The U.S. Court of Appeals for the Fifth Circuit, on Sept. 3, 2014, vacated bankruptcy court and district court Chapter 11 debtor-in-possession (“DIP”) financing orders due to: (1) the lender’s lack of good faith in relying on a third party’s shares of stock as collateral; and (2) the bankruptcy court’s lack of subject matter jurisdiction. In re TMT Procurement Corp., 2014 WL 4364894 (5th Cir. Sept. 3, 2014).
The U.S. District Court for the Southern District of New York, on April 27, 2014, issued a decision directing the bankruptcy court to dismiss fraudulent transfer complaints brought by the Madoff Securities Investor Protection Act of 1970 (“SIPA”) trustee against investment funds, their customers and individuals when the trustee failed “plausibly [to] allege that defendant[s] did not act in good faith.” SIPC v. Bernard L. Madoff Inv. Sec. LLC, 2014 WL 1651952, at *5 (S.D.N.Y. April 27, 2014).
The U.S. Court of Appeals for the Fourth Circuit, on Feb. 21, 2014, affirmed the dismissal of a bankruptcy trustee’s fraudulent transfer complaint against a “warehouse” lender who had been paid by a distressed home mortgage originator several months prior to the originator’s bankruptcy. Gold v. First Tennessee Bank, N.A., 2014 U.S. App. LEXIS 3279 (4th Cir. Feb. 21, 2014) (2-1). Affirming the lower courts, the Fourth Circuit held that “the bank accepted the payments” from its borrower “in good faith.” Id., at *2.
The U.S. Court of Appeals for the Second Circuit, on Dec. 6, 2010, summarily affirmed a bankruptcy court’s designation of a secured lender’s vote on a reorganization plan in a two-page order, effectively enabling the debtor to cram down the lender’s claim. In re DBSD North America, Inc., __ F.3d__, 2010 WL 4925878 (2d Cir. Dec. 6, 2010).1 As a result, the lender who bought all of the debtor’s senior first-lien secured debt at par will be paid only interest over a period of four years before its loan matures. SeeIn re DBSD North America, Inc., 419 B.R. 179, 207-08 (Bankr.
On April 16, 2009 and April 22, 2009, General Growth Properties, Inc. (“GGP”) and certain of its subsidiaries (the “Debtors”), including many subsidiaries structured as special purpose entities (the “SPE Debtors”), filed voluntary petitions for relief under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of New York (the “Court”).
The Fourth Circuit, on June 15, 2007, affirmed the dismissal of a Chapter 11 reorganization petition filed by a tenant debtor in a commercial lease dispute. Maryland Port Administration v. Premier Automotive Services, Incorporated (In re Premier Automotive Services, Incorporated), ___ F.3d ___, 2007 WL 1721951 (4th Cir. 6/15/07).
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.
This Installment will address the potential legal disabilities that exist under the New York Debtor and Creditor Law for the Wilpon/Katz families, the owners of the New York Mets (collectively, the “Wilpon Interests”), in their effort to sell a minority interest(s) in the Mets, in light of the existence of the lawsuit against them (the “Wilpon Case”) by Irving Picard, the Trustee in the Bernard L. Madoff bankruptcy.
Summary
In a 24 page decision signed July 8, 2011, Judge Walrath of the Delaware Bankruptcy Court granted a motion to for summary judgment, holding a non-debtor defendant liable with the Debtor as a single employer for alleged WARN Act violations. Judge Walrath’s opinion is available here (the “Opinion”).
Background
On April 1, 2010, Judge Kevin J. Carey , Chief Judge of the United States Bankruptcy Court for the District of Delaware issued an opinion (the "Opinion") in the Spansion bankruptcy rejecting the Debtor's proposed plan of reorganization.