The Bankruptcy Code limits the amount a landlord may recover from a bankrupt tenant for damages caused by the termination of a lease of real property. But what if the tenant trashes the landlord's property before turning over the premises? Does the damage limitation apply to the landlord's claim for the cost of cleaning up the mess?

A recent ruling by a federal court in New York has the potential to severely impact the $500 billion a year distressed debt market.

The Delaware Supreme Court has affirmed, without opinion, a ruling by a lower court that ‘deepening insolvency’ is not a cause of action under Delaware law. Trenwick America Litig. Trust v. Billett, 931 A.2d 438 (Del. 2007).

The ruling appears to be the strongest nail yet in the coffin of so-called “deepening insolvency” actions.

The U.S. Court of Appeals for the Fourth Circuit has held that a creditor may not allocate payment by a nondebtor to interest first, before applying the balance to principal—and then seek to collect the remainder of the principal from a jointly liable debtor.

That strategy violated the Bankruptcy Code’s prohibition against collecting post-petition interest, the court reasoned in National Energy & Gas Transmission, Inc. v. Liberty Electric Power, LLC, No. 06-1459 (4th Cir. July 10, 2007). The majority’s rationale drew a pointed dissent.

Can a United States bankruptcy court deny recognition of a foreign insolvency proceeding even if no one opposes such recognition? In a recent decision, Judge Burton Lifland, a highly respected bankruptcy judge and one of the authors of Chapter 15 of the Bankruptcy Code, says yes.

Liquidators of Bear Stearns Funds Seek Relief under Chapter 15

A federal court in California recently has thrown its weight behind a majority rule that holds that letter of credit proceeds should be applied to damages resulting from the rejection of a lease of non-residential real property. In re Connectix Corp., No. 05-556848, 2007 WL 2137802 (Bankr. N.D. Cal. May 10, 2007). The court also addressed the formula the parties should employ to arrive at a damages figure.

A company attempting to reorganize its affairs in bankruptcy may seek to enjoin its creditors or other third parties from suing members of the company's senior management team during the course of the reorganization proceedings, so that the senior management members can devote their time and resources to the reorganization effort without distraction. Courts throughout the country have applied differing standards in determining when the granting of an injunction of proceedings against a non-debtor is appropriate.

The power to alter the relative priority of claims due to the misconduct of one creditor that causes injury to others is an important tool in the array of remedies available to a bankruptcy court in exercising its broad equitable powers. However, unlike provisions in the Bankruptcy Code that expressly authorize a bankruptcy trustee or chapter 11 debtor-in-possession (“DIP ”) to seek the imposition of equitable remedies, such as lien or transfer avoidance, the statutory authority for equitable subordination—section 510(c)—does not specify exactly who may seek subordination of a claim.

The nature of online commerce requires the collection of information from individuals to identify the parties to individual transactions, transfer funds for payment, and ensure the delivery of the goods or services being acquired. Public concern about the potential for abuse of such information by online merchants gave rise to the development of so-called "privacy policies" that provide a measure of reassurance that information collected will be protected from unauthorized use and disclosure.

This past summer, the Minnesota Court of Appeals held that "deepening insolvency" is not a recognized theory of damages in Minnesota. Christians v. Thornton, 733 N.W.2d 803 (Minn. App. 2007). In September, the Supreme Court of Minnesota denied a petition to review, 2007 Minn. LEXIS 572 (Minn. Sept. 18, 2007), leaving in place a decision that is an enormous relief to officers and directors of troubled companies, to banks that have lent to troubled companies, and to professionals such as lawyers, accountants and investment brokers who have provided services to troubled companies.