In Whirlpool Corporation v. Wells Fargo Bank, N.A., et al. (In re hhgregg, Inc.), No. 18-3363 (7th Cir. Feb. 11, 2020), the Seventh Circuit Court of Appeals recently held that the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (“BAPCPA“) created a federal priority rule rendering a secured lender’s first-priority, floating liens on inventory superior to the reclamation claims of a trade vendor. The facts in the case are typical, and the holding does not mark a demonstrative shift in common practice.

Facts

DELAWARE – The appellants are latent asbestos claimants who did not file by the bar date set by Chapter 11 bankruptcy but who were subsequently diagnosed with mesothelioma. The appellee is Energy Future Holdings Corporation (EFH), which was a holding company for several energy properties. Those subsidiaries became defunct long ago as a result of asbestos litigation. EFH also filed for bankruptcy as a result of vast sums of money owed to asbestos debtors. The reorganization plan called for a notice period to latent claimants followed by a subsequent bar date for claims.

The Small Business Reorganization Act of 2019 (“SBRA“) is in effect as of yesterday, February 19, 2020. The SBRA was enacted to provide smaller business debtors with a more streamlined path to restructuring their debts. Below are some highlights of the new law.

Absolute-Priority Rule

Last summer, my colleague C.J. Summers and I posted a report about Saccameno v. U.S. Bank National Association, a Seventh Circuit case in which we had filed an amicus brief on behalf of the Chamber of Commerce of the United States.

In May 2019, with its ruling in Mission Products Holding Inc. v. Tempnology, the US Supreme Court resolved a nationwide circuit split regarding what happens to a trademark license when the trademark owner and licensor declares bankruptcy.

States across the country have enacted so-called “reviver” statutes allowing otherwise time-barred claims for childhood sexual abuse to proceed. The statutes vary by jurisdiction, but generally do one of three things: (1) eliminate the statute of limitations for such claims; (2) extend the statute of limitations for such claims; or (3) create a window (e.g., a period of a few years) in which otherwise time-barred claims can be filed.

The filing of a bankruptcy case imposes an “automatic stay” that protects debtors from creditors attempting to pursue litigation against them. Creditors may in turn ask the bankruptcy court to lift the stay. But if that request is denied, must a creditor wait for months or years until the entire bankruptcy case is over before it can finally appeal the bankruptcy court’s denial of its request to lift the stay?

Only two asbestos bankruptcy cases were filed in 2019 – the lowest number in any one year since Congress enacted the special asbestos bankruptcy trust/channeling injunction statute, Section 524(g) of the Bankruptcy Code.

Last October we highlighted an important ruling issued in September 2019 by the Seventh Circuit in the bankruptcy proceeding of In re I80 Equipment, LLC.

A survey of recent rulings by judges from the bankruptcy courts for the Southern District of New York and the District of Delaware suggests that judges in these districts have very different views about the nature and extent of “consensual” third-party releases that may be approved in a given case. The data also indicates that their thinking on this issue continues to evolve as they confront new arguments.