As the Seventh Circuit has recently made clear in Airadigm Communications, Inc. v. FCC, bankruptcy courts have the discretion under Bankruptcy Code §524 to approve a release contained in a Plan of Reorganization of a party which did not seek bankruptcy protection. Such a non-debtor release is more likely to be approved by the bankruptcy court where the creditors do not object to the confirmation of the Plan or vote to approve the Plan.

In In re River Center Holdings, LLC,1 the United States Bankruptcy Court for the Southern District of New York refused to permit lenders to enforce an oral commitment of the debtors’ principal to fund certain litigation. In River Center, the debtors’ principal had stated at a hearing that he would fund a condemnation action relating to property that served as collateral for the lenders’ financing.

In Henderson v. Powermate Holding Corp. (In re Powermate Holding Corp.)1, the United States Bankruptcy Court for the District of Delaware became the second bankruptcy court to address the status of WARN Act claims after the 2005 amendments to section 503 of the Bankruptcy Code.

In ABN Amro Bank N.V. v. Parmalat Finanziara S.p.A. (In re Parmalat Finanziara S.p.A.),1 the United States District Court for the Southern District of New York affirmed the Bankruptcy Court’s entry of an injunction pursuant to former section 304 of the Bankruptcy Code (the precursor to current chapter 15, applicable in crossborder insolvency proceedings), which prevented the beneficiary of a guaranty governed by New York law from asserting its guaranty claim against Italian debtor (and guarantor) Parmalat S.p.A. (“Parmalat”) in the United States.

AUTOMOTIVE

EZ Lube LLC, Express Lube Inc. filed for Chapter 11 protection in Delaware.  

Key Plastics files prepackaged Chapter 11 petition; secured $20M in DIP financing.  

Precision Parts International filed Chapter 11 petition; commences winding down operations.  

BROADCASTING

Equity Media Holdings, Corp. filed for Chapter 11; secured lender seeks conversion to Chapter 7  

ENERGY  

A recent decision of the Court of Appeals for the Seventh Circuit appears to have further raised the hurdle to equitably subordinate claims. Continuing what appears to be a move toward a narrower interpretation of equitable subordination, the Seventh Circuit held that misconduct alone does not provide sufficient justification to equitably subordinate a claim; injury to the interests of other creditors is required as well.

On January 6, 2009, the United States Court of Appeals for the Second Circuit rendered a decision in the case of Riker, Danzig, Scherer, Hyland & Perretti v. Official Comm. of Unsecured Creditors (In re: Smart World Tech., LLC) that clarifies the implications of a bankruptcy court's "pre-approval" of the terms of a professional's retention by the bankruptcy estate under Sections 327 and 328 of the Bankruptcy Code.

The decision in In re SemCrude, L.P., et al. prohibiting parties from contracting around Bankruptcy Code section 553’s mutuality requirement may disrupt customary business practices, including those widely used in the energy, natural gas and crude oil markets, because it rules that contracting for cross affiliate netting does not “create” the mutuality required for setoff.

The “Ades” and “Berg” groups of investors (the “Ades Berg Group”), were parties who joined in the bankruptcy proceedings of the Bennett Funding Group, Inc. and related companies (the “Bennett Group”), based on claims that, among other things, the Bennett Group had defrauded them in an investment scheme. The Bennett Group was insured under a reinsurance contract issued by Sphere Drake Insurance PLC (“Sphere Drake”). A settlement was reached in the course of the bankruptcy proceedings between some groups of investors and Sphere Drake.

On December 18, 2008, in connection with the bankruptcy of the Steve & Barry’s retail chain, the United States Bankruptcy Court for the Southern District of New York held that under Section 365(d)(3) of the U.S. Bankruptcy Code (the “Code”), landlords are entitled to pro-rata postpetition rental payments for the monthly “stub” period following the filing of the debtor-tenant’s bankruptcy petition provided that the debtor-tenant continues to enjoy the right to use and occupy the leased property.