Although it has been described as an “extraordinary remedy,” the ability of a bankruptcy court to order the substantive consolidation of related debtor-entities in bankruptcy (if circumstances so dictate) is relatively uncontroversial, as an appropriate exercise of a bankruptcy court’s broad (albeit nonstatutory) equitable powers. By contrast, considerable controversy surrounds the far less common practice of ordering consolidation of a debtor in bankruptcy with a nondebtor.
Mata, et al., v. Eclipse Aerospace, Inc. (In re AE Liquidation, Inc., et al.) Case No. 08-51891, 2011 BL 51047 (Bankr. D. Del. Feb. 28, 2011)
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Most employers know that it is unlawful to terminate the employment of or to discriminate against an individual who has previously filed bankruptcy because of his or her status as a debtor in a bankruptcy proceeding. A recent Federal Court of Appeals decision, however, highlights the distinction between denying employment to an individual based on prior bankruptcy filing and terminating the individual’s employment because of it.
On June 7th, the Eleventh Circuit affirmed the entry of summary judgment dismissing Chapter 13 debtors' claims against Wells Fargo, which holds debtors' mortgages. Debtors alleged that Wells Fargo violated the Bankruptcy Code's automatic stay provisions by recording in its internal records the fees it incurred to file its proof of claim. The Eleventh Circuit held that Wells Fargo did not violate the automatic stay because it had not collected or attempt to collect those fees. Similarly, a claim based on Wells Fargo's failure to disclose the fees was not yet ripe for action.
Last month, the Chapter 7 trustee (the "Trustee") in the Viashow bankruptcy filed avoidance actions against several creditors of the bankruptcy estate. One avoidance action in particular seeks to recover damages allegedly sustained by Viashow due to breaches of fiduciary duties by its officers and directors (the "D&O Action"). In addition to Viashow's officers and directors, the D&O Action seeks damages against defendants who allegedly "aided and abetted" the officers and directors in their breach.
ReGen Capital I, Inc. v. UAL Corporation, et al., (In the Matter of UAL Corporation, et al.), 635 F.3d 312 (7th Cir. 2011).
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Summary
In a 14 page opinion published June 7, 2011, Judge Carey ruled that publication of notice in only two newspapers was insufficient information to grant a motion to dismiss based on adequacy of notice. Judge Carey’s opinion is available here (the “Opinion”).
Background
In re Heller Ehrman, LLP No. 10-CV-03134 2011 WL 635224 (N.D. Cal. Feb. 11, 2011)
In In re Heller Ehrman, LLP, the court analyzed whether the statutory cap imposed on a landlord’s damages resulting from the rejection of a lease should be computed based on the time remaining in the lease, or the full damages resulting from the rejection. While noting a split of authority, the District Court determined that the computation of the cap should be based on a temporal measure to be consistent with statutory language.
Lewis Brothers Bakeries Incorporated and Chicago Baking Company v. Interstate Brands Corporation (In re Interstate Bakeries Corporation, et al.), Bk. Case No. 04-45818-11-JWV (W.D. Mo. March 21, 2011)
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Spectrum Scan LLC and Joli Lofstedt, Trustee v. Valley Bank & Trust Co. (In re Tracy Broadcasting Corporation), 438 B.R. 323 (Bankr. D. Colo. 2010)
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