A degree of certainty—for the time being—has been restored for participants in the commercial lending and debt trading markets who have been tracking the appeal of a controversial 2009 fraudulent transfer decision in the TOUSA, Inc. bankruptcy case.i On February 11, 2011, Judge Gold of the United States District Court for the Southern District of Florida quashed (or nullified)ii the bankruptcy court’s decision, which ordered a group of lenders to disgorge $480 million received in connection with loans they extended to a joint venture involving TOUSA, Inc.
Does this sound familiar? A newly formed entity purchases distressed bank debt after the debtor has proposed a reorganization plan. The purchaser obtains a blocking position and uses its negotiating leverage to obtain control of the plan process and ultimately the borrower’s assets, which have strategic importance to the purchaser.
BUSSON-SOKOLIK v. MILWAUKEE SCHOOL OF ENGINEERING (February 10, 2011)
As discussed in previous posts on this site, back in December the Second Circuit Court of Appeals issued a summary order that reversed the bankruptcy court’s confirmation of the reorganization plan (the “Plan”) of DBSD North America, f/k/a ICO North America (“DBSD”).
In re TOUSA, Inc., Nos. 10-60017-CIV/Gold, 10- 61478, 10-62032, 10-62035, and 10-62037 Slip Op. (S.D. Fla. Feb. 11, 2011)
CASE SNAPSHOT
A decision recently handed down by the Delaware Chancery Court, CML V, LLC v. Bax, indicates that creditors of a limited liability company (“LLC”) organized under Delaware law do not have standing to institute derivative suits against an LLC’s management, even when the LLC is insolvent, unless the right is expressly set forth in the LLC’s organizational documents or external agreements.
Background
The Delaware federal district court issued an order directing the district’s bankruptcy court to determine whether an adversary proceeding constituted a “core” proceeding. PRS Insurance Group commenced a chapter 11 bankruptcy proceedings in 2001. Thereafter, the trustee appointed filed suit in Ohio against Westchester Fire Insurance Company and ACE INA Holding for breach of two reinsurance agreements and bad faith refusal to pay claims.
A United States Magistrate Judge in the United States District Court for the Western District of North Carolina has denied a motion to compel discovery of all claims for which the insurer had denied coverage based on the desire of an insolvent insured to forfeit coverage.Lane v. Endurance American Specialty Insurance Co., 2011 WL 1791343 (W.D.N.C. May 10, 2011). The court granted, however, the plaintiff’s motion to compel the insurer to provide information about all other claims noticed under the policies at issue.
In its opinion in Gray v. Warfield (In re Gray), 523 B.R. 170 (9th Cir. BAP 2014), the Ninth Circuit BAP held that the U.S. Supreme Court’s decision in Law v. Siegel, 134 S. Ct. 1188 (2014) precludes a bankruptcy court from denying a debtor’s amendment of his claim of exemption on equitable grounds.
n re Sterling Bluff Investors, LLC, 515 B.R. 902 (Bankr. S.D. Ga. 2014) –
A mortgagee moved to dismiss a real estate debtor’s chapter 11 case, or in the alternative for relief from the automatic stay. It contended that the debtor filed bankruptcy in bad faith, and that this was a “single asset real estate” case subject to special provisions regarding its entitlement to relief from the stay.