In a May 2, 2017 decision, the Sixth Circuit Court of Appeals decided the fate of a stream of rental payments from the bankrupt owner of a residential complex. (In re: Town Center Flats, LLC, No. 16-1812, May 2, 2017, Sixth Circuit Court of Appeals) The case resembled a similar one, far more controversial and with a different result, from 1993. (Octagon Gas Systems, Inc. v. Rimmer, 995 F.2nd 948, 10th Circuit Court of Appeals, 1993) The Octagon Gas case roiled the factoring and receivables purchasing industry.
Recent Events
The federal district court in New Jersey recently denied an appeal by maritime creditors of Hanjin to lift bankruptcy protections and allow arrest of Hanjin's vessels in and near U.S. ports. The federal district court judge agreed with the bankruptcy judge's grant of blanket protection to Hanjin and directed creditors of Hanjin to file claims in the Korean bankruptcy proceeding. Those claims are now due by October 25, 2016 in the Korean proceedings, according to an amended order issued by the Korean judge.
A number of towage and bunker suppliers in the Hanjin Shipping Co. Ltd. chapter 15 case have requested the intervention of a district court judge to clarify whether the U.S. Bankruptcy Court has authority to "effectively extinguish[] . . . maritime liens" on chartered vessels. The bankruptcy judge has acted to try to preserve Hanjin's assets and ability to continue its business, as he should do. The case concerns roughly $14 billion worth of cargo afloat or held up in container yards across the world. At least 10 vessels are known to be steaming toward U.S.
This past weekend, Hanjin vessels commenced unloading operations on the U.S. West Coast for the first time since Hanjin filed its bankruptcy petition with the Seoul Central District Court in Korea. Vessels have also been reportedly unloading in Japanese and Canadian ports. There is an obvious overriding public interest in having the many millions of dollars worth of cargo resume moving to its various destinations.
Yesterday afternoon in Newark, New Jersey, Judge John K. Sherwood of the U.S. Bankruptcy Court granted Hanjin Shipping Co. Ltd.'s request to recognize its Korean bankruptcy case and to provide U.S. bankruptcy protection to its assets and operations within the United States. However, the U.S. Bankruptcy Court's protection is subject to another hearing on Friday to sort out what arrangements can be made among the various stakeholders.
The Wall Street Journal has recently observed that if Hanjin Shipping Co. Ltd. fails in its attempts to reorganize and emerge from bankruptcy proceedings in Korea, it would represent the largest container shipping company to date to collapse. In the meantime, its creditors have apparently been active in Chinese, Singaporean, and American ports.
On January 15, 2016, the United States Court of Appeals for the Third Circuit (the “Third Circuit”) held in In re Trump Entertainment Resorts that section 1113 of the Bankruptcy Code permits a debtor to reject an expired collective bargaining agreement (“CBA”).
In Quadrant Structured Products Company, Ltd. v. Vertin (Oct. 20, 2015), the Delaware Court of Chancery, in a post-trial decision, rejected Quadrant’s challenges to transactions by Athilon Capital Corp., with Athilon’s sole stockholder (private equity firm Merced), after Athilon had returned to solvency following a long period of insolvency. Merced held all of Athilon’s equity and all of its junior notes; and both Quadrant and Merced held the company’s publicly traded senior notes.
On May 21, 2015, the United States Court of Appeals for the Third Circuit (the “Third Circuit”) affirmed the order of the United States District Court for the District of Delaware in Official Committee of Unsecured Creditors v. CIT Group/Business Credit Inc. (In re Jevic Holding Corp.) approving a settlement and dismissal of a chapter 11 case by way of a “structured dismissal.” A structured dismissal is, simply, the dismissal of the bankruptcy case preceded by other orders, such as an order approving a settlement or granting releases, which survive dismissal of the case.
To Our Clients and Friends Memorandum friedfrank.com Copyright © 2015 Fried, Frank, Harris, Shriver & Jacobson LLP 06/04/15 A Delaware Limited Liability Partnership 1 The Supreme Court Rules That Bankruptcy Judges May Adjudicate Stern Claims with the Parties’ Knowing and Voluntary Consent On May 26, 2015, the Supreme Court in Wellness International Network v.