On August 9, 2006, Judge Burton R. Lifland of the United States Bankruptcy Court for the Southern District of New York entered a Final Order Establishing Procedures for Trading in Claims and Equity Securities of Dana Corporation (the “Dana NOL Trading Order”). The Dana NOL Trading Order is materially different from NOL trading orders that have been approved by other bankruptcy courts and, from the perspective of investors in claims and distressed securities, represents a material improvement.

Treatment of NOLs in Business Reorganizations

In In re Arch Wireless,1 the United States Court of Appeals for the First Circuit held that a creditor who asserted claims against the debtor in various correspondence between the parties was a “known” claimant of the debtor’s estate entitled to direct notice of the bar date by which it must file a proof of claim. The Court of Appeals concluded that publication notice was insufficient to inform the creditor of the bar date or of the terms of the confirmed plan, even though the creditor was generally aware of the debtor’s bankruptcy filing.

In Go West Entertainment, Inc. v. New York Liquor Authority (In re Go West Entertainment, Inc.),1 the United States Bankruptcy Court for the Southern District of New York refused to extend the automatic stay or to utilize its other injunctive powers to prevent state regulatory authorities from revoking a debtor’s liquor license.

In Bear Stearns High-Grade Structured Credit Strategies Master Fund, Ltd.,1 the United States Bankruptcy Court for the Southern District of New York refused to allow the foreign representatives of two Bear Stearns funds2 to institute ancillary proceedings under new chapter 15 of the United States Bankruptcy Code. There, Judge Lifland held that, even though the Funds were in liquidation proceedings in the Cayman Islands, those proceedings constituted neither “foreign main” nor “foreign non-main” proceedings for purposes of the U.S.

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.

On May 4, 2012, Judge J. Paul Oetken of the United States District Court of the Southern District of New York held that the Bankruptcy Court has the injunctive power to enforce the automatic stay against entities falling within the Bankruptcy Court’s in personam jurisdiction, and that, in this case, the enforcement of the automatic stay did not violate interests of comity.  Sec. Investor Prot. Corp v. Bernard L. Madoff Inv. Sec., LLC (In re Bernard L. Madoff Inv. Sec., LLC), No. 11 Civ. 8629 (JPO), 2012 WL 1570859 (S.D.N.Y. May 4, 2012).  

In re Vitro, S.A.B de C.V v. ACP Master, Ltd., et al., Case No. 11-33335-HDH-15 (N.D. Tex. 2011), is a decision by a bankruptcy court but contains discussion of the issue often arising in contentious international litigation:  attempts to enjoin proceedings in other countries in favor of proceedings in the U.S., or attempts to enjoin proceedings in the U.S.

In two recent decisions, the United States Bankruptcy Court for the Southern District of New York has interpreted narrowly certain of the Bankruptcy Code’s safe harbor provisions.  

In the W.R. Grace bankruptcy, the United States Court of Appeals for the Third Circuit recently reaffirmed its prior rulings on the controversial issue of a bankruptcy court’s power to enjoin actions by third parties against non-debtors.1 Resting on prior precedent, the Third Circuit held that bankruptcy courts lack subject matter jurisdiction to enjoin third party actions that have no direct effect upon the bankruptcy estate.