The U.S. Bankruptcy Court for the Central District of Illinois held that a debtor's explanation of estate planning as a rationale for asset transfers made prior to bankruptcy is sufficient to survive the Bankruptcy Trustee's motion for summary judgment. However, the Court noted that a deeper factual analysis would be required and expressed skepticism for the debtor's estate planning rationale.
Bankruptcy Courts may be courts of equity, but a recent decision by the United States District Court for the Southern District of New York holds that even equity can’t trump the plain words of a settlement agreement.
A New York trial court recently held that affiliates and subsidiaries of a bankrupt Mexican holding company were liable as guarantors on indentures issued by the corporation, despite ongoing Mexican bankruptcy proceedings that could potentially discharge their liability under Mexican law. Wilmington Trust, National Assoc. v. Vitro Automotriz, S.A. De C.V., et al., No. 652303/11 (N.Y. Sup. Ct. 2011).
Health care lenders and others evaluating or relying on the financial strength of a healthcare provider need to think about the potential recoupment and setoff of claims against Medicare/Medicaid receivables of the provider.
RECOUPMENT
2011 did not begin with a bang for bankruptcy professionals. Commercial bankruptcy case filings were infrequent and so too were the release (or publication) of major bankruptcy court decisions. The second half of the year was a different story.
News reports in 2011 suggested that municipal bankruptcy filings were frequent and substantial. Each of Central Falls, Rhode Island, Harrisburg, Pennsylvania, and Jefferson County, Alabama filed for bankruptcy protection in the second half of 2011. Even a state-owned local monopoly on (legal) gambling was not safe from financial turmoil in 2011: Suffolk County’s Off-Track Betting Corporation filed for bankruptcy on March 18. Indeed, 2011 seemed to be the year of chapter 9, which governs municipal bankruptcy filings.
Active participants in the derivatives market rely on the Bankruptcy Code safe harbor set forth in section 546(e) in pricing their securities. That provision restricts a debtor’s power to recover payments made in connection with certain securities transactions that might otherwise be avoidable under the Bankruptcy Code. Two high profile cases decided in 2011 addressed challenges to the application of section 546(e). The more widely reported decision (at least outside the bankruptcy arena) was in connection with the Madoff insolvency case. See Picard v.
In a September 7, 2010 article, the Wall Street Journal reported an uptick in bankruptcy claim activity by traders and the desire of the traders to not comply with certain bankruptcy disclosure requirements that applied to “committees.” The Journal highlighted one case where Bankruptcy Judge Brendan Shannon of the Delaware District Court held the following exchange with a lawyer for certain bondholders: “‘Are you a Committee?’ The lawyer began to answer, ‘Well, actually Your Honor, we are a group of - -’.
A recent decision by the Seventh Circuit Court of Appeals contains two important lessons for anyone drafting documents which contain a trademark license. In In re XMH Corporation, the Seventh Circuit held that a licensee may not assign a trademark license in a bankruptcy case over the licensor's objection unless there is an expres