Section 502(b)(6) of the Bankruptcy Code caps the amount of a lessor’s claim against a debtor-lessee for damages arising from the termination of a real property lease. The statutory cap is calculated according to a formula that considers, among other things, the date on which the lessor “repossessed” or the debtor-lessee “surrendered” the leased property. Because those terms are not defined in the Bankruptcy Code, however, courts disagree as to whether state or federal law should determine their meanings for the purpose of calculating the allowed amount of the lessor’s claims.
On January 10, 2012, a Florida bankruptcy court ruled in In re Pearlman, 462 B.R. 849 (Bankr. M.D. Fla. 2012), that substantive consolidation is purely a bankruptcy remedy and that it accordingly did not have the power to consolidate the estate of a debtor in bankruptcy with the assets and affairs of a nondebtor. In so ruling, the court staked out a position on a contentious issue that has created a widening rift among bankruptcy and appellate courts regarding the scope of a bankruptcy court’s jurisdiction over nondebtor entities.
The enduring impact of the Great Recession on businesses, individuals, municipalities, and even sovereign nations has figured prominently in world headlines during the last three years. Comparatively absent from the lede, however, has been the plight of charitable and other nonprofit entities that depend in large part on the largesse of donors who themselves have been less able or less willing to provide eleemosynary institutions with badly needed sources of capital in the current economic climate.
As part of the overhaul of bankruptcy laws in 1978, Congress for the first time included the definition of "claim" as part of the Bankruptcy Code. A few years later, in Avellino & Bienes v. M. Frenville Co. (In re M. Frenville Co.), the Third Circuit became the first court of appeals to examine the scope of this new definition in the context of the automatic stay.
In the chapter 1 1 cases of Adelphia Communications Corporation and its subsidiaries, Adelphia sought to assume and assign more than 2,000 franchise agreements in connection with the proposed transfer of its cable operations to affiliates of Comcast Corporation and Time Warner Cable. Numerous local franchising authorities objected, arguing, among other things, that they had a right of first refusal under the agreements, and in some cases also under a local ordinance, to purchase the franchise on substantially the same terms and conditions.
The U.S. Supreme Court has issued two bankruptcy rulings so far in 2007. On February 21, 2007, the Court ruled in Marrama v. Citizens Bank of Massachusetts that a debtor who acts in bad faith in connection with filing a chapter 7 petition may forfeit the right to convert his case to a chapter 13 case. On March 20, 2007, the Court ruled in Travelers Casualty & Surety Co. v. Pacific Gas & Electric Co.
A recent bankruptcy court decision denying a royalty owner's motion for summary judgment is highly relevant to any investor that currently owns a term royalty interest or is considering such an investment. The United States Bankruptcy Court for the Southern District of Texas found in NGP Capital Resources Co. v. ATP Oil & Gas Corp. (In re ATP Oil & Gas Corp.), No. 12-3443, 2014 Bankr. LEXIS 33 (Bankr. S.D. Tex. Jan.
Chapter 11 debtors and sophisticated creditor and/or shareholder constituencies are increasingly using postpetition plan support agreements (sometimes referred to as “lockup” agreements) to set forth prenegotiated terms of a chapter 11 plan prior to the filing of a disclosure statement and a plan with the bankruptcy court. Under such lockup agreements, if the debtor ultimately proposes a chapter 11 plan that includes prenegotiated terms, signatories are typically obligated to vote in favor of the plan.
On December 12, 2011, the Supreme Court granted a petition for certiorari in a case raising the question of whether a debtor's chapter 11 plan is confirmable when it proposes an auction sale of a secured creditor's assets free and clear of liens without permitting that creditor to "credit bid" its claims but instead provides the creditor with the "indubitable equivalent" of its secured claim. RadLAX Gateway Hotel, LLC v. Amalgamated Bank, No. 11-166 (cert. granted Dec. 12, 2011).
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.