Is a debtor “engaged in commercial or business activities” for Subchapter V eligibility?

Such question has been addressed on many occasions and by many courts.

The trend seems to be toward a conclusion that the nature and quantity of “commercial or business activities” required for Subchapter V eligibility is this:

• Nature = “easily met”; and
• Quantity = “not much.”

The latest opinion to confirm the trend is In re Robinson, Case No. 22-2414, Southern Mississippi Bankruptcy Court (issued April 17, 2023; Doc. 90).

A claim under s 127 is restitutionary (see Hollicourt (Contracts) Ltd v Bank of Ireland and Ahmed v Ingram), and in a case involving the payment of money is for unjust enrichment (see Officeserve Technologies Ltd v Annabel’s (Berkeley Square) Ltd).

Oral arguments occur on April 24, 2023, before the U.S. Supreme Court in Lac Du Flambeau Band of Lake Superior Chippewa Indians v. Coughlin, Case No 22-227. Here is a link to the oral arguments transcript.

What follows is an attempt to, (i) summarize the facts and issue in the case, and (ii) provide a sampling of questions and comments from the justices during oral arguments.

Facts

Here’s what happened:

Re Nasmyth Group Ltd (Re Companies Act 2006) [2023] EWHC 988 (Ch) sets out Leech J’s reasons for refusing to sanction a Part 26A restructuring plan.

The company acted as the holding company of engineering subsidiaries in the UK and elsewhere and provided administrative and treasury functions to the rest of the group.

“within three (3) business days of termination of the mediation, the Debtors shall publicly disclose the terms of the last offers extended by each of the Mediation Parties, respectively.”[Fn. 1]

Say what!?

Whoever heard of such a thing—a requirement that the “last offers” of the mediating parties be publicly disclosed?

And this requirement is in a “consensual” mediation order entered in the Genesis Global Holdco, LLC, bankruptcy.[Fn. 2]

Context

Here’s the context.[Fn. 3]

Dismissal of a bankruptcy—for bad faith filing—is a rarity.

So, how a bankruptcy court grapples with the bad faith issue . . . and ends up dismissing the bankruptcy . . . can provide a lesson for us all.

What follows is a summary of how a Chapter 11 bankruptcy is dismissed when the Court is convinced that the bankruptcy is intended for the benefit of a non-debtor . . . and not for the benefit of the debtor or its creditors.

It’s a defense v. offense distinction:

• Defense—An objection and counterclaim designed to diminish or zero-out a proof of claim in bankruptcy is not subject to arbitration; but
• Offense—An objection or counterclaim designed to do anything more . . . can be compelled to arbitrate.

That’s the essence of a recent opinion in Johnson v. S.A.I.L. LLC (In re Johnson), Adv. No. 22 -172, Northern Illinois Bankruptcy Court (issued March 28, 2023; Doc. 18). What follows is a summary of that opinion.

Facts

The judgment of the Court of Appeal (Newey, Males and Snowden LLJ) in Hunt v Ubhi [2023] EWCA Civ 417 demonstrates the importance of the adequacy of any undertaking in damages given in support of an application for a freezing order and underlines the need for full and frank disclosure.

Johnson & Johnson filed bankruptcy back in 2021 (In re LTL Management, Case No. 21-30589, New Jersey Bankruptcy Court).

That bankruptcy is now dismissed—on order of the U.S. Third Circuit Court of Appeals.

So, Johnson & Johnson refiles its bankruptcy (In re LTL Management, Case No. 23-12825, New Jersey Bankruptcy Court).

New and Improved

Here’s what’s new and improved about the second bankruptcy[fn. 1]:

There are many cases about the appointment of administrators, not so many about terminating their appointment. Re Central Properties Holdings Ltd (In Administration) [2023] EWHC 829 (Ch) is one.