The United States Court of Appeals for the Seventh Circuit issued its much anticipated decision in In Re River Road Hotel Partners, LLC, __ F.3d __ (7th Cir., June 28, 2011). In the closely watched case, the Seventh Circuit declined to follow the Third Circuit’s decision in Philadelphia Newspapers, 599 F.3d 298 (3d Cir. 2010), holding instead that secured lenders have the right to credit bid in “free and clear” asset sales where their liens are being stripped, whether those sales occur under section 363 of the Bankruptcy Code or under a chapter 11 plan.

The United States Supreme Court will hand down its decision in the next few weeks in the case of Wellness Int’l Network, Ltd. v. Sharif (“Wellness”), 727 F.3d 751 (7th Cir. 2013) regarding bankruptcy courts’ jurisdiction.  The jurisdictional quagmire is a major and growing virus in the bankruptcy courts, increasing exponentially the costs of bankruptcy litigation.  Hopefully the Wellness decision will eventually provide a belated prescription on bankruptcy courts’ jurisdiction, and make us all feel just peachy.

A little background:

The following Middle Market insight* originally appeared in the Spring 2015 edition of Disclosure Statement, the official publication of the Bankruptcy Section of the North Carolina Bar Association.

In Beeman v. BGI Creditors’ Liquidating Trust (In re BGI, Inc.), 772 F.3d 102 (2d Cir. 2014), the U.S. Court of Appeals for the Second Circuit considered whether the doctrine of “equitable mootness” applied to the appeal of a confirmation order approving a liquidating chapter 11 plan. In a matter of first impression, the court ruled that the standards governing equitable mootness in an appeal of an order confirming a chapter 1 1 plan of reorganization also apply in the context of a chapter 11 liquidation.

The United States Court of Appeals for the Eighth Circuit and the United States Bankruptcy Appellate Panel for the Eighth Circuit (the “BAP”) issued a number of published and unpublished decisions in the fourth quarter of 2014 that impact both consumer and business bankruptcy practice throughout the circuit.

On September 26, 2014, in the Farnum case (Krys v. Farnum Place, LLC (In re Fairfield Sentry Ltd.), 768 F.3d 239 (2d Cir. 2014)) the Court of Appeals for the Second Circuit held that Bankruptcy Code section 363 review applied to a transfer of a Securities Investor Protection Act (“SIPA”) claim held by an off-shore entity in foreign liquidation proceedings recognized in the United States. The decision is significant for two reasons.

In two recent decisions, ASARCO LLC v. Goodwin, 756 F.3d 191 (2d Cir. 2014) and ASARCO LLC v. Union Pacific Railroad Co., 755 F.3d 1183 (10th Cir. 2014), the Second Circuit and the Tenth Circuit each held that a reorganized bankruptcy debtor's direct contribution claims against other potentially responsible parties under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), 42 U.S.C.

The U.S. Court of Appeals for the Fifth Circuit held on June 23, 2014 that an oversecured lender’s legal fees were subject to the bankruptcy court’s review for reasonableness despite a court-ordered non-judicial foreclosure sale of the lender’s collateral. In re 804 Congress, LLC, ­­__ F.3d ­­__, 2014 WL 2816521 (5th Cir. June 23, 2014). Affirming the bankruptcy court’s power and reversing the district court, the Fifth Circuit found the lender’s utter failure to detail its legal fees with any documentary support to be fatal.

Facts

The United States Supreme Court, on June 9, 2014, unanimously held that certain “core” proceedings (e.g., fraudulent transfer suits ) could still be litigated in the bankruptcy court, but only if that court’s proposed fact findings and legal conclusions are subject to de novo review by the district court. Executive Benefits Ins. Agency v. Arkison (In re Bellingham Ins. Agency), 2014 WL 2560461 (U.S. Sup. Court, June 9, 2014).

The U.S. Supreme Court resolved a split among the circuits, holding that assets in non-spousal inherited individual retirement accounts are not exempt or protected from claims of the heir’s creditors. Clark v. Rameker, 573 U.S. ___ (2014) (No. 13-299; June 12, 2014).

“Inherited” IRAs hold funds from persons who established Individual Retirement Accounts for their own use and died before depleting the funds in those accounts. The U.S. Supreme Court affirmed the judgment by the Seventh Circuit Court of Appeals {In re Clark, 714 F.3d 559 (7th Cir. 2013)}.