Judge Drain has now issued a long-awaited Order on Remand from the Second Circuit’s decision in Momentive Performance Materials determining the appropriate cramdown interest rate applicable to replacement notes issued by Momentive.

In a win for lenders, on March 18, the U.S. Bankruptcy Court for the Southern District of New York held that an unambiguous make-whole provision in a loan contract was enforceable under New York law, despite the fact that the lender had accelerated the loan. In re 1141 Realty Owner LLC, 2019 WL 1270818 (Bankr. S.D.N.Y. Mar. 18, 2019).

Background

The subject matter jurisdiction of bankruptcy courts causes confusion and can be hard to understand. In a recent decision, the United States Court of Appeals for the Eleventh Circuit clarified the meaning of the phrase “related to” in 28 U.S.C. §1334(b), the federal statute that governs the subject matter jurisdiction of bankruptcy courts.[1]

In a case of first impression, the Fifth Circuit held that a defendant is not required to plead as an affirmative defense under the Real Estate Settlement Procedures Act that it had complied with Section 1024.41 of the Code of Federal Regulations by responding properly to a borrower’s loss mitigation application. Germain v. US Bank National Association, — F. 3d — (2019 WL 146705, April 3, 2019). It affirmed the dismissal of the borrower’s RESPA claim on a summary judgment motion, based on the following facts.

In Popular Auto, Inc. v. Reyes-Colon (In re Reyes-Colon), Nos. 17-1971, 17-1972, 2019 WL 1785039 (1st Cir. April 24, 2019), the First Circuit recently ruled that “special circumstances” does not authorize a bankruptcy court to use its equitable powers to contravene the numerosity requirement for an involuntary petition under section 303(b)(1) of the Code. This twelve year dispute did not end well for the petitioning creditors.

Amendments to the Federal Rules of Bankruptcy Procedure became effective on December 1, 2017, which impose affirmative obligations on secured creditors to protect their rights to distributions in a bankruptcy case. Previously, Bankruptcy Rule 3002(a) required only unsecured creditors and equity security holders to file proofs of claim or proofs of interest in a bankruptcy. Although often recommended, it was not statutorily necessary for a secured creditor to file a proof of claim in order to protect its rights.

The purchase-money security interest (“PMSI”) is a powerful tool that enables lenders to take priority over the holders of prior perfected security interests that cover the same collateral. Those lenders seeking to obtain a PMSI often take great care to comply with the statutory perfection requirements. Yet, the notice requirements for a PMSI in inventory are every bit as important. A secured party that fails to comply with the PMSI notice requirements is likely to find its security interest subordinate to prior conflicting interests.

Bankruptcy Rule 2004 allows the examination of any entity with respect to various topics, including conduct and financial condition of the debtor and any matter that may affect the administration of the estate. Does a subordination agreement that is silent on the use of Rule 2004 prevent the subordinated creditor from taking a Rule 2004 examination of the senior creditor? Yes, says an Illinois bankruptcy court.

Last year, a California Bankruptcy Court wiped out $10.2 million in default interest (“DRI”) when it ruled that a 5% DRI was an unenforceable penalty in a Chapter 11 bankruptcy case where the construction lender fully recovered principal, interest, and other costs of collection.

A Georgia bankruptcy court on April 17 issued a significant ruling that breaks new ground concerning how future claimants’ representatives in asbestos bankruptcies (FCRs) are chosen. In In re The Fairbanks Co., Case No. 18-41768-PWB (Bankr. N.D. Ga.