In U.S. Capital Bank N.A. v. Village at Lakeridge, LLC, No. 15-1509 (U.S. Mar. 5, 2018), the U.S. Supreme Court held that an appellate court should apply a deferential standard of review to a bankruptcy court's decision as to whether a creditor is a "nonstatutory" insider. Nonstatutory insiders are creditors who are not specifically designated as insiders under the Bankruptcy Code (such as officers, directors, and controlling shareholders), but who the bankruptcy court determines nonetheless have sufficient influence over a debtor to be deemed insiders.

Safe Harbor Protection Generally

In general, a trustee or debtor-in-possession in a bankruptcy has the power to avoid certain prepetition transfers made by a Debtor. The most common of these are fraudulent transfers and preference payments. But this avoiding power is not unlimited. It is subject to a number of codified exceptions and defenses. And one such exception that has been used to shield an increasing number of transactions is the securities “safe harbor” provision found in section 546(e) of the Bankruptcy Code.

Zohar III, Corp., along with five of its subsidiaries and affiliates, has filed a petition for relief under Chapter 11 in the Bankruptcy Court for the District of Delaware (Lead Case No. 18-10512).

On March 7, the U.S. Court of Appeals for the 2nd Circuit denied a bank’s motion to compel arbitration, holding that arbitration of the debtor’s claims would present an inherent conflict with the intent of the Bankruptcy Code because the dispute concerns a core bankruptcy proceeding.

The Court of Appeals for the Ninth Circuit revived a chapter 13 debtor’s bankruptcy case holding that the bankruptcy court below made no specific finding that the debtor violated the Controlled Substance Act (“CSA”) to support dismissal of the case.

On March 8, the CFPB issued a final rule updating technical aspects of the upcoming periodic statement requirements for borrowers in bankruptcy under Regulation Z.

Last week, in Merit Management Group, LP v. FTI Consulting, Inc.1 the Supreme Court settled a split in the circuit courts, unanimously holding that the safe harbor provision created by 11 U.S.C. § 546(e), 11 U.S.C.

Under newly issued guidance, the IRS has made it easier for many tax-exempt organizations to restructure.

The IRS will now continue to recognize as exempt, those organizations that:

•             change their structure from an unincorporated association to a corporation;

•             reincorporate from one state to another;

It’s been an interesting couple of weeks for bankruptcy at the United States Supreme Court with two bankruptcy-related decisions released in back-to-back weeks. Last week, the Supreme Court issued an important decision delineating the scope of section 546(e) of the Bankruptcy Code (discussed here [1] for those who missed it).

In September, we reported on the possible bankruptcy of Connecticut’s capital city and questioned whether anything short of a State-led bailout could save the City from its crippling deficit and mounting debt service payments. Recent news reports suggest that the State is finally ready to come to the rescue.