Here’s the latest opinion on a controversial question: In re Franco’s Paving LLC, Case No. 23-20069, Southern Texas Bankruptcy Court, (decided 10/5/2023; Doc. 74).

The Question & Answer

Voter apathy is a problem in Subchapter V cases. That apathy is in the form of creditors failing or refusing to vote on a Subchapter V plan. The In re Franco’s opinion addresses this apathy problem head-on.

The Hong Kong court has granted an order forcing an uncooperative former director of a Hong Kong listed company to ratify the appointment of a Hong Kong liquidator as the sole director of the companies' four BVI subsidiaries. The court rejected the idea that the liquidators should be made to apply for fresh winding up orders in the BVI and stressed that courts should be ready to offer each other mutual assistance.

Recent expressions of concern about courts mandating mediation reminded me of a mandated mediation process that worked well: the City of Detroit bankruptcy.

An illustration of the success of mandated mediation in the Detroit case is this line:

The Bankruptcy Judge“put an end to the public bickering over the water deal by ordering the parties into confidential mediation.”

In Purdue Pharma, the U.S. Supreme Court grants certiorari on this question:

Industrial and manufacturing businesses face all kinds of challenges: pricing and competitive pressures; regulatory demands; cross-border trade regulations and obligations; and litigation risk stemming from environmental and tort claims. These challenges create risks around every corner, some even rising to the level of "bet-the-company" issues – the things that keep GCs up at night.

The absolute priority rule [Fn. 1] has been a problem for businesses in bankruptcy—for a very long time! The rule dates back to at least 1899, when the U.S. Supreme Court prevents certain shareholder actions “until the interests of unsecured creditors have been preserved.” [Fn. 2]

Since then, the U.S. Supreme Court has followed a long and relatively straight road for the absolute priority rule. And the rule has shown staying power, along that road.

The Singapore High Court has again confirmed that a winding-up application concerning a disputed debt that is subject to an arbitration agreement will be dismissed if the arbitration agreement is prima facie valid and covers the dispute. This prima facie standard of review was first formulated three years ago by the Singapore Court of Appeal in AnAn Group (Singapore) Pte Ltd v VTB Bank (Public Joint Stock Company) [2020] SCGA 33.

The opinion is In re Legarde, Case No. 22-12184, Eastern Pennsylvania Bankruptcy Court (issued September 14, 2023; Doc. 112).

Facts

Debtor claims Creditor raped her.

Then, Debtor posts stuff about Creditor on the internet.

So, Creditor sues Debtor for defamation, alleging willful and malicious conduct.

Bankruptcy Developments

“courts agree that . . . evaluating, asserting, pursuing, and defending litigation claims . . . can satisfy Section 1182(1)(A)’s requirement of ‘commercial or business activities.’”

This isn’t going to end well.

Looks like our bankruptcy system in these United States is about to take a big hit—to the tune of hundreds of millions of dollars (projected to be around $350 million). And those responsible for creating the debacle are going to skate.

Here’s how.

U.S. Trustee v. John Q. Hammons