Southeastern Grocers (operator of the Winn-Dixie, Bi Lo and Harvey’s supermarket chains) recently completed a successful restructuring of its balance sheet through a “prepackaged” chapter 11 case in the District of Delaware. As part of the deal with the holders of its unsecured bonds, the company agreed that under the plan of reorganization it would pay in cash the fees and expenses of the trustee for the indenture under which the unsecured bonds were issued.

As an officer of the court every attorney is held accountable to the standards set forth in the Rules of Professional Conduct. In bankruptcy court, attorneys are held to additional standards set forth in local bankruptcy law. A violation of the rules can result in harsh sanctions as attorney Richard Gates discovered in In re Gates, Misc. Case No. 18-00301-KRH (Bankr. E.D. Va. Apr. 5, 2018).

The bankruptcy of Energy Future Holdings has spawned numerous decisions in the various segments of its Chapter 11 case. Yet another such decision was handed down by the U.S. District Court for the District of Delaware in March of this year, in which the court addressed the question of what constitutes collateral, and proceeds of collateral, in a complex Chapter 11 reorganization.

The U.S. Court of Appeals for the Ninth Circuit held that a party with a pecuniary interest affected by a bankruptcy court order satisfies the “person aggrieved” requirement for appellate standing even where the party fails to appear and object in the bankruptcy proceeding.

Accordingly, the Ninth Circuit reversed the district court’s dismissal of the appeal for lack of standing and remanded the case.

On May 22, 2018, the United States Court of Appeals for the Fifth Circuit issued its decision in Franchise Services of North America v. United States Trustees (In re Franchise Services of North America), 2018 U.S. App. LEXIS 13332 (5th Cir. May 22, 2018). That decision affirms the lower court’s holding that a “golden share” is valid and necessary to filing when held by a true investor, even if such investor is controlled by a creditor.

Just last month, the Bankruptcy Cave reported upon a Southern District of Texas case in which a debtor was denied discharge of a debt owed to an old (and likely former!?!) friend from church who had been required to pay off a student loan made to the debtor which the friend had guaranteed. Today we report another case involving friends and family and non-dischargeable student debt from the U.S.

On June 4, 2018, the U.S. Supreme Court ruled in Lamar, Archer & Cofrin, LLP v. Appling, No. 16-1215, 138 S. Ct. 1752, 2018 WL 2465174 (U.S. June 4, 2018),  that an individual debtor's false statement about a single asset, as distinguished from the debtor's overall financial status, can make a debt for money, property, services, or credit obtained on the basis of the statement nondischargeable in the debtor's bankruptcy case, but only if the statement is in writing.

The Bottom Line

On May 25, 2018, the United States Court of Appeals for the Second Circuit confirmed in re Sabine Oil & Gas Corp.1 that a midstream gathering agreement did not create a real covenant that ran with the land,2 and therefore, a debtor may reject the agreement as an “executory contract” under section 365 of the Bankruptcy Code.3

There has been a recent rash of discussions on whether foreign trusts are truly better for asset protection purposes than DAPTS (domestic asset protection trusts), especially DAPTs created by someone who does not reside in one of the states that has enacted DAPT law.