The Board of Directors of the Federal Deposit Insurance Corporation (FDIC) voted on December 18 to approve an interim final rule clarifying how the agency will treat certain creditor claims under the new orderly liquidation authority established under the Dodd-Frank Wall Street Reform and Consumer Protection Act.
- Introduction
Congress enacted the current Bankruptcy Code, Sections 101 through 1502 of Title Eleven of the United States Code (as amended, the “Bankruptcy Code”), in 1978, and it took effect late in 1979. Many important federal environmental statutes were enacted around the same time, e.g., Congress enacted the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) in 1980. Thus, Congress did not fully consider environmental liability schemes when it created the bankruptcy code.
On December 23, 2010, the Bankruptcy Appellate Panel of the 6th Circuit, upheld the Eastern District of Kentucky’s Bankruptcy Court’s order that post petition rents, revenues or other funds derived from leased real property is property of the estate under 11 U.S.C. §541 and can be used as cash collateral under 11 U.S.C. §363. However, post petition rents can be used as cash collateral only if the debtor can provide adequate protection for the use of those rents through an existing equity cushion in the property.
On January 24, 2011, the Honorable Dwight H. Williams, Jr. of the U.S. Bankruptcy Court for the Middle District of Alabama denied the Federal Deposit Insurance Corporation’s (“FDIC”) request for relief from the automatic stay in the Colonial BancGroup, Inc.
In the current economic environment, many banks have lost significant capital and are under immense pressure, regulatory and otherwise, to recapitalize. Failure to recapitalize within time frames set by bank regulators can result in a bank’s seizure by its chartering authority and an FDIC receivership.
On February 7, 2011, the Court of Appeals for the Second Circuit issued a highly significant opinion in two consolidated appeals from the order of the United States District Court for the Southern District of New York affirming the bankruptcy court’s confirmation of a chapter 11 plan of reorganization for DBSD North America and its subsidiaries (DBSD).
In an apparent case of first impression in Massachusetts, the US Bankruptcy Court for the District of Massachusetts recently held that an allonge must be physically affixed to the original promissory note to be effective.
The Bankruptcy Appellate Panel for the Sixth Circuit Court of Appeals1 recently issued an opinion of importance in bankruptcy cases involving commercial real estate as the debtor’s only asset, such as a shopping center or office building.
The Bankruptcy Code sets forth the relative priority of claims against a debtor and the waterfall in which such claims are typically paid. In order for a court to confirm a plan over a dissenting class of creditors – what is commonly called a “cram-down” – the Bankruptcy Code demands thateither (i) the dissenting class receives the full value of its claim, or (ii) no classes junior to that class receive any property under the plan on account of their junior claims or interests. This is known as the “absolute priority rule.”
On February 8, 2011, the Second Circuit Court of Appeals issued an opinion that will have a major impact on Chapter 11 plan confirmation. In consolidated appeals stemming from theIn re DBSD North America, Inc. bankruptcy case, the Second Circuit held that (1) the “gifting” aspect of the debtors’ plan of reorganization violated the absolute priority rule, and (2) the bankruptcy court did not err in designating a secured creditor’s vote as lacking “good faith” and disregarding that vote for purposes of confirmation.
The DBSD Plan