A recent decision provides new support for excluding a broad range of severance pay from FICA taxes—a position undercut by the taxpayer’s loss in CSX Corp. v. United States, 518 F.3d 1328 (Fed. Cir. 2008). United States v. Quality Stores Inc., (W.D. Mich., Feb. 23, 2010), affirms a bankruptcy court’s conclusion that, contrary to Revenue Ruling 90-72, 1990-2 C.B.
INTRODUCTION
The District Court for the Southern District of New York recently issued an opinion in Picard v. Katz, et al., (In re Bernard L. Madoff Investment Securities LLC),1 which limits avoidance actions against a debtor-broker’s customers to those arising under federal law based on actual, rather than constructive, fraud. The decision was issued by US District Judge Rakoff in the Trustee’s suit against the owners of the New York Mets (along with certain of their friends, family and associates).
On February 7, 2011, in a highly anticipated decision, the Second Circuit Court of Appeals held that in Chapter 11 reorganizations, senior creditors may not “gift” recoveries to junior creditors and/or equity interest holders over the objection of an intervening class. In In re DBSD N.A., Inc., __ F.3d __, 2011 WL 350480 (2d Cir. 2011), the majority ruled that such “gift plans” run afoul of the “absolute priority rule,” which is codified in Section 1129(b) of Bankruptcy Code. The decision has significant implications for future bankruptcy cases in New York.
Overview
The United States Court of Appeals for the First Circuit upheld a bankruptcy court’s ruling that, where subordination agreements lacked explicit provisions addressing the payment of post-petition interest on senior unsecured debt, the agreements were ambiguous, and an inquiry into the parties’ intent was required. After probing the facts and analyzing New York law, the bankruptcy court determined that the contracting parties did not intend to subordinate the junior unsecured debt to post-petition interest on the senior debt.
Background
After a relatively brief and checkered stint in Delaware courts, it appears that the cause of action against corporate directors for “deepening insolvency” may have lost its place in Delaware corporate jurisprudence.
On May 1, 2017, the U.S. Supreme Court agreed to hear Merit Management Group v. FTI Consulting, No. 16-784, on appeal from the U.S. Court of Appeals from the Seventh Circuit. See FTI Consulting, Inc. v. Merit Management Group, LP, 830 F.3d 690 (7th Cir. 2016) (a discussion of the Seventh Circuit's ruling is available here).
On July 26, 2016, a three-judge panel of the U.S. Court of Appeals for the Seventh Circuit ruled that the Bankruptcy Code section 546(e) "safe harbor" applicable to constructive fraudulent transfers that are settlement payments made in connection with securities contracts does not protect "transfers that are simply conducted through financial institutions (or the other entities named in section 546(e)), where the entity is neither the debtor nor the transferee but only the conduit."FTI Consulting, Inc. v. Merit Management Group, LP, 2016 BL 243677.
The U.S. Supreme Court has handed down two rulings thus far in 2016 (October 2015 Term) involving issues of bankruptcy law. In the first, Husky Int’l Elecs., Inc. v. Ritz, 194 L. Ed. 2d 655, 2016 BL 154812 (2016), the Court addressed the scope of section 523(a)(2)(A) of the Bankruptcy Code, which bars the discharge of any debt of an individual debtor for money, property, services, or credit to the extent obtained by "false pretenses, a false representation, or actual fraud, other than a statement respecting the debtor’s or an insider’s financial condition."