On June 6, 2024, the Supreme Court issued its opinion in Truck Insurance Exchange v. Kaiser Gypsum Co., No. 22-1079, conferring broad standing to debtors’ pre-bankruptcy liability insurers to appear and be heard in Chapter 11 bankruptcy proceedings. The ruling eliminates the “insurance neutrality” doctrine that previously constrained the participation of insurers in Chapter 11, greatly expanding insurers’ capacity to influence the reorganization process.
Background: Insurer Standing in Chapter 11 Bankruptcy
Over the past few years, the senior living sector has endured some hard times. In 2023, many operators found themselves in distress and facing a sale or court-governed proceeding. Interest rates, wage inflation, staffing shortages and patient volume decline post-pandemic all impact operational risk and investment opportunities.
This morning, after much anticipation, the Supreme Court has released its judgment in Yan v Mainzeal Property Construction Limited (in liq) [2023] NZSC 113, largely upholding the Court of Appeal's decision, and awarding damages of $39.8m against the directors collectively, with specified limits for certain directors. The decision signals that a strong emphasis on 'creditor protection' is now embedded in New Zealand company law.
In a recent decision, Bruce v. Citigroup, Inc., et al., the United States Court of Appeals for the Second Circuit clarified the limits of bankruptcy court jurisdiction over class actions. Specifically, the court rejected a bankruptcy court’s ruling that allowed a plaintiff’s nationwide class action to survive Defendant Citibank, N.A.’s (“Citi”) motion to dismiss and strike class allegations.
In recent years much ink has been spilled opining on the so called 'Quincecare' duty of care, and the limits of it (see links to our recent insolvency law updates covering the topic below). The judgment in Barclays Bank plc v Quincecare Ltd [1992] 4 All ER 363 was a first instance decision on Steyn J, in which he found that a bank has a duty not to execute a payment instruction given by an agent of its customer without making inquiries if the bank has reasonable grounds for believing that the agent is attempting to defraud the customer.
On June 15, 2023, the U.S. Supreme Court ruled that the Bankruptcy Code barred an Indian tribe’s attempts to collect on a defaulted debt from a Chapter 13 debtor.
Our last newsletter commented on high inflation, dwindling business confidence and international supply chain issues. Those factors continue to influence the economic outlook, with some businesses unable to survive the strengthening head winds impacting the economy. The consumer price index increased 7.2 percent in the 12 months to December 2022, remaining stubbornly high despite significant movements in the official cash rate to 4.5%, up significantly from the 0.25% it was sitting at in October 2021. ANZ's economic forecast warns that a "policy induced recession is looming".
The United States Court of Appeals for the Fifth Circuit issued a ruling on Oct. 14, 2022 regarding the treatment of make-whole premiums in bankruptcy. The court held that claims for payment of a make-whole premium are the economic equivalent of unmatured interest and therefore disallowed under section 502(b)(2) of the Bankruptcy Code — unless the “solvent debtor exception” applies.
The United Kingdom Supreme Court has just released an important insolvency judgment in BTI 2014 LLC v Sequana SA [2022] UKSC 25 (Sequana), which concerns when and the extent to which directors of a company must consider the interests of creditors.
The United Kingdom Supreme Court has just released an important insolvency judgment in BTI 2014 LLC v Sequana SA [2022] UKSC 25 (Sequana), which concerns when and the extent to which directors of a company must consider the interests of creditors.