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Fourth Circuit concludes that certain commissions and margin interest payments are protected from avoidance by "stockbroker defense"

CASE SNAPSHOT

In a case of first impression, the Fourth Circuit determined that broker commissions shown to be reasonable and customary parts of settling stock sales constitute "settlement payments" and that the payment of margin interest constitutes "margin payments" under section 546(e) of the Bankruptcy Code such that these types of payments are immune from avoidance and recovery by a bankruptcy trustee.

FACTUAL AND PROCEDURAL BACKGROUND

USA, Capital Markets, Insolvency & Restructuring, Litigation, Reed Smith LLP, Debtor, Interest, Margin (finance), Commission (remuneration), Fourth Circuit
Data Protection Act – obligations of liquidators

A judgment recently handed down from the High Court clarifies the obligations of liquidators under the Data Protection Act 1998, providing them with greater personal protection from fines or other sanctions.

Reed Smith acted for the liquidators in their application for directions.

Background

United Kingdom, Insolvency & Restructuring, IT & Data Protection, Litigation, Reed Smith LLP, Data Protection Act 1998 (UK)
‘Super priority’ of financial support directions overturned in Supreme Court of England and Wales

Summary

The Supreme Court has today allowed an appeal against the decision of the Court of Appeal (14 October 2011) which, in certain circumstances in an insolvency situation, would have accorded “super priority” to a financial support direction made by the Pensions Regulator.

United Kingdom, Employee Benefits & Pensions, Insolvency & Restructuring, Litigation, Reed Smith LLP, The Pensions Regulator (UK), Pensions Act 2004 (UK), Pensions Act 1995 (UK), Supreme Court of the United States
In re Lehman Brothers Inc.: repo claims fall outside of SIPA protection

As part of the Lehman Brothers Inc. ("Lehman") bankruptcy, the Bankruptcy Court for Southern District of New York ("Court") determined that three banks’ (the "Claimants") claims in relation to repurchase agreements ("repos") were not "customer claims" entitled to customer protection under the Securities Investor Protection Act of 1970 ("SIPA").

USA, New York, Capital Markets, Insolvency & Restructuring, Litigation, Reed Smith LLP, Security (finance), Lehman Brothers, United States bankruptcy court
Bankruptcy Court concludes that renewable power purchase and sale agreement is a "forward contract" entitled to safe harbor protections

CASE SNAPSHOT

USA, Insolvency & Restructuring, Reed Smith LLP, Bankruptcy, Debtor, Renewable energy, Title 11 of the US Code, United States bankruptcy court
Tenth Circuit joins Fourth Circuit in holding that absolute priority rule applies to individual chapter 11 cases

Dill Oil Company, LLC v. Stephens, No. 11-6309 (10th Cir., Jan. 15, 2013)

CASE SNAPSHOT

The Court of Appeals for the Tenth Circuit, in a case of first impression before the court, joined the Fourth Circuit in holding that the absolute priority rule remains applicable in individual chapter 11 cases.

FACTUAL BACKGROUND

USA, Insolvency & Restructuring, Litigation, Reed Smith LLP, Debtor, Unsecured debt, Secured creditor, United States bankruptcy court, Fourth Circuit, Tenth Circuit
Creditor defeats preference action based on ‘new value’ defense

In re ESA Environmental Specialists, Inc., 2013 WL 765705 (4th Cir., Mar. 1, 2013)

CASE SNAPSHOT

USA, Insolvency & Restructuring, Insurance, Litigation, Projects & Procurement, Reed Smith LLP, Letter of credit, Debtor, Collateral (finance), Debt, Liquidation, Certificate of deposit, European Space Agency, Fourth Circuit
Exit lenders liable for conversion where distributions contravene credit agreement

Prudential Insurance Company of America v. WestLB AG, 961 N.Y.S. 2d 360 (2012)

CASE SNAPSHOT

USA, Banking, Insolvency & Restructuring, Litigation, Reed Smith LLP, Credit (finance), Collateral (finance)
Beware the credit overbid

In re Miller, 2013 WL 425342 (6th Cir. Feb. 5, 2013)

CASE SNAPSHOT

The Sixth Circuit Court of Appeals held that the secured lender’s credit bid, which equaled the total debt owed on two properties but exceeded the value of the only foreclosed property involved in the sheriff’s sale, extinguished the entire debt. The court affirmed the order to lift the automatic stay only to require the lender to dismiss the second foreclosure action, release the promissory note and mortgage, and turn over the second property to the borrower free and clear.

USA, Banking, Insolvency & Restructuring, Litigation, Reed Smith LLP, Debt, Mortgage loan, Foreclosure, United States bankruptcy court, Sixth Circuit
Ninth Circuit joins majority, holds unstayed judgments not ‘bona fide dispute’

In re Georges Marciano, No. 11-60070 (9th Cir., Feb. 27, 2013)

CASE SNAPSHOT

Judgment creditors of Georges Marciano filed an involuntary chapter 11 petition against Marciano, who appealed the state judgments before the petition was filed. The Ninth Circuit ruled, in a case of first impression, that unstayed state court judgments on appeal were not "the subject of a bona fide dispute," and thus the Bankruptcy Court did not err when it entered an order for relief under chapter 11 against Marciano, notwithstanding the pending appeals.

USA, Insolvency & Restructuring, Litigation, Reed Smith LLP, Good faith, Ninth Circuit, United States bankruptcy court, California superior courts