In re Vitro, S.A.B de C.V v. ACP Master, Ltd., et al., Case No. 11-33335-HDH-15 (N.D. Tex. 2011), is a decision by a bankruptcy court but contains discussion of the issue often arising in contentious international litigation:  attempts to enjoin proceedings in other countries in favor of proceedings in the U.S., or attempts to enjoin proceedings in the U.S.

The bankruptcy case of TOUSA, Inc. and its various subsidiaries (collectively “Tousa”) is one where lenders have seen their fortunes rise and fall. On March 15, 2012, they fell again when the Eleventh Circuit¹ (the “Circuit Court”) reversed the District Court’s opinion and reinstated the Bankruptcy Court’s order, which had disgorged over $400 million from Tousa’s senior lenders and avoided certain guarantees and liens granted to them by the Conveying Subsidiaries (defined below).

On April 17, 2012, the Northern Mariana Islands Retirement Fund (the “Fund”) became the first United States public pension fund to seek formal bankruptcy protection. The Fund, which provides retirement benefits to government employees of the Commonwealth of the Northern Mariana Islands (the “Commonwealth”) a U.S. territory, listed $256 million in assets and $1 billion in liabilities and has alleged it will exhaust its claims paying ability by as early as 2014. ”

In Senior Transeastern Lenders v. Official Committee of Unsecured Creditors (In re TOUSA, Inc.), the Eleventh Circuit Court of Appeals reinstated the decision of the United States Bankruptcy Court for the Southern District of Florida (the “Bankruptcy Court”) in which the Bankruptcy Court avoided the liens given by TOUSA’s subsidiaries to new lenders and permitted the recovery of the proceeds of the new loan from other TOUSA lenders that had taken the funds in repayment of their TOUSA guaranteed loans.

Buying natural gas assets from financially distressed companies is an inherently risky proposition.  Even when an attractive prospect is identified, the purchaser has to overcome a number of issues such as clearing up title, including mechanic and materialman liens and getting assignments of contracts and lessor consents.  Assuming these hurdles can be managed, the purchaser is also faced with legacy liability problems ranging from plugging and abandonment and decommissioning costs, unknown claims from interest owners under joint operating agreements, general claims from oil field

Nearly a year has passed since the Supreme Court held, in Stern v. Marshall,¹ that bankruptcy courts may not determine a potentially broad range of “private rights” disputes arising in bankruptcy proceedings. Lower courts have grappled with the practical implications of Stern, but it is not yet clear whether the decision will ultimately result in a significant curtailment of bankruptcy court power or prove narrower in application.

The outcome of the TOUSA appeal has been much anticipated and closely watched by the lending community, their counsel and advisors, and legal scholars. On May 15, 2012, the Eleventh Circuit Court of Appeals issued its opinion (found here), reversing the District Court for the Southern District of Florida and affirming the Bankruptcy Court for the Southern District of Florida, at least insofar as to the bankruptcy court’s factual findings, but not remedies.

A purchaser of assets from a debtor in bankruptcy may not be able to rely entirely on bankruptcy court approval of the sale to bar a claim arising long after the sale and based on a claimed defect in a product sold by the debtor years prior to its bankruptcy.

Although bankruptcy court sale orders routinely shield asset purchasers from successor liability claims, that protection is not unlimited, particularly where a claimant did not and could not have received notice of the sale.

On May 15, 2012, the Eleventh Circuit Court of Appeals upheld a ruling by the U.S. Bankruptcy Court for the Southern District of Florida, which required certain lenders to return $403 million in prepetition payments they had received from TOUSA, Inc.

Sleep better at night knowing that the loan you made to your borrower is supported by collateral from the borrower’s subsidiaries? You may want to keep one eye open. On May 15, 2012, the U.S. Court of Appeals for the Eleventh Circuit upheld a bankruptcy court opinion that reinforces lender liability for fraudulent transfers in subsidiary-supported loans. The Eleventh Circuit upheld the opinion of the U.S. Bankruptcy Court for the Southern District of Florida in In re TOUSA, Inc., and overruled a contrary opinion by the U.S. District Court.