A recent bankruptcy case merits the attention of credit managers and others involved in credit decisions. To avoid credit risk when dealing with a chapter 11 debtor in possession, you must verify that the debtor has court authority to use cash collateral prior to shipping or accepting payment.

In a recent decision, Judge Mary F. Walrath of the United States Bankruptcy Court for the District of Delaware greatly limited debtors’ ability to release parties under a chapter 11 plan in the bankruptcy cases of Washington Mutual, Inc. (“WMI”), and its debtor affiliates (together with WMI, the “Debtors”). In In re Washington Mutual, Inc., Judge Walrath approved a global settlement agreement (the “Global Settlement”) reached by the Federal Deposit Insurance Corporation (“FDIC”) as receiver for Washington Mutual Bank (“WaMu Bank”); JPMorgan Chase Bank, N.A.

Rehabilitating a debtor’s business and maximizing the value of its estate for the benefit of its various stakeholders through the confirmation of a chapter 11 plan is the ultimate goal in most chapter 11 cases. Achievement of that goal, however, typically requires resolution of disagreements among various parties in interest regarding the composition of the chapter 11 plan and the form and manner of the distributions to be provided thereunder.

When a company that has been designated a responsible party for environmental cleanup costs files for bankruptcy protection, the ramifications of the filing are not limited to a determination of whether the remediation costs are dischargeable claims. Another important issue is the circumstances under which contribution claims asserted by parties coliable with the debtor will be allowed or disallowed in the bankruptcy case. This question was the subject of rulings handed down early in 2011 by the New York bankruptcy court presiding over the chapter 11 cases of Lyondell Chemical Co.

Earlier this month, the Chapter 7 Trustee (the "Trustee") appointed in the Indalex bankruptcy began filing avoidance actions against various Indalex creditors. For those not familiar with the Indalex bankruptcy, Indalex filed petitions for bankruptcy in the United States Bankruptcy Court for the District of Delaware on March 20, 2009. Prior to filing bankruptcy, Indalex was one of the largest aluminum extruders in the United States.

Summary

Receiverships are on the rise in Ohio and across the Midwest. In most cases, the appointment of a receiver heralds the close of a business. Receiverships are also commonly part of a foreclosure proceeding. Calfee's Business Restructuring and Insolvency practice group lawyers have extensive experience with both state and federal court receiverships and we can assist you in determining the impact of a receivership on your business.

On October 21, 2010, the New York Court of Appeals (the Appeals Court), New York’s highest appellate court, addressed two appeals, and then issued an important ruling regarding the parameters of the affirmative defense of in pari delicto in suits against outside auditors, holding that the doctrines of in pari delicto and imputation are a complete bar to recovery when the corporate wrongdoer’s actions are imputed to the company.

The Doctrines of In Pari Delicto and Imputation

In September 2010, the District Court for the Eastern District of Virginia denied a reclaiming seller rights despite the claimant’s service of a timely written reclamation demand and compliance with a reclamation procedures order and section 546(c) of the Bankruptcy Code.

Section 546(c) of the Bankruptcy Code provides that:

Summary

In a 15 page decision signed yesterday, April 5, 2011, Judge Sontchi of the Delaware Bankruptcy Court determined that when a company receives pleadings in a bankruptcy case, even if served on their “doing business as” name, they have received proper service. Judge Sontchi’s opinion is available here.

Background