Companies that plan to sell goods or services to a debtor in bankruptcy should be aware of a recent case decided by the Court of Appeals for the Eleventh Circuit, holding that a trustee may avoid a debtor’s post-petition transfers of cash collateral if such transfers were made without the consent of the secured party or court order.1

On June 2, 2010, the Third Circuit overruled longstanding precedent interpreting the definition of a “claim” under the Bankruptcy Code. In JELD-WEN, Inc. v. Van Brunt (In re Grossman’s Inc.), No. 09-1563, slip op., (3d Cir. June 2, 2010) an en banc panel rejected the state law accrual theory of claims recognition established in Avellino & Bienes v. M. Frenville Co. (Matter of M. Frenville Co.), 744 F.2d 332 (3d Cir. 1984), in favor of the more widely followed conduct test theory.

Not necessarily so, according to the recent rulings of Southern District of New York Bankruptcy Judge Allan Gropper in the US$27 billion General Growth Properties Chapter 11 bankruptcy—at least with respect to the issue of substantive consolidation.

Everyone is familiar with the story of the dashing Musketeers – Porthos, Athos, Aramis and d’Artagnan- and their inspirational motto. At the end of his adventures, one member of this famous band retired in order to marry the widow of a wealthy French lawyer, for whom the rallying cry might well have had a different significance.

The first appeal ruling from the newly formed UK Supreme Court concerned the construction of a clause setting out the distribution of assets in a collapsed structured investment vehicle (“SIV”). For the creditors attempting to salvage the remains of the SIV, and onlookers in similar situations, the judicial process has been a rollercoaster ride which has left them reeling.

On September 15, 2009, the United States Bankruptcy Court of the Southern District of New York ordered Metavante Corporation (“Metavante”) to make payments to Lehman Brothers Special Financing Inc. (“LBSF”) under a prepetition interest rate swap agreement guaranteed by Lehman Brothers Holdings Inc. (“LBHI” and, together with LBSF, “Lehman”) after Metavante had suspended ordinary course settlement payments under the swap.1 Metavante claimed a contractual right to withhold payment under Section 2(a)(iii) of the 1992 ISDA Master Agreement as a result of Lehman’s bankruptcy.

Litigation is not always about money. Sometimes, it really is about the principle of the thing. Sometimes there are rights at stake which cannot be measured in financial terms. Usually, though, litigation is born of a financial loss and ultimately what matters is that the victor receives his spoils.

Recent changes in Peruvian insolvency laws1 will now allow financial institutions and insurance company counterparties to close-out and net obligations under derivatives and repurchase agreements with Peruvian financial institutions or insurance companies which become subject to bankruptcy proceedings.

The recent ruling by the Bankruptcy Court for the District of Montana in the Chapter 11 case of In re Yellowstone Mountain Club LLC 1 (“Yellowstone”), which found that a senior secured lender had engaged in “overreaching and predatory lending practices”, suggests an application of lender liability theory from today’s perspective to a transaction that took place before the credit crisis.  

On May 14, 2009, Judge Allan Gropper of the US Bankruptcy Court, Southern District of New York, approved a US$400 million DIP financing package in the US$27 billion General Growth Properties, Inc. (“GGP”) Chapter 11 case. Judge Gropper’s ruling also included approval of GGP’s proposal to use cash flow generated by shopping centers, structured by GGP as bankruptcy remote, special purpose entities, to fund GGP’s ongoing central operations while in bankruptcy.