The English Supreme Court has handed down its long-awaited judgment in Sevilleja v Marex Financial Ltd. The key issue the case has dealt with is the scope of the reflective loss principle in English law. This might not mean much to the average person, but the decision is potentially ground-breaking for creditors of companies seeking justice. This short article explains why.
The reflective loss principle
In a case of first impression on the issue of “whether a lease assumption can survive discharge even though it is not reaffirmed[,]” the U.S. Court of Appeals for the Ninth Circuit recently held that a creditor’s post-discharge attempt to collect the balance owed under an automobile lease assumed by the debtor post-petition but prior to discharge in a Chapter 7 case did not violate the discharge injunction.
The U.S. Court of Appeals for the Sixth Circuit recently held that wages withheld as a voluntary 401(k) contribution prior to filing bankruptcy were not considered “disposable income” under a Chapter 13 bankruptcy plan.
A copy of the opinion in In re Camille Davis is available at: Link to Opinion.
An individual debtor (“consumer”) filed a Chapter 13 bankruptcy with more than $200,000 in debt ($189,000 unsecured debt) and fewer than $39,000 in assets.
The U.S. Court of Appeals for the Ninth Circuit recently held that bankruptcy courts could confirm Chapter 13 plans proposing estimated time periods to complete the plan if unsecured creditors and the trustee did not object, reversing a contrary ruling from its Bankruptcy Appellate Panel.
A copy of the opinion in In re Nanette Sisk is available at: Link to Opinion.
At present, global businesses face huge amounts of uncertainty owing to the Covid-19 crisis that is influencing the global economy in an unprecedented manner. From contractual supply chain issues, which have led to the activation of force majeure clauses, among others, to employment issues, insurance disputes, and the real and imminent threat of insolvency of counterparties, businesses need to take quick, effective steps to avoid trouble in these difficult times.
The U.S. Bankruptcy Appellate Panel for the Eighth Circuit recently held managing members of a limited liability company that filed a Chapter 11 bankruptcy were equitably estopped from asserting ownership of equipment where the members previously verified documents in the bankruptcy showing ownership of the equipment by the company.
A copy of the opinion in Richards v. Rabo ArgiFinance, LLC is available at: Link to Opinion.
The U.S. Court of Appeals for the Seventh Circuit recently held that absent unforeseen extraordinary circumstances, debtors in Chapter 13 cases cannot proceed on appeal in forma pauperis.
A copy of the opinion in Bastanipour v. Wells Fargo Bank, N.A. is available at: Link to Opinion.
The U.S. Bankruptcy Appellate Panel for the Eighth Circuit recently reversed a bankruptcy court’s disallowance of postpetition interest at the default contract rate, holding that “the bankruptcy court erred in applying a liquidated damages analysis and ruling the default interest rate was an unenforceable penalty,” and also erred in weighing “equitable considerations” to avoid enforcing the contractual default interest rate.
Shareholders in FTSE 250 company TI Fluid Systems yesterday voted down the company’s proposal to pay a £27 million dividend. In a highly unusual move, 57 per cent of shareholders in the motor part manufacturer used their votes to block the dividend payment which had been recommended by the board just four days earlier. It followed critical media coverage of the proposal, which centred on the fact that the company was making the payment while furloughing staff and cutting workers’ pay and would have resulted in a payment of almost £15 million to US private equity firm Bain Capital.
A recently published decision from the Technology and Construction Court, which examined the widely debated issue of whether companies in liquidation can adjudicate, could have increasing significance over the coming months in light of the Covid-19 pandemic.