In Monday’s 7-2 decision in Florida Department of Revenue v. Piccadilly Cafeterias, Inc., the Supreme Court of the United States held that the exemption from state transfer and stamp taxes in Section 1146(a) of the Bankruptcy Code does not apply to transfers that take place prior to the time the Bankruptcy Court confirms a reorganization plan. Section 1146(a) had been cited by bankruptcy debtors and their asset purchasers in seeking tax exemptions for Section 363 sales and other pre-confirmation transfers.

In a recent decision, the United States Supreme Court resolved a circuit split regarding the meaning of the statutory phrase "under a plan confirmed under [Chapter 11] of the bankruptcy Code," as codified in 11 U.S.C. § 1146(a). The case arose from the bankruptcy of Piccadilly Cafeterias, Inc. At one time among the nation's most successful cafeteria chains, Piccadilly had fallen on hard financial times. In 2003, Piccadilly filed for Chapter 11 bankruptcy protection in the Southern District of Florida.

On June 16th, the Supreme Court of the United States issued a decision that is likely to have a significant impact on how debtors will sell assets in bankruptcy. InFlorida Department of Revenue v.

Resolving a split among various circuits, the United States Supreme Court has ruled that the exemption from state stamp taxes under section 1146(a) of the Bankruptcy Code does not apply to asset sales under section 363 of the Bankruptcy Code that took place before confirmation of a debtor’s chapter 11 plan—an event that may take months or years to accomplish.1

In the case of Florida Dept. of Revenue v. Piccadilly Cafeterias, Inc.,¹ the United States Supreme Court ruled that the exemption from the payment of stamp taxes or similar taxes on transfers of property of a Chapter 11 debtor’s estate, contained in section 1146(a) of the Bankruptcy Code,² does not apply to transfers of property made before a Chapter 11 plan is confirmed.

On June 16, 2008, the United States Supreme Court held that the stamp-tax exemption under 11 U.S.C. § 1146(a) does not apply to transfers made before confirmation of a Chapter 11 plan. This decision will impact the structuring of asset sales in Chapter 11 cases where the transfers involve significant stamp taxes or similar taxes. Full text of the opinion.

In a case of first impression, the United States Court of Appeals for the Second Circuit recently held that antidiscrimination laws may be violated when a white employee is fired for having a black spouse. In Holcomb v. Iona College, 521 F.3d 130 (2d Cir. 2008), the Second Circuit vacated and remanded a federal district court’s grant of summary judgment in favor of Iona College (the “College”), finding that triable issues existed as to whether the College’s decision to terminate its employee, Craig Holcomb, was based at least in part upon a racially discriminatory motive.

The U.S. Court of Appeals for the Eleventh Circuit has affirmed a lower court ruling that lease termination fees can be considered preferential transfers under the Bankruptcy Code, subject to avoidance. The court’s holding reinforces concerns over whether landlords can structure lease terminations in a manner that protects them from preference recovery.

The U.S. Court of Appeals for the Ninth Circuit has held that there is a federal common law of receivership in the context of real property security interest, joining the Eleventh Circuit. Can. Life Assurance Co. v. LaPeter, 557 F.3d 1103 (9th Cir. 2009).

The Eleventh Circuit Court of Appeals has just issued an opinion that should concern anyone doing business with a debtor in bankruptcy. In short, the court ruled that a company that supplied $1.9 million worth of goods to a debtor after the petition date had to return the debtor's payment. The reason? The debtor did not have permission from the court or its secured creditor to use the money. The payments were for value given post-petition and were apparently made in accordance with the pre-petition practice between the parties.