This week, in a 2-1 decision affirming the District Court’s reversal of a ruling of the Bankruptcy Court for the Eastern District of Pennsylvania, the United States Court of Appeals for the Third Circuit held that secured creditors do not have a right as a matter of law to credit bid their claim at an auction pursuant to a plan of reorganization where the debtor intends to impose the plan on its secured creditors through a “cramdown” under section 1129(b)(2)(A)(iii) of the Bankruptcy Code; i.e., a plan providing the secured creditors with the “indubitable equivalent” of their secured claim.
On March 18th, the Fifth Circuit held that a U.S. bankruptcy court may offer avoidance relief under a foreign country's law in a Chapter 15 bankruptcy proceeding. Plaintiffs had been appointed trustees by a Nevis court in a Nevis winding up petition. Plaintiffs filed a Chapter 15 bankruptcy petition in the U.S. alleging that the debtor had transferred assets to put them out of the reach of the Nevis court. The U.S.
Defanging Stern v. Marshall1: The United States District Court for the Southern District of New York Modifies the Reference of Bankruptcy Matters to Address Issues Resulting from the Supreme Court’s Ruling
On January 11th, the Eighth Circuit held that a bankruptcy court properly awarded summary judgment to the bankruptcy trustee in a suit seeking to avoid as a preferential transfer, the pre-petition transfer of a mortgage from the debtor to the bank. Because the bank failed to record the home mortgage prior to the borrower's filing of a Chapter 7 bankruptcy petition, Section 547(e)(2)(C) of the Bankruptcy Code deemed the transfer of the mortgage to have occurred immediately before the debtor filed his bankruptcy petition.
A New York bankruptcy court recently considered the effects of Bankruptcy Code section 552 on a lender’s security interest in the proceeds of an FCC broadcast license and held that a prepetition security interest extended to proceeds received from a post-petition transfer of the debtors’ FCC license. Sprint Nextel Corp. v. U.S. Bank. N.A. (In re Terrestar Networks, Inc.), Case No. 10-15446, Adv. Pro. No. 10-05461 (Bankr. S.D.N.Y. Aug. 18, 2011). This result directly conflicts with Spectrum Scan LLC v. Valley Bank and Trust Co. (In re Tracy Broadcasting Corp.), 438 B.R.
In a recent holding that a creditor may collect, on an unsecured basis, post-petition attorneys’ fees under an otherwise enforceable pre-petition contract, the Second Circuit Court of Appeals followed a similar ruling by the Ninth Circuit earlier this year, adding to a conflict among the circuits on this issue.
On September 19th, the Ninth Circuit considered whether the exception to Chapter 7 bankruptcy discharge for debts resulting from a violation of state or federal securities laws applies when the debtor himself is not culpable for the securities violation that caused the debt. The case involved an attorney who was required by court order to return the unearned retainer paid by a company that engaged in securities fraud. The attorney filed a petition for Chapter 7 bankruptcy before he was technically required to return the money.
Sending the Debtors back to the drawing board after almost three years in bankruptcy, in a 139 page opinion, the Bankruptcy Court has for the second time denied confirmation of the Plan of Reorganization for Washington Mutual, Inc. (“WaMu”), which was the owner of the largest savings bank ever to be seized by the FDIC.
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.