The bankruptcy of the largest U.S. city to file a chapter 9 bankruptcy petition has yielded a decision with serious implications for municipal creditors. Specifically, the United States Bankruptcy Court for the Eastern District of California overruled the objections asserted by retired employees of the City of Stockton, California and authorized the City to suspend the retiree’s health benefits during the City’s Chapter 9 case. Ass’n of Retired Employees of the City of Stockton, et al. v. City of Stockton, California (In re City of Stockton), 56 Bankr.Ct.Dec. 250 (Bankr. E.D.

The long ELNY saga continues, at least for the time being, with two recent developments.

Sec. Investor Prot. Corp. v. Bernard L. Madoff Inv. Secs., 474 B.R. 76 (2012)

The trustee for the Securities Investor Protection Act ("SIPA") liquidation of Bernard L. Madoff Investment Securities LLC ("BLMIS") filed a complaint in the bankruptcy court against Maxam Absolute Return Fund Ltd. ("Maxam"), seeking the return of about $100 million distributed to Maxam by BLMIS.  Maxam answered the complaint and then sued the trustee in the Cayman Islands seeking a declaration that it was not required to return the money. 

Earlier this week we reported that St. Louis County’s foreclosure mediation ordinance was set to be effective today, September 28, 2012. However, a St.

In the first decision, the U.S. Court of Appeals for the Sixth Circuit affirmed the district court decision, concluding that a defendant’s bankruptcy filing does not prevent the district court from ruling on a contempt motion for violation of a temporary restraining order protecting plaintiff’s trademarks.  Dominic’s Restaurant of Dayton, Inc. v. Mantia, Case Nos. 10-3376; -3377 (6th Circuit July 5, 2012) (Batchelder, C.J.; McKeague, J.; Quist, D.J., sitting by designation).

Channel 1 – Thorpe Insulation Addresses Insurer Standing to Object to Plan and Assignability of Insurance Contracts to Plan Trusts

Bottom Line:

Baker Hostetler serves as court-appointed counsel to Irving H. Picard, SIPA Trustee for the liquidation of Bernard L. Madoff Securities LLC (“BLMIS”). In January of 2011, the SIPA Trustee obtained approval from the United States Bankruptcy Court for a $5 billion settlement for BLMIS customers with allowed claims. At the same time, the Bankruptcy Court also issued a permanent injunction with respect to claims that were duplicative or derivative of the SIPA Trustee’s claims. After an appeal, the District Court affirmed the settlement and the injunction in March of 2012.

On June 13, 2012, Judge Harlin D. Hale of the United States Bankruptcy Court for the Northern District of Texas refused to enforce provisions of a Mexican plan of reorganization that purported to extinguish guarantees by the debtor’s non-debtor subsidiaries.  In refusing to enforce the non-debtor release, Judge Hale held both that the release of non-debtor guarantors was contrary to United States public policy and that the release did not merit enforcement under the specific criteria of chapter 15 for granting relief to a foreign debtor.

On May 30, 2012, the United States Court of Appeals for the Eleventh Circuit held that a bankruptcy court in one federal district lacks jurisdiction to determine whether a debt was discharged under a chapter 11 plan confirmation order issued by a bankruptcy court in another federal district.  Alderwoods Group, Inc. v. Garcia, 1:10-cv-20509-KMM, 2012 U.S. App. LEXIS 10891 (11th Cir. May 30, 2012).  The decision makes it clear that a debtor must seek enforcement of its discharge order in the same federal court that granted the discharge in the first place.

In a decision further defining when US public policy restricts the relief a court may grant in aid of a foreign restructuring or insolvency proceeding, the Bankruptcy Court in the Chapter 15 case of Vitro, S.A.B. de C.V. v. ACP Master, Ltd. (In re Vitro, S.A.B. de C.V.), Ch. 15 Case No. 11-33335-HDH-15, 2012 WL 2138112 (Bankr. N.D. Tex. Jun. 13, 2012) refused to a enforce a Mexican restructuring plan that novated and extinguished the guaranty obligations of the Mexican debtor’s non-debtor subsidiary guarantors.