A recent decision by the United States Bankruptcy Court for the Southern District of Texas in In re Walker County Hospital Corporation serves as an important reminder to clients that are purchasing or renewing directors and officers (“D&O”) insurance coverage that the “Insured versus Insured” exclusion must contain the broadest possible exceptions for claims brought against directors and officers following a bankruptcy filing. Without the specific policy language, current and former directors and officers may be exposed to personal liability.
One common denominator links nearly all stressed businesses: tight liquidity. After the liquidity hole is identified and sized, the discussion inevitably turns to the question of who will fund the necessary capital to extend the liquidity runway. For a PE-backed business where there is a credible path to recovery, a sponsor, due to its existing equity stake, is often willing to inject additional capital into an underperforming portfolio company.
In a much-anticipated decision, the United States Court of Appeals for the Third Circuit recently held that unsecured noteholders’ claims against a debtor for certain “Applicable Premiums” were the “economic equivalent” to unmatured interest and, therefore, not recoverable under section 502(b)(2) of the Bankruptcy Code.
On April 3, 2024, the Eleventh Circuit Court of Appeals (comprised of Federal Courts in Alabama, Florida and Georgia), affirmed the decision of the District Court for the Middle District of Florida in Al Zawawi v. Diss (In re Al Zawawi). The Court held that eligibility requirements for a “debtor” contained in section 109(a) of the Bankruptcy Code do not apply to foreign recognition proceedings under chapter 15 of the Bankruptcy Code.
#1: Artificial Intelligence
The impact of artificial intelligence on the legal profession was a hot topic in 2023, with the English judiciary receiving guidance on the use of the technology. Debate on the role and regulation of AI is likely to continue throughout 2024, particularly as more specific applications are developed and demonstrated.
ISDA argued the need for clarity in rules that govern the ownership of customer digital assets in the event of an intermediary’s insolvency.
JPMorgan Chase Bank assumed all of First Republic Bank's deposits and nearly all assets, making all depositors of First Republic Bank depositors of JPMorgan Chase Bank as of Monday, May 1, 2023.
A Manhattan federal jury ruled in favor of luxury brand Hermès in its trademark infringement lawsuit against an individual that created non-fungible tokens ("NFTs") depicting images resembling the famous Hermès Birkin handbag.
Last week was a bad week for landlords, with challenges to the restructuring plan proposed by the Virgin Active Group and the company voluntary arrangement ("CVA") implemented by New Look both being unsuccessful in the courts. Whilst the recent revocation by the court of the Regis CVA may provide a glimmer of hope, the general outlook is not optimistic.
Business headlines have warned of a potential “chilling effect on buyouts” as a result of the decision recently issued by the U.S. District Court for the Southern District of New York in In re: Nine West LBO Securities Litigation (Dec. 4, 2020). Contrary to the views of some other commentators on the decision, we do not believe that the decision is likely to chill leveraged buyout activity, to upend how LBOs have been conducted, or to significantly increase the potential of liability for target company directors selling the company in an LBO.