On April 12th, a federal district court addressed the in pari delicto defense, including the sole actor exception to the adverse interest exception. In the instant case, a litigation trust created in bankruptcy court to pursue the debtor's claims sued Credit Suisse for allegedly assisting the debtor's founders' looting of the debtor's subsidiaries. Credit Suisse sought summary judgment, asserting the in pari delicto defense. The Court agreed, finding that the evidence supported the conclusion that the founders so dominated the subsidiaries that the subsidiaries lacked a separate existence.
The United States Bankruptcy Court for the District of Delaware recently dismissed equitable subordination and fraudulent transfer claims filed by the Official Committee of Unsecured Creditors of Champion Enterprises, Inc.
The Federal Deposit Insurance Corporation (FDIC) and the Federal Reserve Board announced the process for receiving and evaluating the initial resolution plans--also known as living wills--from the largest banking organizations operating in the United States. The agencies also gave a timetable for release of the public portion of such plans, which are due on July 2.
On Monday, December 12, 2011, Madoff trustee Irving Picard filed a lawsuit against Credit Suisse Group AG in the U.S. Bankruptcy Court in Manhattan alleging it and several of its affiliates harbored money that belonged to Madoff's estate. Specifically, Picard is attempting to recover $375 million, representing funds that were deposited with Credit Suisse through two of Madoff's largest feeder funds, Fairfield Sentry Ltd.
Judge Buchwald of the U.S.
The Ruling
Yellowstone Mountain Club LLC (Yellowstone Club) developed land near Yellowstone National Park in Montana as a high-end residential development with a private ski and golf club.
The development of Yellowstone Club didn’t progress as promptly or as smoothly as projected. Memberships ended up being sold at substantially discounted prices.
In an unusual ruling recently entered in the Chapter 11 case of Yellowstone Mountain Club, LLC and certain of its subsidiaries, the United States Bankruptcy Court for the District of Montana equitably subordinated the claim of a non-insider senior secured lender. While the equitable subordination of a claim is rare, the Yellowstone decision may signal that courts will be looking at loan transactions with a highly critical eye.
In a harshly worded decision, a federal bankruptcy judge concluded that a syndicated loan product was so one-sided in favor of the lender as to "shock the conscience" of the court. The judge therefore equitably subordinated the secured lender's claim. See In re Yellowstone Mountain Club, LLC, No. 08-61570, 2009 WL 1324950 (Bankr. D. Mont. May 12, 2009).
Yellowstone Mountain Club
Although courts are generally reluctant to equitably subordinate claims of non-insiders, the United States Bankruptcy Court for the District of Montana recently did just that to the claims of a non-insider lender based on overreaching and self-serving conduct in Credit Suisse v. Official Committee of Unsecured Creditors (In Re Yellowstone Mt. Club, LLC), Case No. 08-61570-11, Adv. No. 09-00014 (Bankr. D. Mont. May 13, 2009).