In one of the most important bankruptcy court decisions of all time, Northern Pipeline Construction Co. v. Marathon Pipe Line Co., the United States Supreme Court held that the 1979 Bankruptcy Code was unconstitutional because it lodged too much judicial power in bankruptcy judges who were not given “Article III” status, which grants lifetime tenure and salary protection and helps assure judicial independence.
On March 22, 2017, the Supreme Court decided Czyzewski v. Jevic Holding Corp., holding that a bankruptcy court may not approve a structured dismissal of a Chapter 11 bankruptcy case if the order does not comply with the priority rules of the Bankruptcy Code. 580 U.S. __ (2017).
The new receivership and assignment for benefit of creditors statutes took effect in 2012. See Minn. Stat. §§ 576 and 577. The statutes codified existing common law and best practices, and provided a comprehensive reference point for practitioners and judges. See e.g. Minn. Stat. § 576.22(d). It was anticipated that the receivership and ABC law would become more accessible and usable. While concrete statistics are not available, receiverships and ABCs appear to be used with greater frequency.
In April 2018, the United States Supreme Court approved rule changes to both the Federal Rules of Civil Procedure (the Civil Procedure Rules) and the Federal Rules of Bankruptcy Procedure (the Bankruptcy Rules). The rule changes became effective on December 1, 2018. While the modifications are not as monumental as those made in previous years, one set of changes, focusing on electronic service, will certainly impact the day-to-day practice for bankruptcy professionals.
In a ruling of much consequence to secured lenders everywhere, the Delaware Supreme Court held in Motors Liquidations v. JPMorgan Chase Bank that filing an incorrect UCC-3 termination statement can be a costly mistake.
THE UCC-3 TERMINATION STATEMENT
The Delaware Supreme Court ruled last fall that a UCC termination statement inadvertently releasing collateral on a $1.5 billion term loan was valid. The creditor could not later claim it did not intend to include the collateral in its release of other collateral with regard to a different credit facility. Official Committee of Unsecured Creditors v. JPMorgan Chase Bank, NA (Del. 2014).
Receiverships and assignments for the benefit of creditors (ABCs) can be important tools for banks and other lenders when a borrower is suffering financial distress. Because they are often cost-effective and efficient, receiverships are being used increasingly throughout the country, and ABCs are commonly utilized in many states. In Minnesota, however, the statutes regarding receiverships and ABCs were outdated or largely ignored; as a result, receivership practices and procedures are not uniform, and ABCs are almost never used.
Picture this: You are wrapping up writing a brief, memorandum of law, motion or the like regarding a complex bankruptcy issue. It is a close call, and you are grasping for additional arguments to make to the judge. Now ask yourself: Have I discussed the relevant burden of proof? If not, now ask yourself: Whose burden is it anyway?
Conventional wisdom suggests there is no requirement that a debtor be “insolvent” to file a case under Chapter 11 or any other chapter of the Bankruptcy Code. No Code provision explicitly imposes such a requirement. Yet in 2023, several courts addressed the issue, and two courts directed the dismissal of massive Chapter 11 cases imposing what may fairly be characterized as an insolvency requirement.
Consensus remains elusive on the two major questions concerning the application of bankruptcy law in mass tort cases. In the past few months, at least five major decisions have addressed the significant issues of the availability of third-party releases and the two-step bankruptcies. Appeals have been filed or are threatened. In the meantime, the authors of a University of Chicago Law Review article argue that, as a matter of public policy, both should be available with court safeguards.