The House Judiciary Subcommittee on Regulatory Reform, Commercial, and Antitrust Law recently held hearings regarding certain provisions of the Bankruptcy Code, including the safe harbor from preference and fraudulent conveyance claims for “settlement payments.”

On March 20, 2014, the Court of Appeals for the Eighth Circuit issued an important decision in Stoebner v. San Diego Gas & Electric Co. (In re LGI Energy Solutions Inc.), No. 12-3899, Slip Op. (8th Cir. Mar. 20, 2014) that expands the scope of the “subsequent new value” defense in lawsuits seeking to clawback alleged preference payments.

This morning the US Supreme Court issued a ruling providing that severance payments are taxable FICA wages. In United States vs. Quality Stores, Quality Stores made severance payments to employees who were involuntarily terminated as part of Quality Stores’ Chapter 11 bankruptcy. Quality Stores paid and withheld income and FICA taxes from the severance payments. Later, Quality Stores sought a refund on behalf of itself and former employees for FICA taxes withheld and paid.

On March 7, the Spanish government reformed its bankruptcy law to encourage companies to restructure their debt and avoid liquidation. The decree is one part of an ongoing reform program intended to strengthen and stabilize the Spanish financial sector.  The reforms provide stronger incentives for lenders to accept write-offs, maturity extensions, and debt forgiveness for struggling companies. The new rules also reduce the majority of creditors needed to vote for a restructuring.

It seems that most bankruptcy decisions by the U.S. Supreme Court involve individual debtors, and the Supreme Court’s latest opinion is no exception. Even though the decision is not in a business bankruptcy case, it examines the bankruptcy court’s powers under Section 105(a) of the Bankruptcy Code.

Sometime this summer, the Supreme Court is expected to issue its ruling in U.S. v. Quality Stores.  In this case, the Supreme Court reviewed the Sixth Circuit’s holding that supplemental unemployment compensation benefits (“SUB payments”) relating to severance payments are not subject to FICA taxes. U.S. v. Quality Stores, 693 F.3d 605 (6th Cir. 2012).  The Sixth Circuit decision resurrects a long-disputed issue regarding the applicability of FICA to severance pay.

Last Friday, Judge Sleet of the U.S. District Court for the District of Delaware denied Hybrid Tech Holdings LLC’s appeal of the Delaware bankruptcy court’s decision in In re Fisker Automotive Holdings, Inc. et al, to (i) cap Hybrid Tech’s credit bid for Fisker Automotive’s assets, and (ii) require that the assets be sold via a public auction rather than directly to Hybrid Tech in a private sale.

On January 14, 2014, Judge Robert E.

In a departure from other bankruptcy courts in the Third Circuit and her own recent prior opinion, U.S. Bankruptcy Chief Judge Mary France of the Middle District of Pennsylvania broadly interpreted the U.S. Supreme Court’s ruling in Stern v. Marshall, 564 U.S. 2 (2011), and held that a bankruptcy court lacks the constitutional authority to issue a final judgment in any fraudulent transfer action where the defendant (i) has not filed a proof of claim and (ii) has not consented to the bankruptcy judge entering a final judgment on the matter. 

The Bankruptcy Code provides debtors in possession and other potential plan proponents with considerable flexibility to implement a plan under chapter 11. An important consideration is the preservation of potentially valuable causes of action held by the estate and the provision of a vehicle for post-confirmation prosecution of such claims.