In re Visteon Corp., No. 10-1944-cv, 2010 WL 2735715 (3d Cir. July 13, 2010), the Third Circuit held that Visteon Corporation (Visteon) could not terminate unvested retiree health and life insurance benefits during a Chapter 11 bankruptcy without seeking court approval pursuant to Bankruptcy Code § 1114, 11 U.S.C. § 1114. The Third Circuit’s decision departs from the rulings of many other federal courts, and is in tension, if not outright conflict, with the Second Circuit’s decision in LTV Steel Co. v. United Mine Workers (In re Chateaugay Corp.), 945 F.2d 1205 (2d Cir.

It is no surprise that there are risks inherent in doing business with a debtor in bankruptcy, including, of course, the risk that the debtor may not have the money to pay for goods sold to it on credit. Businesses can manage those risks by, for example, shortening trade credit terms, obtaining the debtor’s agreement to pay on delivery or in advance for product, or obtaining a deposit or letter of credit as security. But, once a debtor has paid for goods or services it actually received, most vendors would probably assume that the transaction cannot be challenged.

Introduction

Good v RMR Investments, Inc, 428 BR 249 (ED Texas, March 31, 2010)

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A secured creditor in a chapter 11 case objected to the confirmation of the reorganization plan of the debtor, arguing that the proper “cramdown” interest rate (court-modified rate) was the pre-petition contractual default rate, rather than the significantly lower cramdown rate. After the debtor appealed, the District Court affirmed, holding that utilizing the contract rate of interest was appropriate because the debtor was solvent.

In re Goody’s Family Clothing, Inc- F3d – 2010 WL 2671929 (3d Cir June 29, 2010)

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JELD-WEN, Inc v Van Brunt (In re Grossman’s Inc), (3d Cir No 09-1563, June 2, 2010)

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In re Spansion, Inc, 426 BR 114 (Bankr Del April 1, 2010)

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In re Exide Technologies, 607 F3d 957 (3rd Cir June 1, 2010)

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Suppliers to chapter 11 debtors-in-possession should always ensure that they are not being paid from the debtor’s “cash collateral” without court approval. Marathon Petroleum Company supplied products to debtor Delco Oil in the ordinary course of its business during the bankruptcy case, but was forced to return all of the postpetition payments it received from Delco, pursuant to section 549 of the Bankruptcy Code. Marathon was required to return these payments because they were deemed part of the cash collateral that was secured by Delco’s pre-petition creditor, CapitalSource Finance.

Longview Aluminum, LLC v Brandt (In re Longview Aluminum, LLC), 2010 WL 2635787 (ND Ill, June 28, 2010)

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