On Feb. 18, 2011, the Seventh Circuit Court of Appeals (the “Circuit Court”) held that (i) an assignment of unsecured contract claims from AT&T to ReGen Capital I, Inc. (“ReGen”) was broad enough to include right to receive “cure” payments in the event the debtor, UAL Corporation (“United”), assumed the underlying executory contracts, but (ii) ReGen could not successfully assert a “cure” claim because United had not assumed the executory contracts, even though United’s confirmed plan of reorganization included them on a list of assumed contracts. ReGen Capital I, Inc. v. UAL Corp.

In a second decision of the United States District Court for the Southern District of Florida involving secured lenders to bankrupt homebuilder TOUSA, Inc., on March 4, 2011, Judge Adalberto Jordan affirmed the dismissal of fraudulent conveyance claims brought against the lenders on a revolving credit facility. In dismissing those claims, the Bankruptcy Court had emphasized that, because the revolving credit agreement was entered into, and the liens securing it were pledged, well before the company's alleged insolvency, they were immune from fraudulent conveyance attack.

1 Loranger v Jones, 184 Cal App 4th 847 (3d Dist May 2010)

Jones, a licensed contractor, had a workers' compensation policy covering his employees. Jones unknowingly used an unlicensed subcontractor and knowingly permitted two minors without work permits, and another person without a contractor's license, to help perform work for Loranger. Loranger refused to pay the final invoice and Jones filed suit for breach of contract. Loranger cross-complained alleging defects and sought disgorgement of monies paid.  

For over 30 years, most bankruptcy courts have approved plans where the secured lender “gifts” a distribution to a junior class in order to obtain a consensual plan. These courts note that the distribution is from the secured lender’s property (not estate property) and the secured lender can do what it wants with its own property.

Summary

The U.S. Supreme Court’s October 2010 Term (which extends from October 2010 to October 2011, although the Court hears argument only until June or July) officially got underway on October 4, three days after Elena Kagan was formally sworn in as the Court’s 112th Justice and one of three female Justices sitting on the Court.

A popular line of thinking among bankruptcy practitioners and commentators holds that substantive consolidation – the combining of assets and liabilities of a debtor and another debtor or non-debtor entity to satisfy creditor claims against both entities ratably from the resulting pool – is an equitable remedy of judicial invention with no specific foundation in the Bankruptcy Code.

On November 4, 2010, the United States Bankruptcy Court for the Northern District of Illinois certified the appeal of debtors River Road Hotel Partners, LLC, et al. of the court’s Order Denying Debtors’ Bid Procedures Motion (the Order) entered October 5, 2010. In its Order, the bankruptcy court expressly denied the debtors’ attempts to prevent their secured creditors from credit bidding in a proposed sale of assets under a chapter 11 plan.

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Summary

In a 5 page decision signed May 4, 2011, Judge Walsh of the Delaware Bankruptcy Court held that a proceeding initiated by a Debtor, seeking contribution relating to environmental claims is non-core. Judge Walsh’s opinion is available here (the “Opinion”).

Background