The Ninth Circuit recently held that: (1) bankruptcy courts lack the constitutional authority to enter a final judgment on all fraudulent transfer claims against non-claimants, whether brought under state or federal law, and (2) a defendant can waive such an argument by not asserting the applicability of Stern v. Marshall1 at the trial level.2 Further, in dicta, the court noted that bankruptcy courts may issue proposed findings of fact and conclusions of law in matters in which the bankruptcy court cannot issue final orders.
In re Zais Investment Grade Ltd. VII1 is the latest in a recent line of bankruptcy cases challenging bedrock assumptions regarding securitization special purpose entities (SPEs) and bankruptcy considerations in securitization transactions.2 Zais establishes precedent allowing a senior noteholder of a collateralized debt obligation (CDO) to place the CDO issuer in an involuntary chapter 11 bankruptcy in order to advance an asset management plan that would otherwise require supermajority approval of all noteholders (including all junior classes) under the related indenture.
Judge John Koeltl in the U.S. District Court for the Southern District of New York recently denied a motion to dismiss a securities class action arising, in part, from the Lehman Brothers bankruptcy filing.
On May 26, Lehman Brothers Holdings Inc. (LBHI) filed a motion requesting the U.S. Bankruptcy Court for the Southern District of New York to establish August 24 as the deadline for filing proofs of claim against LBHI and its affiliates, and to establish a procedure for such filing, including a required form to be completed online relating to derivatives claims, and a new proof of claim form specific to this case.
The District Court sustained claims of breach of fiduciary duty, fraud and deepening insolvency asserted by the successor-in-interest to the Committee of Unsecured Creditors of DVI, a defunct company, against DVI’s former officers and directors.
Overview
The bankruptcy court overseeing the Lehman Brothers chapter 11 cases rejected efforts by Lehman Brothers Special Financing Inc. (LBSF) to recover roughly $1 billion in payments made to numerous noteholder defendants from the liquidation of collateral originally pledged to secure both obligations under notes issued by special purpose entities and credit default swap (CDS) obligations to LBSF, holding that the termination of the swap and liquidation and distribution of the collateral were protected by the Bankruptcy Code’s safe harbor.
Six trade associations representing non-dealer swap market participants sent a letter to the Financial Stability Board on November 4, urging the FSB to reconsider its initiative to promote contractual waivers of default rights under industry-standard derivative master agreements. The letter, signed by the Managed Funds Association, the Alternative Investment Management Association Limited, the American Council of Life Insurers, the Association of Institutional Investors, the Commodity Customer Coalition and the Commodity Markets Council, responds to comments made by the FSB in the cons
The US House of Representatives Financial Services Subcommittee on Oversight and Investigations (Committee) has released a report on the collapse of MF Global (Report). The Report finds that Jon Corzine, MF Global’s Chairman and CEO, made a number of decisions that ultimately caused MF Global’s bankruptcy. The Committee also found fault with the regulatory agencies, rating agencies and the New York Federal Reserve Board, among others.
The scenario has become all too familiar in recent years: a borrower defaults on a loan and, when the lender pursues the loan collateral through foreclosure or other proceedings, the borrower files for bankruptcy protection. More often than not, when the lender appears in bankruptcy court to pursue its interest in the collateral, the borrower counterattacks with a host of state law lender liability claims.