The Bankruptcy Protector
Facts
The US Supreme Court tends to hear a couple of bankruptcy cases per term. Most of these cases deal with interpreting provisions of the Bankruptcy Code. However, every few years or so, the Supreme Court decides a constitutional issue in bankruptcy. Some are agita-inducing (Northern Pipeline, Stern), some less so (Katz). The upcoming case is a little more nuanced, but could have major consequences.
Over the past decade, there have been several court decisions on whether particular make-whole premiums should be allowed as part of a creditor's claim in bankruptcy, such as Momentive,1 EFH,2 American Airlines,3 and Ultra Petroleum.4 Although these decisions and others set forth the legal standards to be applied and resolved the specific claims at issue, the decisions provide little guidance or clarity on the allowability of make-whole claims in future cases.
Not your Ordinary Bankruptcy Case
Columbia, South Carolina is hot during the summer, such that the City adopted the motto “Famously Hot” a few years ago. Temperatures frequently exceed 100 degrees in the summer. On June 12, 1987, the PTL Club filed chapter 11 cases in Columbia, adding heat to the already hot City.
Before the new bankruptcy law (Royal Decree 53/2019) (the “Bankruptcy Law”) came into effect in Oman, the laws and regulations regulating bankruptcies were limited and simply addressed in laws such as the commercial law (Royal Decree 55/1990 (as amended)) (the “Commercial Law”) and the commercial companies law (Royal Decree 18/2019) (the “Commercial Companies Law”). These laws provided the framework for the bankruptcy of a person and the liquidation of insolvent companies only.
The filing of a bankruptcy petition under any chapter of the Bankruptcy Code creates the ‘automatic stay,’ which prevents creditors from taking any further action against either the debtor or the debtor’s assets during the bankruptcy. Seasoned bankruptcy attorneys know that a violation of the automatic stay is a serious matter and, because of this, appropriately advise their clients on complying with, or enforcing, the stay. However, stay violations can inadvertently occur even when all reasonable and necessary precautions are taken.
The Second Circuit Court of Appeals recently issued an opinion that potentially broadens the proximate cause element of claims brought under the Racketeer Influenced and Corrupt Organizations Act (RICO). RICO’s proximate cause element requires a plaintiff to allege facts plausibly establishing that there is a “direct relationship” between the claimed injury and the defendant’s conduct in violation of RICO.
Court watchers have kept a close eye on the In re: Purdue Pharma LP chapter 11 bankruptcy case, and for good reason. It is one of the largest cases to test a question that has divided the Circuit Courts of Appeals: can a debtor in its chapter 11 plan include releases from liability for non-debtor third parties over the objection of creditors? Although the debate over the answer has been stewing for some time now, a December 2021 decision from the Southern District of New York may finally cause the pot to boil over.
The merchant cash advance (“MCA”) industry recently provided two different bankruptcy courts with an opportunity to consider the characterization of MCA funding transactions as either “true sales” of receivables or “disguised loans”.