“courts agree that . . . evaluating, asserting, pursuing, and defending litigation claims . . . can satisfy Section 1182(1)(A)’s requirement of ‘commercial or business activities.’”
This isn’t going to end well.
Looks like our bankruptcy system in these United States is about to take a big hit—to the tune of hundreds of millions of dollars (projected to be around $350 million). And those responsible for creating the debacle are going to skate.
Here’s how.
U.S. Trustee v. John Q. Hammons
On 4 May 2023, the Court of Final Appeal (CFA) delivered a landmark judgment in Guy Kwok-Hung Lam (Respondent) -v- Tor Asia Credit Master Fund LP (Appellant) Final Appeal No.13 of 2022 (on appeal from CACV No. 393 of 2021 [2023 HKCFA 9) (“Re Guy Kwok-Hung Lam”).
Back on 4 May 2023, the Hong Kong Court of Final Appeal (the “CFA”) in Re Guy Kwok-Hung Lam [2023] HKCFA 9 delivered a ground breaking judgment in relation to whether a foreign exclusive jurisdiction clause (EJC) should be upheld in insolvency cases, upholding the Court of Appeal’s (the “CA”) judgment that, in an ordinary case where there is an EJC, absent any countervailing factors such as the risk of insolvency affecting third parties and a dispute that borders on the frivolous or abuse of process, the petitioner and the debtor ought to be held to their contract and to submit their disput
Here’s a Bankruptcy Court opinion addressing a no-discharge claim under § 1141(d)(3) against an individual debtor who proposes a liquidating Subchapter V plan:
- RGW Construction, Inc. v. Lucido (In re Lucido), Adv. No. 21-4031, Northern California Bankruptcy Court (issued 9/13/2023, Doc. 113).
The Issue
What rate of interest should a debtor pay under a bankruptcy plan?
Question
Once a Subchapter V debtor is removed from possession under § 1185(a), what happens next?
The answer to this question seems to have evolved over the few years of Subchapter V’s existence:
- from a low-power position for debtor, early-on;
- to a high-power position for debtor, in a re-thought view; and
- then back to the low-power position for debtor, when problems of the re-thought view become evident.
I’ll try to explain.
Early Answer
The equitable mootness doctrine is before the U.S. Supreme Court on a Petition for writ of certiorari. The case is U.S. Bank National Association v. Windstream Holdings, Inc.[Fn. 1]
All who’ve seen an effort to abuse equitable mootness, from a creditor’s view, will appreciate the following information from U.S. Bank’s Petition and from a supporting Amicus Brief of law professors in U.S. Bank v. Windstream.
Here’s my take on third-party releases in a bankruptcy plan [not that anyone asked]:
“(b) Duties.—The [Subchapter V] trustee shall— . . . (7)facilitate the development of a consensual plan of reorganization.”
- From 11 U.S.C § 1183(b)(7)(emphasis added).
Facilitation is, by statute, a duty of every Subchapter V trustee—something a Subchapter V trustee must do. But the nature and boundaries of the facilitation role have always been fuzzy and, therefore, misunderstood.