“Federal law does not prevent a bona fide shareholder from exercising its right to vote against a bankruptcy petition just because it is also an unsecured creditor,” held the U.S. Court of Appeals for the Fifth Circuit on May 22, 2018. In re Franchise Services of North America Inc., 2018 WL 2325909, *1 (5th Cir. May 22, 2018). According to the court, applicable Delaware law would not “nullify the shareholder’s right to vote against the bankruptcy petition.” Id.

Relevance

Claims held by employees of a Chapter 11 debtor based on “restricted stock units (‘RSUs’) … must be subordinated [under Bankruptcy Code § 510(b)] to the claims of general creditors because … (i) RSUs are securities, (ii) the claimants acquired them in a purchase, and (iii) the claims for damages arise from those purchases or the asserted rescissions thereof,” held the U.S. Court of Appeals for the Second Circuit on May 4, 2017. In re Lehman Brothers Holdings, Inc., 2017 U.S. App. LEXIS 7920, *6 (2d Cir. May 4, 2017).

Parties to an appeal who condition a settlement on the vacating of the lower court’s judgment “may still [have] an appropriate remedy,” held the U.S. Court of Appeals for the Eleventh Circuit on July 12, 2016. Hartford Cas. Ins. Co. v. Crum & Forster Specialty Ins. Co., 2016 U.S. App LEXIS 12813, *15 (11th Cir. July 12, 2016). Reversing the district court’s “narrow” refusal to vacate its judgment after the parties had settled, the Eleventh Circuit found that “exceptional circumstances” warranted the vacatur. Id., at *3, *14.

A secured lender had to “pay the [encumbered] Property’s maintenance expenses incurred while the [bankruptcy] trustee was trying to sell the Property,” held the U.S. Court of Appeals for the Fifth Circuit on Dec. 29, 2015. In re Domistyle, Inc., 2015 WL 9487732, at *1 (5th Cir. Dec. 29, 2015).

A Chapter 11 debtor’s reorganization plan purporting to cure a default under a pre-bankruptcy loan agreement must pay “the agreed-upon default rate interest,” consistent with “the underlying agreement” and the “applicable nonbankruptcy law,” held the U.S. Court of Appeals for the Eleventh Circuit on Aug. 31, 2015. In re Sagamore Partners, Ltd., 2015 WL 5091909, at *4 (11th Cir. Aug. 31, 2015).

In an August 2014 Alert,¹ we reported that (most of) the Banking Recovery and Resolution Directive (‘BRRD’)2 that was adopted on 15 May 2014 was required to be implemented by the EU Member States through local legislation by 1 January 2015.

The New York Court of Appeals, on July 1, 2014, in response to questions certified by the U.S. Court of Appeals for the Second Circuit, held that “pending hourly fee matters are not [a dissolved law firm’s] ‘property’ or ‘unfinished business’” under New York’s Partnership Law. In re Thelen LLP, __ N.Y.3d __, slip op. at 2 (July 1, 2014); see In re Thelen LLP, 213 F.3d 213, 216 (2d Cir. 2013).

The U.S. Court of Appeals for the Fifth Circuit held on August 5 that a secured lender’s disputed “lien on [the debtor’s] principal asset survived . . . confirmation of [the debtor’s] Chapter 11 . . . reorganization plan” because the lender had not participated in the bankruptcy case.S. White Transportation, Inc. v. Acceptance Loan Co., 2013 WL 3983343, *1,*3 (5th Cir. Aug. 5, 2013). Had the lender participated in the case, the court reasoned, its lien might have been avoided.Id., at *1, citingIn re Ahern Enterprises, Inc., 507 F.3d 817, 822 (5th Cir.

A New York bankruptcy court recently held that a losing acquiror in a competing Chapter 11 plan fight had “standing” to seek reimbursement of its legal fees and expenses as a “substantial contribution” to the reorganization case. In re S & Y Enterprises, LLC, et al., 2012 Bankr. LEXIS 4622, at *4-*5 (Bankr. E.D.N.Y., September 28, 2012). Nevertheless, the losing acquiror failed to recover because, in the court’s view, it did not satisfy the statutory requirements for reimbursement with the requisite “preponderance of the evidence.” Id.

The U.S. Court of Appeals for the Second Circuit, on Dec. 2, 2011, ruled in favor of SRZ client Alfa, S.A.B. de C.V., denying Enron’s petition for rehearing in Enron Creditors Recovery Corp. v. Alfa, S.A.B. de C.V., 651 F.3d 329 (2d Cir. 2011). The court had previously ruled against Enron more than five months ago, holding that its redemptions of commercial paper were “settlement payments” and thus not voidable as preferential or fraudulent transfers under Bankruptcy Code § 546(e), one of the code’s so-called “safe harbor” provisions.