Last week, the 8th Circuit B.A.P. affirmed, first noting that criminal judgments, including restitution awards and liens, are afforded special protection from bankruptcy discharge.
The Court of Appeals for the Sixth Circuit held that no exception exists to Tennessee’s general prohibition on direct actions against an insurer, even in cases where the insured has declared bankruptcy triggering an automatic stay before a judgment in the underlying action. Mauriello v. Great American E&S Insurance Co., 2014 WL 321921 (6th Cir. Jan. 30, 2014). In so holding, the Sixth Circuit reasoned that an adequate remedy remains notwithstanding the automatic stay for a claimant to obtain a judgment against a bankrupt insured.
In Jaffé v. Samsung Electronics Company, Limited,1 a Court of Appeals protected the rights of cross- licensees of a German debtor’s American patents by applying the U.S. Bankruptcy Code, instead of inconsistent German law. Specifically, in Chapter 15 U.S. bankruptcy proceedings ancillary to German insolvency proceedings, the administrator notified certain cross-licensees of the debtor’s patents that their cross-licenses were not enforceable under German law. The cross-licensees argued that under U.S. law, they had the option to retain their rights under the cross-licenses.
On January 17, 2014, Chief Judge Kevin Gross of the Bankruptcy Court for the District of Delaware issued a decision limiting the right of a holder of a secured claim to credit bid at a bankruptcy sale. In re Fisker Auto. Holdings, Inc., Case No. 13-13087-KG, 2014 WL 210593 (Bankr. D. Del. Jan. 17, 2014). Fisker raises significant issues for lenders who are interested in selling their secured debt and for parties who buy secured debt with the goal of using the debt to acquire the borrower’s assets through a credit bid.
Recent developments in the bankruptcy arena have placed a greater burden on claimants. Creditors are now required to make additional disclosures in their proof of claim forms, and courts are under no obligation to recognize late-filed claims. Proposed changes to the Bankruptcy Rules, including an amendment slashing the time to file a proof of claim, highlight the need for creditors to exercise extra vigilance.
GREATER DISCLOSURE
Chapter 11 has long been used by companies to obtain relief from legacy tort liabilities. There has been a lingering question, however, as to whether chapter 11 can bar claims by tort litigants who were exposed to a hazardous material or defective product before bankruptcy but do not develop injuries until after the case is over. Some debtors have set up trusts and appointed representatives for so-called “future claimants”: this approach can be effective, but may add months or years to a bankruptcy case along with significant cost, business disruption and litigation.
A & F Enterprises, Inc. v. IHOP Franchising LLC (In re A & F Enterprises, Inc.), 2014 WL 494857 (7th Cir. 2014)
The ability to "surcharge" a secured creditor's collateral in bankruptcy is an important resource available to a bankruptcy trustee or chapter 11 debtor in possession ("DIP"), particularly in cases where there is little or no equity in the estate to pay administrative costs, such as the fees and expenses of estate-retained professionals. However, as demonstrated by a ruling handed down by the Third Circuit Court of Appeals, the circumstances under which collateral may be surcharged are narrow. In In re Towne, Inc., 2013 BL 232068 (3d Cir. Aug.
The Seventh Circuit Court of Appeals recently held that a plan under chapter 13 of the Bankruptcy Code can modify the rights of a purchaser of delinquent real estate taxes on a debtor’s home by providing for payment of those taxes over time rather than in a lump sum. See In re LaMont (No. 13-1187, 7th Cir. January 7, 2014).