On May 1, 2017, the U.S. Supreme Court announced that it would review the Seventh Circuit’s decision in FTI Consulting, Inc. v. Merit Management Group, LP, 830 F.3d 690 (7th Cir. 2016) (“Merit”), which addressed the scope of the safe harbor found in Section 546(e) of the Bankruptcy Code for settlement payments.
In a significant ruling impacting commercial real estate lenders in Michigan, the Sixth Circuit Court of Appeals has ruled that an absolute assignment of rents that had been fully perfected (by demanding payment from tenants to the lender and related recording) precludes a debtor from asserting that such rents can be used as cash collateral in bankruptcy. The reasoning is that these rents do not constitute property of the bankruptcy estate. As such, the debtor could not proceed with its Chapter 11 case.
Background
In Midland Funding, LLC v. Johnson, the U.S. Supreme Court held that a debt collector does not run afoul of the FDCPA by filing a proof of claim in bankruptcy on a stale debt.
In an opinion by Judge Roth issued on March 30, 2017, the Court of Appeals for the Third Circuit held that two suppliers who had sold electrical materials to a bankrupt contractor had violated the automatic stay by asserting a construction lien against the owner of the development where the contractor had installed the materials supplied.
Don’t forget that ….
judicial estoppel can require dismissal of a claimant’s suit for ERISA-governed long term disability (LTD) benefits if the claimant failed to list the “potential cause of action” in bankruptcy filings.
The key is to determine when the “potential cause of action” accrued. And a recent case says those claims “accrue” when the claimant receives the initial benefit denial letter.
In a May 2, 2017 decision, the Sixth Circuit Court of Appeals decided the fate of a stream of rental payments from the bankrupt owner of a residential complex. (In re: Town Center Flats, LLC, No. 16-1812, May 2, 2017, Sixth Circuit Court of Appeals) The case resembled a similar one, far more controversial and with a different result, from 1993. (Octagon Gas Systems, Inc. v. Rimmer, 995 F.2nd 948, 10th Circuit Court of Appeals, 1993) The Octagon Gas case roiled the factoring and receivables purchasing industry.
On May 8, 2017, Judge Gross ruled on a Motion to Compel Production of Documents in the Haggen bankruptcy. Judge Gross’ opinion (the “Opinion”) addresses the conflict when a party is acting on another’s behalf and that entity claims “the oldest of the common law privileges”. Opinion at *5. A copy of the Opinion is available here.
On a motion to “’confirm the trial schedule,’” Vice Chancellor Glasscock determined that actions brought by the limited partners of a partnership based upon the general partner’s alleged fraud, self interest and breach of the partnership agreement were direct claims and therefore not subject to a stay pursuant to the partnership’s bankruptcy proceeding. Sehoy Energy LP et al. v. Haven Real Estate Group, LLC et al., C.A. No. 12387-VCG (Del. Ch.
After several years of drafting, debate, compromise and fine tuning, it appears that major changes to the administration of consumer bankruptcy cases are imminent. On April 27, 2017, Chief Justice John Roberts submitted to Congress amendments to the Federal Rules of Bankruptcy Procedure that will have a profound impact on consumer bankruptcy cases.
Following the commencement of an involuntary proceeding against the company by certain creditors in Illinois, Central Grocers, Inc., a retail food cooperative and distributor founded in 1917, and 11 of its affiliates, has filed for chapter 11 bankruptcy protection in the United States Bankruptcy Court for the District of Delaware (Lead Case No. 17-10993 BLS). The petition lists between $100 million and $500 million in both assets and liabilities.