Almost every significant bankruptcy case eventually involves preference demands and litigation. Around this abundance of litigation developed a significant body of jurisprudence, to which Judge Sean Lane of the Southern District of New York Bankruptcy Court recently added in clarifying the ordinary course of business preference defense.

In recent years, second lien financings have increased in popularity. Senior creditors rely on intercreditor agreements to protect their interests by limiting the rights that junior lien holders would otherwise enjoy as secured creditors through either lien subordination, payment subordination, or both. Lien subordination requires the turnover to first lien creditors of proceeds of shared collateral until the first lien holders are paid in full.

In a decision that will have profound implications for insolvency professionals of all types, the U.S. Supreme Court has agreed to hear an appeal of the 5th U.S. Circuit Court of Appeals’ decision that Section 330 of the U.S. Bankruptcy Code does not allow applicants to seek compensation in connection with successful defenses to objections to fee applications.

On October 1, a bankruptcy judge ruled that the pension agreement between Stockton, California and Calpers, California’s massive state-run pension fund for public employees, is an executory contract that can be rejected in bankruptcy. Judge Christopher Klein of the Eastern District of California found that California laws designed to protect Calpers from municipal bankruptcies could not be enforced once a city entered bankruptcy.

Case Summary

This case presents a common scenario and dynamic that a party involved with a distressed bank holding company may have seen in the last several years.

On Monday, October 6, 2014, the U.S. Supreme Court issued an order denying the petition for a writ of certiorari in the Jaffe v. Samsung case, also known as the Qimonda case.

Section 503(b)(9) of the Bankruptcy Code provides creditors with an administrative expense priority claim for value of goods that were received by the debtor in the ordinary course within the 20 days prior to the bankruptcy filing Because section 503(b)(9) affords administrative priority status to an otherwise unsecured prepetition claim, it is strictly construed by courts.  Nowhere was this more apparent than in the bankruptcy court’s recent decision in 

In a recent decision from the Delaware bankruptcy court, Judge Christopher S. Sontchi joined the debate over the interpretation of section 547(c)(4)(B) of the Bankruptcy Code, which sets forth the new value defense to a preference claim. 

Many indentures contain “make-whole provisions,” which protect a noteholder’s right to receive bargained-for interest payments by requiring compensation for lost interest when accrued principal and interest are paid early. Make-whole provisions permit a borrower to redeem or repay notes before maturity, but require the borrower to make a payment that is calculated to compensate noteholders for a loss of expected interest payments.

Last year, the 112-year old retailer J.C. Penney was regularly in the news – and it was rarely good.  The stock was in a free-fall, in the process of dropping from about $20 per share in May 2013 to a low of a little more than $6 dollars per share in late October.  Media reports were grim, focusing on the attempt and failure of the former Apple executive Ron Johnson to turn the business around.  But now, as we approach the critical holiday season, J.C.