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    Second Circuit rules against net winners in Madoff “net equity” dispute
    2011-08-18

    In a decision likely to affect thousands of Madoff investors, the Second Circuit Court of Appeals on Aug. 16, 2011 unanimously upheld the method used by the liquidating trustee for Bernard L.

    Filed under:
    USA, Capital Markets, Insolvency & Restructuring, Litigation, White Collar Crime, Schulte Roth & Zabel LLP, Security (finance), Fraud, Standard of review, Liquidation, Broker-dealer, Investment funds, Market value, Pro rata, Securities Investor Protection Corporation, Second Circuit, United States bankruptcy court, Trustee
    Authors:
    Michael L. Cook
    Location:
    USA
    Firm:
    Schulte Roth & Zabel LLP
    Fifth Circuit treats severance payments to insider as fraudulent transfers under 2005 Bankruptcy Code amendment
    2010-03-05

    The U.S. Court of Appeals for the Fifth Circuit held on Feb. 10, 2010, that a corporate debtor’s pre-bankruptcy severance payments to its former chief executive officer (“CEO”) were fraudulent transfers. In re Transtexas Gas Corp., ____ F.3d _____, 2010 BL 28145 (5th Cir. 2/10/10). Because of its holding “that the payments were fraudulent under the Bankruptcy Code,” the court did “not consider other possible violations, including [the Texas Uniform Fraudulent Transfer Act] or [Bankruptcy Code] Section 547(b) [preferences].” Id. at *5.

    Filed under:
    USA, Insolvency & Restructuring, Litigation, White Collar Crime, Schulte Roth & Zabel LLP, Bankruptcy, Debtor, Fraud, Board of directors, Federal Reporter, Employment contract, Liquidation, Severance package, Title 11 of the US Code, United States bankruptcy court, Fifth Circuit, Chief executive officer, Trustee
    Authors:
    Michael L. Cook
    Location:
    USA
    Firm:
    Schulte Roth & Zabel LLP
    Champerty clarified: a victory for activist distressed debt and claims investors
    2009-11-03

    In a decision to be hailed by buyers of distressed debt and bankruptcy claims on the secondary loan market, on Oct. 15, 2009, the New York Court of Appeals (the “Court”), in a fact-specific ruling, held that an assignment of claim does not violate New York’s champerty statute (forbidding trading in litigation claims) if the purpose of the assignment is to collect damages by means of a lawsuit for losses on a debt instrument in which the assignee holds a pre-existing proprietary interest. Trust for the Certificate Holders of the Merrill Lynch Mortgage Investors, Inc.

    Filed under:
    USA, New York, Banking, Insolvency & Restructuring, Litigation, Securitization & Structured Finance, Schulte Roth & Zabel LLP, Security (finance), Fraud, Accounts receivable, Interest, Mortgage loan, Foreclosure, Default (finance), Distressed securities, Mortgage-backed security, Commercial mortgage, Merrill Lynch, UBS, Second Circuit
    Authors:
    Lawrence V. Gelber , David J. Karp
    Location:
    USA
    Firm:
    Schulte Roth & Zabel LLP
    Involuntary bankruptcy: practical tips and advice for creditors
    2008-10-24

    Creditors often consider filing an involuntary bankruptcy petition against their financially distressed debtors. Before using this extraordinary remedy, a creditor should evaluate whether it will achieve a valid business objective. Additionally, each creditor should evaluate whether there is a valid basis to support the filing. When the debtor's bankruptcy is appropriate, it can be a valuable step in maximizing a creditor's recovery. But the stakes are high.

    Filed under:
    USA, Insolvency & Restructuring, Schulte Roth & Zabel LLP, Bankruptcy, Debtor, Unsecured debt, Fraud, Debt, Foreclosure, Liquidation, Secured creditor, Attorney's fee, Title 11 of the US Code, US Congress, United States bankruptcy court, Trustee
    Location:
    USA
    Firm:
    Schulte Roth & Zabel LLP
    Second Circuit affirms dismissal of employees' lender liability WARN Act suit
    2007-09-28

    The United States Court of Appeals for the Second Circuit on Aug. 30, 2007, affirmed the dismissal of a lender liability class action brought by employees of a defunct originator and seller of mortgages and home equity loans. 2007 U.S. App. LEXIS 20791 (2d Cir. August 30, 2007). Agreeing with the district court, the Second Circuit held that the lender was not an "employer" within the meaning of the Worker Adjustment & Retraining Notification Act ("WARN Act"), and thus was not liable to the employees for the sudden loss of their jobs. Id., at *2.

