A Chapter 11 debtor’s financial advisers were entitled to a “Success Fee” based on a percentage of a $50-million “debt-to-equity conversion,” held a split U.S. Court of Appeals for the Fifth Circuit on May 4, 2016. In re Valence Technology, Inc., 2016 WL 2587109, *1 (5th Cir. May 4, 2016) (2-1). Key to the opinion was the parties’ concession that the “debt-to-equity conversion qualified as a Private Placement under [their] engagement agreements.” Id., at n.1.

A divided panel of the U.S. Court of Appeals for the Third Circuit stayed the part of a bankruptcy court’s sale order that would have “stripped” a commercial tenant’s lease from the casino property being sold to a third party. In re Revel AC, Inc., 2015 WL 5711358 (3d Cir. Sept. 30, 2015) (2-1).

The United States Court of Appeals for the Seventh Circuit, on March 19, 2014, held that a corrupt debtor’s pre-bankruptcy cash transfer to a commodity broker was a “settlement payment” made “in connection with a securities contract,” thus falling “within [Bankruptcy Code] §546(e)’s safe harbor” and insulating the transfer from the trustee’s preference claim. Grede v. FCStone, LLC (In re Sentinel Management Group, Inc.), 2014 WL 1041736, *7 (7th Cir. Mar. 19, 2014).

Chapter 11 creditors’ committees and debtors continue to challenge lenders’ prepayment premiums, commitment fees and post-bankruptcy interest claims in reorganization cases. Nevertheless, courts regularly reject these challenges in well-reasoned decisions.

United States District Court Judge Alan S. Gold, on February 11, 2011, reversed a Florida bankruptcy court’s controversial October 2009 fraudulent transfer judgment1 against a group of lenders based on their receipt of a $421 million loan repayment in July 2007. 3V Capital Master Fund, et al., v. Official Committee of Unsecured Creditors of Tousa, Inc., et al, Case No. 10-60017-CIV (S.D. Fla. Feb.

The United States Court of Appeals for the Second Circuit held on Nov. 5, 2009, that a creditor was entitled to its post-bankruptcy legal fees incurred on a pre-bankruptcy indemnity agreement. Ogle v. Fid. & Deposit Co. of Md., __F.3d __, No. 09-0691-bk, 2009 U.S. App. LEXIS 24329 (2d Cir. Nov. 5, 2009). Affirming the lower courts, the Second Circuit explained that the Bankruptcy Code (“Code”) “interposes no bar . . . to recovery.” Id. at *8-9 (citing Travelers Cas. & Sur. Co. of Am. v. Pac. Gas & Elec. Co., 549 U.S.

The U.S. Court of Appeals for the Fifth Circuit reversed a bankruptcy court’s equitable subordination order on June 20, 2008. Wooley v. Faulkner (In re SI Restructuring, Inc.), ____ F.3d __, 2008 WL2469406 (5th Cir. 2008). According to the court, subordination of the insiders’ secured claims was “inappropriate” because the bankruptcy trustee had failed to show that the defendant insiders’ “loans to the debtor harmed either the debtor or the general creditors.” Id., at *1. The court also rejected the trustee’s “deepening insolvency” argument on the facts and as a matter of law.

Parties to an appeal who condition a settlement on the vacating of the lower court’s judgment “may still [have] an appropriate remedy,” held the U.S. Court of Appeals for the Eleventh Circuit on July 12, 2016. Hartford Cas. Ins. Co. v. Crum & Forster Specialty Ins. Co., 2016 U.S. App LEXIS 12813, *15 (11th Cir. July 12, 2016). Reversing the district court’s “narrow” refusal to vacate its judgment after the parties had settled, the Eleventh Circuit found that “exceptional circumstances” warranted the vacatur. Id., at *3, *14.

An insolvent corporate subsidiary’s payment of its parent’s contractual obligations was not a fraudulent transfer when “the [subsidiary] Debtor received reasonably equivalent value in exchange for [its cash] transfers,” held the U.S. Court of Appeals for the Eleventh Circuit on Sept. 4, 2015. In re PSN USA, Inc., 2015 WL 5167803, at *7 (11th Cir. Sept. 4, 2015) (per curiam).

The U.S. Court of Appeals for the Fourth Circuit, on Feb. 21, 2014, affirmed the dismissal of a bankruptcy trustee’s fraudulent transfer complaint against a “warehouse” lender who had been paid by a distressed home mortgage originator several months prior to the originator’s bankruptcy. Gold v. First Tennessee Bank, N.A., 2014 U.S. App. LEXIS 3279 (4th Cir. Feb. 21, 2014) (2-1). Affirming the lower courts, the Fourth Circuit held that “the bank accepted the payments” from its borrower “in good faith.” Id., at *2.