In In re LTL Management, LLC, No. 22-2003 (Jan. 30, 2023), the U.S. Court of Appeals for the Third Circuit had occasion to consider whether an entity that was created solely to house liabilities and file for bankruptcy could, in fact, file for bankruptcy where another entity was contractually obligated to pay those liabilities. The Court dismissed the bankruptcy petition, reasoning that this contractual obligation meant the former entity was not in financial distress and thus could not avail itself of the bankruptcy process.

In times of economic uncertainty, fraud typically increases. And these are certainly economically uncertain times. Fraud has been on the rise over recent years and that trend is set to continue. The motivation and opportunity to commit fraud increases as financial pressures loom over individuals and businesses. We are also set to see a continued increase in insolvencies as the impact of the pandemic and other global events set in. The appointment of insolvency practitioners means frauds which might have otherwise continued or remained concealed are more likely to be uncovered.

Special Purpose Acquisition Companies (SPACs) and the Outlook in India  

The amendments follow the recent high profile decision in The Australian Sawmilling Company Pty Ltd (in liq) & Ors v EPA & Anor [2021] VSCA 294 (TASCO Judgment). Insolvency practitioners should be aware that the amendments are aimed at preventing liquidators from disclaiming liability for environmental clean-up costs.

TASCO Judgment

Welcome to the eighth edition of our quarterly disputes newsletter, which covers key developments in the dispute resolution world over the last three months or so.

On 5 October 2022 a judgment was handed down by the Supreme Court in the case of BTI 2014 LLC v Sequana SA (Sequana) and others.This judgment relates to an insolvency dispute between BTI, the assignee of AWA’s claims, and Sequana. Principally, it concerns which entity should make the payment for an outstanding liability incurred by AWA, arising out of the National Cash Register Company’s (NCR) pollution of the Fox River in Wisconsin. Through a series of restructurings, AWA became liable to indemnify British American Tobacco (BAT) for these costs.

Retired U.S. Bankruptcy Judge Robert E. Gerber once observed that “issues as to the interplay between environmental law and bankruptcy are among the thorniest on the litigation map.” Difficulties navigating this interplay largely stem from the inherent conflict between the goals of bankruptcy and environmental laws, with the former aimed at providing debtors with a fresh start, while the latter cast a broad net to hold parties (even some innocent parties) responsible for past harm to the environment.

Overview

At the COP26 climate summit in November 2021, over forty countries committed to phase out use of coal-fired power.

In March 2019, Liquidators were appointed to The Australian Sawmilling Company Pty Ltd (TASCO) by way of a creditors’ voluntary winding up. TASCO owned a large lot of contaminated land – there were stockpiles of construction and demolition waste resulting from a former licensee conducting a materials recycling business.