The Bottom Line:
Summary
The United States Supreme Court has unanimously held that federal bankruptcy law does not preclude an unsecured creditor from recovering attorney’s fees authorized under a prepetition contract and incurred postpetition in bankruptcy-related litigation with the debtor.
The district court in Hartford Accident & Indemnity Company, et al. v. American Capital Equipment, et al., No. 06-0891 (U.S. Dist. Ct. W.D. Pa. May 11, 2007), affirmed that Skinner Engine Company's insurers have standing to move to dismiss Skinner's chapter 11 bankruptcy case and to challenge its bankruptcy plan. However, the court also affirmed the bankruptcy court's denial of the insurers' motion to dismiss the bankruptcy case.
In North American Catholic Educational Programming Foundation, Inc. v. Gheewalla, 2007 WL 1453705 (Del. May 18, 2007), the Delaware Supreme Court, in a case of first impression, provided some clarity on the controversial issue of whether and to what extent creditors have the ability to assert fiduciary duty claims against directors.
In a significant Delaware law decision regarding creditors’ ability to sue corporate fiduciaries, the Delaware Supreme Court recently addressed the issue of whether a corporate director owes fiduciary duties to the creditors of a company that is insolvent or in the “zone of insolvency.” In North American Catholic Educ. Programming Found., Inc. v. Gheewalla, the court concluded that directors of a solvent Delaware corporation that is operating in the zone of insolvency owe their fiduciary duties to the corporation and its shareholders, and not creditors.
The decision of the U.S. Bankruptcy Court in Hutson v. Smithfield Packing Co. (In re National Gas Distributors, LLC)1 poses potentially serious problems for parties trading gas under the North American Energy Standards Board (NAESB) base contract. The U.S. Court of Appeals for the Fourth Circuit will soon review this case of first impression about what constitutes a “swap agreement” under the expanded definition included in the U.S. Bankruptcy Code after the 2005 amendments.
The U.S. Court of Appeals for the Fourth Circuit recently issued an opinion, reversing an earlier bankruptcy court ruling that had revived the question of whether a physical supply contract may qualify as a forward contract or swap agreement for purposes of the Bankruptcy Code. Previously, the bankruptcy court for the Eastern District of North Carolina ruled that what it termed a simple supply contract between a natural gas seller and an end-user, as a matter of law, does not constitute a swap agreement.
We have previously reported on the procedurally tortured case between the New York Insurance Department, as liquidator of Nassau Insurance Company, and Jeanne Di Loreto to recover assets contended to have been diverted from Nassau. In the latest salvo, defendants New York Insurance Department, William Costigan, and Eric DiNallo, Mark Peters and Andrew Lorin separately moved to dismiss plaintiff Di Loreto’s Complaints seeking to prevent execution of a judgment obtained against her by the New York Liquidation Bureau.
Metropolitan Insurance Company has joined ING Clarion Capital Loan Services, Inc., Wells Fargo Bank, N.A., and FRM Funding Company, Inc in requesting the Bankruptcy Court to dismiss as bad faith filings the bankruptcy cases of twenty-one property level CMBS borrower subsidiaries of General Growth Properties, Inc. ING filed the first motion on May 4th with respect to eight debtors, and a hearing was set for May 27th. That hearing was subsequently adjourned to June 17th. Creditors having similar motions to be heard on June 17th were required to file their motions to dismiss by May 29th .