In a decision that will be of great interest to the creditor community, the US Court of Appeals for the Second Circuit held, on November 5, 2009, that the Bankruptcy Code does not bar an unsecured claim for post-petition attorneys’ fees that was authorized under a valid prepetition contract. The case, Ogle v. Fidelity & Deposit Company of Maryland,1 extends and clarifies the US Supreme Court’s March 2007 decision in the Travelers case,2 which opened the door for such a ruling.

Masuda Funai routinely represents creditors in bankruptcy proceedings in order to protect their contractual and legal interests and rights to payment. The following is a list of some recent larger U.S. bankruptcy filings in various industries. To the extent you are a creditor to any of these debtors, or other entities which may have filed for bankruptcy protection, you as a creditor are entitled to certain protections under the Bankruptcy Code.

AUTOMOTIVE

Introduction

5620 Central Avenue, LLC recently filed for Chapter 11 bankruptcy, and, although no sale has been announced, the Debtor’s assets may be available for acquisition under the right circumstances. The Debtor’s real property is located at 5620 Central Avenue in El Cerrito, California, valued at $6 million. The property is described as parcels 510-053-32, 510-053-33 and 510-053-25. Real estate listings describe the property as a 142,000 sq. ft. vacant lot that is zoned C-3 Regional Commercial. The Debtor did not list any income.

After more than a decade of rising real estate values, the tide has turned against commercial and development real estate, prompting major builders and developers to commence Chapter 11 bankruptcy proceedings. As a result of the enactment of the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) in 2005, many Chapter 11 cases that revolve around real estate will fall within the Bankruptcy Code’s definition of single asset real estate (SARE) cases and are thus subject to special provisions in the Bankruptcy Code.1 As a result, it is now time to think about SARE.

In an Opinion issued on December 2, 2009 in the Washington Mutual, Inc. ("WaMu") Chapter 11 case, the Delaware Bankruptcy Court held that Bankruptcy Rule 2019 clearly applies to "ad hoc committees," regardless of how they might try to disclaim collective action. As a result, the members of an informal group of WaMu bondholders must now provide detailed information concerning their holdings, including a history of when they bought and sold their bonds and the prices paid. Perhaps more importantly, the Opinion packs a second bombshell.

Last week, the Associated Press announced that the number of bankruptcy filings in federal courts this year have increased by more than one-third. Based on numbers from the Administrative Office of the U.S. Courts, the Associated Press reports that about 1.4 million bankruptcy cases were filed between October 1, 2008 and September 30, 2009. In comparison, 1 million cases were filed during this same period last year. While Chapters 7, 12 and 13 filings have all increased, of particular note, Chapter 11 filings increased by 68 percent.

For participants in the over-the-counter ("OTC") derivatives markets, perhaps the most significant recent US legal decision interpreting counterparty rights upon a bankruptcy event of default was the September 15, 2009 bench ruling in the US Lehman Brothers chapter 11 bankruptcy cases, In re Lehman Brothers Holdings, Inc., Case No. 08-13555 et seq. (JMP)(jointly administered) ("Bankruptcy Case").

Publishing Company in Pleasantville, New York In re Reader’s Digest Sales and Services, Inc. (Bankr. S.D.N.Y.) Case no. 09-09548

To promote equal treatment of creditors, the US Congress has armed debtors with the power to bring suit to recover a variety of pre-bankruptcy transfers. Prominent among these is a debtor’s ability under Section 548 of the Bankruptcy Code to recover constructively fraudulent transfers — i.e., transfers made without fair consideration when a debtor is insolvent.