    Filed under:
    USA, Banking, Employment & Labor, Insolvency & Restructuring, Litigation, Schulte Roth & Zabel LLP, Debtor, Fraud, Class action, Interest, Default (finance), Line of credit, US Code, Worker Adjustment and Retraining Notification Act 1988 (USA), Second Circuit, Ninth Circuit
    Location:
    USA
    Firm:
    Schulte Roth & Zabel LLP
    Delaware’s high court affirms dismissal of creditor’s suit against directors
    2007-05-25

    The Delaware Supreme Court affirmed on May 18, 2007, the Delaware Chancery Court’s dismissal of a breach of fiduciary duty suit brought by a creditor against certain directors of Clearwire Holdings Inc. North American Catholic Educational Programming Foundation, Inc. v. Gheewalla, C.A. No. 1456-N (May 18, 2007).

    Whether a creditor may assert a direct claim against corporate directors for breach of fiduciary duty when the corporation is insolvent or in the so-called “zone of insolvency.”

    Answer: No.

    Filed under:
    USA, Company & Commercial, Insolvency & Restructuring, Litigation, Schulte Roth & Zabel LLP, Bankruptcy, Shareholder, Breach of contract, Fraud, Fiduciary, Board of directors, Limited liability company, Beneficiary, Standing (law), Good faith, Commercial law, Derivative suit, Westlaw, Delaware Court of Chancery, Delaware Supreme Court
    Location:
    USA
    Firm:
    Schulte Roth & Zabel LLP
    Second Circuit Defines Adequate Capitalization in Fraudulent Transfer Case
    2016-06-21

    A debtor’s pre-bankruptcy repurchase of its stock for $150 million was not a fraudulent transfer because the debtor “could have sold off enough of its assets or alternatively obtained sufficient credit to continue its business for the foreseeable future,” held the U.S. Court of Appeals for the Second Circuit on June 15, 2016. In re Adelphia Communications Corp., 2016 WL3315847, *2 (2d Cir. June 15, 2016). Affirming the lower courts, the Second Circuit stressed that “the issue of adequate capitalization,” the “sole issue presented on appeal ...

    Filed under:
    USA, Insolvency & Restructuring, Litigation, Schulte Roth & Zabel LLP, Bankruptcy, Debtor, Fraud, Second Circuit
    Authors:
    Michael L. Cook
    Location:
    USA
    Firm:
    Schulte Roth & Zabel LLP
    Seventh Circuit Holds Diversion of Asset Sale Proceeds to Be Fraudulent
    2016-03-30

    A corporation’s asset sale “was structured [by its insiders] so as to fraudulently transfer assets in order to avoid paying [a major creditor] what it was owed,” held the U.S. Court of Appeals for the Seventh Circuit on March 22, 2016. Continental Casualty Co. v. Symons, 2016 WL 1118566, at *6 (7th Cir., March 22, 2016).

    Filed under:
    USA, Insolvency & Restructuring, Litigation, White Collar Crime, Schulte Roth & Zabel LLP, Breach of contract, Fraud, Seventh Circuit
    Authors:
    Michael L. Cook
    Location:
    USA
    Firm:
    Schulte Roth & Zabel LLP
    Update on alter ego and successor liability claims
    2015-11-23

    An unsecured creditor had “adequately alleged a de facto merger” between a corporate defendant and a purported asset acquiror, held the U.S. District Court for the Southern District of New York when refusing to dismiss the defendants’ “alter ego and de facto merger claims.” John Deere Shared Services Inc. v. Success Apparel LLC, 2015 WL 6656932, at *5-7 (S.D.N.Y. Oct. 30, 2015) (Furman, J.).

    Filed under:
    USA, New York, Corporate Finance/M&A, Insolvency & Restructuring, Litigation, Schulte Roth & Zabel LLP, Fraud, Unsecured creditor
    Authors:
    Michael L. Cook
    Location:
    USA
    Firm:
    Schulte Roth & Zabel LLP
    Cal Dive Offshore Contractors, Inc. preference actions filed
    2017-03-09

    On March 2, 2017, Cal Dive Offshore Contractors, Inc. (“Cal Dive” or “Debtor”) filed approximately 136 complaints seeking the avoidance and recovery of allegedly preferential and/or fraudulent transfers under Sections 547, 548 and 550 of the Bankruptcy Code.

    Filed under:
    USA, Delaware, Insolvency & Restructuring, Fox Rothschild LLP, Bankruptcy, Fraud, US District Court for District of Delaware
    Authors:
    Carl D. Neff
    Location:
    USA
    Firm:
    Fox Rothschild LLP

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