The U.S. Court of Appeals for the Third Circuit held on Feb. 3, 2009, that a debtor’s “strategic partnership” vendor was liable as a non-statutory insider for preferential payments it received approximately four months prior to the debtor’s bankruptcy. In re Winstar Communications, Inc., ___F.3d ___, 2009 U.S. App. LEXIS 1953, at *1 (3d Cir. 2/3/09). The court affirmed the bankruptcy court’s judgment (an 88-page decision with detailed fact findings), rendered after a 21-day bench trial that included 1,400 exhibits and 39 witnesses.

A lender’s right to recover a make-whole premium as part of its allowed claim in a bankruptcy case has been the subject of several recent court decisions. A Delaware bankruptcy court recently allowed a make-whole premium of $23.7 million on a $67 million term loan^[1] and found that the premium was not “plainly disproportionate” to the creditor’s possible loss. As a result, the make-whole was not an unenforceable penalty under New York law. In re School Specialty, Inc., No. 13-10125, Slip Op. (Bankr. D. Del. Apr. 22, 2013).^[2]

Facts

The Ninth Circuit’s Bankruptcy Appellate Panel (the “BAP”) held on July 18, 2008, that the Bankruptcy Code (“Code”) did not authorize a bankruptcy court’s approving the sale of a debtor’s property free and clear of a junior lien outside the reorganization plan context. In re PW, LLC __ B.R. __, 2008 WL 2840659 (B.A.P. 9th Cir. July 18, 2008). It directed the bankruptcy court to ascertain on remand whether state law permitted a court to compel the junior lienholder to release its lien in exchange for payment of less than the face value of its claim. Id., at *13-*16.

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 Tenth Circuit held on July 15, 2008, that a major creditor with a seat on the debtor’s board of directors and a 10.6% equity interest was not an insider in a bankruptcy preference suit. In re U.S. Medical, Inc., 2008 WL2736658 (10th Cir. 7/15/08).

Revised Bankruptcy Rule 2019, which governs disclosure requirements for groups and committees in Chapter 9 and 11 bankruptcy cases, went into effect on Dec. 1, 2011. The following is a summary of a few key facets of the new rule.

Who?

The Ninth Circuit held on July 3, 2008, that an oversecured creditor’s claim for payment was entitled to a “presumption in favor of the loan agreement’s default rate (an additional 2% interest), subject only to reduction based upon any equities involved.” General Elec. Capt’l Corp. v. Future Media Productions, Inc., 2008 WL2610459, *2 (9th Cir. 7/3/08). Reversing the lower courts, the Court of Appeals held that the bankruptcy court had improperly applied a questionable Ninth Circuit precedent when denying the lender a default rate of interest. Id., at *4.

In the decision of Motors Liquidation Co. Avoidance Action Trust v. JPMorgan Chase Bank, N.A. (In re Motors Liquidation Co.), 552 B.R. 253 (Bankr. S.D.N.Y. 2016), the SDNY bankruptcy court held that prepetition interest payments on a term loan did not qualify as “settlement payments” under Section 546(e) of the Bankruptcy Code.

Introduction

On August 7,  2009, Meridian Automotive Systems ("Meridian") filed a voluntary petition for relief under chapter 7 of the United States Bankruptcy Code.  Soon after Meridian filed its petition for bankruptcy, the Office of the United States Trustee appointed George L.