Suppliers to chapter 11 debtors-in-possession should always ensure that they are not being paid from the debtor’s “cash collateral” without court approval. Marathon Petroleum Company supplied products to debtor Delco Oil in the ordinary course of its business during the bankruptcy case, but was forced to return all of the postpetition payments it received from Delco, pursuant to section 549 of the Bankruptcy Code. Marathon was required to return these payments because they were deemed part of the cash collateral that was secured by Delco’s pre-petition creditor, CapitalSource Finance.

Longview Aluminum, LLC v Brandt (In re Longview Aluminum, LLC), 2010 WL 2635787 (ND Ill, June 28, 2010)

CASE SNAPSHOT

In this edition of the Landlord’s Corner, we review various cases that address the (i) rights of landlords to recover their property post-rejection, (ii) whether payments pursuant to a termination of lease agreement constitute preferential transfers and (iii) whether a lease could be retroactively rejected in the absence of a formal motion to reject.

IUE-CWA v Visteon Corporation, 2010 WL 2735715 (3rd Cir July 13, 2010)

CASE SNAPSHOT

American Consolidated Transportation Companies, Inc v RBS Citizens NA (In re American Consolidated Transportation Companies, Inc), Adversary No 10-00154, Bankruptcy No 09-26062 (Bankr ND Ill July 13, 2010)

CASE SNAPSHOT

In re 15375 Memorial Corporation, et al, 430 BR 142 (Bankr D Del May 17, 2010)

CASE SNAPSHOT

Earlier this month, the Chapter 7 Trustee for the Rehrig International bankruptcy estate filed several preference actions against various defendants. As set forth in the complaints, the Trustee seeks to avoid and recover payments which he contends are preferential transfers, fraudulent conveyances and/or postpetition transfers. Rehrig filed for bankruptcy on September 5, 2008. Less than four months later, Rehrig’s Chapter 11 proceedings were converted to cases under chapter 7. Soon after the conversion to Chapter 7, the Office of the United States Trustee appointed George L.

After nearly fifteen years of unsuccessful attempts to recover $71 million worth of securitized bonds after the 1990 bankruptcy of Continental Airlines, Inc., Bluebird Partners L.P. may have suffered its final defeat. In a recent decision by a New York trial court in Bluebird Partners v. The Bank of New York, et al., No. 601016/1996 (New York Co. June 7, 2010), the court granted summary judgment to defendant Bank of New York (“BNY”), holding that the bank behaved prudently in establishing a litigation reserve fund as the collateral trustee in the airline’s bankruptcy.

In a decision that may create a significant roadblock for companies saddled with environmental clean-up liability to continue as a going concern, the Seventh Circuit in U.S. v. Apex Oil Company, Inc., 579 F.3d 734 (7th Cir. 2009) affirmed a district court injunction requiring the clean-up of a contaminated site in Illinois under section 7003 of the Resource Conservation and Recovery Act (RCRA) despite the company's bankruptcy. On September 27, 2010, the Supreme Court is scheduled to discuss whether to grant review of the Apex decision.

On September 15th, the Sixth Circuit resolved a conflict among the district courts within the circuit. It held that a bank holding the undersecured home mortgage of a Chapter 13 debtor who is in arrears at the time of filing, is entitled to receive under the Chapter 13 bankruptcy plan fees and costs in the arrearage cure. Deutsche Bank National Trust Co. v. Tucker.