Introduction
The recent decision in the case of In re Erickson Retirement Communities, LLC, 425 B.R. 309 (Bankr. N.D. Tex. 2010) provides ammunition for those opposing the appointment of an examiner in a debtor’s Chapter 11 case and a cautionary tale for lenders entering into subordination agreements.
The Court of Appeals for the Fifth Circuit recently held that Chapter 15 of the Bankruptcy Code does not prohibit a foreign representative from bringing an avoidance action so long as the claim for relief is based on the substantive laws of the jurisdiction where the foreign proceeding is located. The Fifth Circuit’s decision is consistent with the dual policy considerations of comity and predictability. Fogerty v. Petroquest Res., Inc. (In re Condor Ins. Ltd.), 601 F.3d 319 (5th Cir. 2010).
Background
In Lehman Brothers International (Europe)(in administration) v CRC Credit Fund Limited & Ors [2010] EWCA Civ 917 the Court of Appeal considered the first instance judgment of Mr Justice Briggs on the operation of the Client Money Rules (CASS) in relation to the insolvency of Lehman Brothers International (Europe)(LBIE).
A federal judge has ruled that directors and officers of a company in bankruptcy proceedings may continue to access an eroding liability policy to cover their defense costs. The court based its decision on a close examination of the policy language, and alternatively held that the individual directors and officers had shown they were entitled to relief from the automatic stay. In re: Downey Financial Corp., No. 08-bk-13041 (CSS) (Bankr.D.Del. May 7, 2010).
The US District Court for the District of Connecticut recently dismissed a customer suit against an insurer, based upon its determination that all of the underlying claims were excluded by the policy’s Insolvency Exclusion.1 Associated Community Bancorp, Inc., et al. v. The Travelers Companies, Inc., et al.
The UK Government has announced a consultation on proposals to strengthen the administration regime for insurers, in particular to improve the protection and payment of benefits for persons insured with companies facing financial difficulties and addressing gaps in the administration regime for insurers as compared with the liquidation regime. The proposals include:
1. applying to administration the existing rules for valuing insurance contracts in liquidation; and
2. revising the objectives of administration in insurance company cases by:
Readers of our December 2009 issue will recall that we wrote about the Scottish court decision on the Scottish Lion Insurance Company scheme of arrangement. Just before this issue went to press the decision of the Scottish court of appeal (the Inner House of the Court of Session) on the issue of whether “creditor democracy” would be allowed to prevail or whether unanimity was required became known.
Protecting clients’ money and assets has been a pillar of the UK financial regulatory regime. The obligation on regulated entities to “…arrange adequate protection for clients’ assets when it is responsible for them” is enshrined in Principle 10 of the Principles of Business Sourcebook of the Financial Services Authority (FSA) Handbook. The FSA has made rules to protect client money by requiring FSA regulated entities to hold such money in trust accounts (the Client Money Rules).
Court Broadens Interpretation of Code Sections Invalidating Ipso Facto Contract Provisions