In re Olde Prairie Block Owner, LLC, Bankr. No. 10B22668 (Bankr. N.D. Ill. March 11, 2011)  

CASE SNAPSHOT

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.

On June 23rd, the First Circuit addressed the priority of claims asserted by senior noteholders and junior noteholders of debt issued by an insolvent bank. It affirmed the bankruptcy court's finding that the parties did not intend for the senior noteholders to receive post-petition interest payments prior to the junior noteholders receiving a distribution. In re: Bank of New England Corporation, Debtor.  

As revealed in a recent bankruptcy case, purchasers of contaminated property need to have a very clear understanding of their contractual remedies before proceeding with self-help. The case (In re Evans Industries, Inc., No.

Earlier this year, the U.S. Court of Appeals for the Second Circuit held that a proposed “gifting” plan distributing value from the second lien lenders to the prepetition equity holder violated the absolute priority rule and was confirmed in error.2 This decision, by a 2-1 panel vote,3 reversed the decisions of the Bankruptcy and District Courts for the Southern District of New York. The Second Circuit also affirmed unanimously the designation of the vote of an indirect competitor of the debtor that held no claims prior to the petition date.

A theme running through many apparent-authority cases is the question of who loses: for example, the LLC whose property was used to secure unauthorized, personal borrowings by a member or manager, or the bank that in good faith made the loan to the malefactor? Often the recipient of the funds has used the money for personal matters and is essentially judgment proof.

The United States Bankruptcy Court for the District of Nevada has held that proceeds from a professional liability policy were not property of the insured-debtors' bankruptcy estate because the proceeds were payable only for the benefit of third party claimants and could not be accessed by the debtors directly.  In re Endoscopy Center of Southern Nevada, Nos. BK-S-09-22780-MKN, S-09-22776-MKN, S-09-22784-MKN, 2011 WL 2184387 (Bankr. D. Nev. May 23, 2011).

In a decision that may create serious problems for bankruptcy case administration, the Supreme Court this morning invalidated part of the Bankruptcy Court jurisdictional scheme. Stern v. Marshall, No. 10-179, 564 U.S. ___ (June 23, 2011). Specifically, the Court held that the Bankruptcy Courts cannot issue final judgments on garden variety state law claims that are asserted as counterclaims by the debtor or trustee against creditors who have filed proofs of claim in the bankruptcy case.

In Chapter 11 reorganization cases, a debtor and a creditor generally seek to negotiate a mutually agreeable plan of reorganization. However, in many instances, the debtor will propose a plan which impairs the interest of a secured creditor and results in the secured creditor’s objection of the plan’s proposed treatment. In