On June 26, 2017, the Supreme Court granted certiorari in PEM Entities v. Levin to decide whether bankruptcy courts should apply a federal multi-factor test or an underlying state law when deciding whether to re-characterize a debt claim as equity. The Court’s decision to grant cert in this case should resolve a circuit split and clarify the law as it relates to re-characterizing corporate debt as equity.
Two sections of the Bankruptcy Code addressing leases sometimes work in tandem with each other, but some courts are creating a conflict.
Section 363 gives bankruptcy courts the power to approve the sale of the assets of a bankruptcy debtor, free and clear of any liens, claims or interests in the property, under certain conditions.
Section 365 gives bankruptcy courts the power to approve the termination of unexpired leases of real estate or to approve their assumption and assignment, also under certain conditions.
Model Reorg Acquisition, LLC, along with eighteen of its subsidiaries and affiliates, has filed a petition for relief under Chapter 11 in the Bankruptcy Court for the District of Delaware (Lead Case No. 17-11794).
What Happened: The Third Circuit Court of Appeals joined five other circuits in holding that the unforeseen business circumstances exception excused WARN notice where an event outside the employer's control that would trigger layoffs was possible but not probable to occur.
The Larger Landscape: While the Fifth, Sixth, Seventh, Eighth, and Tenth Circuits have also adopted a probability standard for determining when the unforeseen business circumstances exception applies, the other circuits have not yet ruled on the issue.
Phil Anker, in this article published by DailyDAC's Commercial Bankruptcy Alternatives, explores the “Absolute Priority Rule” and other “Rules” of “Priority” in bankruptcy, and if they really are “absolute,” if they really are “rules,” and if they always provide “priority” to some claimants over others.
Editors’ Note: The Supreme Court’s Jevic ruling last spring remains a treasure trove of bankruptcy theory, suitable for the novice bankruptcy student and highly instructional for those of us who have practiced in chapter 11 for years. We at The Bankruptcy Cave like it so much that we will be offering a few more posts in upcoming weeks on the lower courts’ interpretation of Jevic since the spring, the continued efforts in Delaware to sidestep Jevic, and other important learning from the case.
The U.S. Court of Appeals for the Fifth Circuit recently held that debts arising from a scheme to deprive mortgagees of surplus foreclosure sale proceeds were non-dischargeable, affirming the bankruptcy court’s judgment against the debtor in consolidated adversary proceedings filed by various lenders that held first mortgage liens.
A copy of the opinion is available at: Link to Opinion.
Recently, in Gupta v. Quincy Medical Center, 858 F.3d 657 (1st Cir. 2017), the U.S. Court of Appeals for the First Circuit clarified the limits of the bankruptcy courts’ subject-matter jurisdiction over civil proceedings. The decision, authored by Judge Lipez and joined by retired Supreme Court Justice David Souter (sitting by designation), provides a thorough analysis of the bankruptcy courts’ jurisdiction in such cases.
Do a lessee’s possessory interests in real property survive a “free and clear” sale of the property under section 363 of the Bankruptcy Code? In a recent decision, the Ninth Circuit Court of Appeals said “no,” holding that section 365(h) did not protect the interest of the lessee in the context of a section 363 sale when there had been no prior formal rejection of the lease under section 365.
Effective December 1, 2017, certain amendments to the Federal Rules of Bankruptcy Procedure (“the Bankruptcy Rules”) recently adopted by the Supreme Court[1] will impact the allowance of secured claims in bankruptcy. Below, we focus on the amendments to Bankruptcy Rule 3002, which will serve to: