Introduction

George Miller, the Chapter 7 Trustee in the HomeBanc Mortgage bankruptcy, recently filed approximately 400 preference actions against various defendants under section 547 of the Bankruptcy Code. According to a Summons filed in one of the adversary actions, the first pre-trial conference is scheduled in the United States Bankruptcy Court for the District of Delaware on April 21, 2010. The HomeBanc bankruptcy, along with these adversary actions, are before the Honorable Kevin J.

IN THESE TURBULENT economic times, frantic calls from clients doing business with counterparties facing financial distress or bankruptcy is an increasingly common occurrence.

The U.S. Court of Appeals for the Fifth Circuit held on Feb. 10, 2010, that a corporate debtor’s pre-bankruptcy severance payments to its former chief executive officer (“CEO”) were fraudulent transfers. In re Transtexas Gas Corp., ____ F.3d _____, 2010 BL 28145 (5th Cir. 2/10/10). Because of its holding “that the payments were fraudulent under the Bankruptcy Code,” the court did “not consider other possible violations, including [the Texas Uniform Fraudulent Transfer Act] or [Bankruptcy Code] Section 547(b) [preferences].” Id. at *5.

A recent decision in the Bankruptcy Court for the Southern District of New York (the “Court”) in the Lehman case has extended the unenforceability of ipso facto clauses to a provision triggered by the bankruptcy filing of an affiliate of a contractual party.

In a decision that reaffirms its previous rulings on the jurisdictional limits of bankruptcy courts, the US Court of Appeals for the Third Circuit recently held in W.R. Grace & Co. v. Chakarian (In re W.R. Grace & Co.)1 that bankruptcy courts lack subject matter jurisdiction over third-party actions against non-debtors if such actions could affect a debtor’s bankruptcy estate only following the filing of another lawsuit.

The South Florida Bankruptcy Court in the Tousa case ordered various creditors that had benefitted from a fraudulent conveyance to disgorge $421,000,000 to the jointly-administered Tousa bankruptcy estates. The court also ordered the avoidance of liens on the assets of various Tousa subsidiary entities who were also debtors in the bankruptcy proceedings. This case may raise increased focus upon the legal theory of fraudulent conveyance, which was the rationale used by the bankruptcy court to order the money returned.

On March 1st, the bankruptcy court overseeing the bankruptcy proceedings and SIPA liquidation of Bernard L. Madoff Investment Securities upheld the SIPC trustee's method for determining the net equity held by the victims of Madoff's fraud. The SIPC trustee defines net equity as the amount of cash deposited by the customer into his BLMIS customer account less any amounts withdrawn.

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.

PUBLISHING

White Birch Paper Co. filed for bankruptcy protection in Canada on Wednesday, while its American subsidiary Bear Island Paper Co. LLC filed for Chapter 11.

RETAIL

On March 1st, the Seventh Circuit held that negative equity is included in a creditor's purchase money security interest and is not subject to a bankruptcy court's cramdown authority under Chapter 13 of the Bankruptcy Code. In re Aubrey Howard.