the main question to be decided by the Court of Appeal was whether, when an arbitration is proceeding in one Member State of the European Union, in this case the UK, and one of the parties to the arbitration becomes insolvent in another Member State, in this case Poland, the consequences of that insolvency, in so far as they affect the arbitration, are to be determined by the law of the Member State where the insolvency procee

Two D&O insurers have asked the U.S. Bankruptcy Court for the District of Minnesota to lift an automatic stay in a bankruptcy proceeding pending against their insureds so that the insurers can pursue their coverage defenses as counterclaims against the insureds in a pending declaratory judgment action.In Re Petters Company, Inc., et al., Case No. 08-45257 (Bankr. D. Minn.).