A recent decision from the Bankruptcy Court of the Southern District of New York has rendered the enforcement of reclamation claims that arose 20 days prior to the bankruptcy filing almost impossible in cases in which there is a prepetition lien on inventory.

In In re Dana Corp., 2007 WL 1199221 (Bankr. S.D.N.Y. Apr. 19, 2007) there was $300 million in reclamation claims asserted, but the debtor estimated that valid reclamation claims totaled only approximately $3 million.

The United States Court of Appeals for the Second Circuit on Aug. 30, 2007, affirmed the dismissal of a lender liability class action brought by employees of a defunct originator and seller of mortgages and home equity loans. 2007 U.S. App. LEXIS 20791 (2d Cir. August 30, 2007). Agreeing with the district court, the Second Circuit held that the lender was not an "employer" within the meaning of the Worker Adjustment & Retraining Notification Act ("WARN Act"), and thus was not liable to the employees for the sudden loss of their jobs. Id., at *2.

The U.S. Court of Appeals for the Seventh Circuit has held that a dragnet clause within a master security agreement was effective, even though a subsequent loan agreement remained silent as to whether pre-existing collateral secured the new advance. Universal Guaranty Life Ins. Co. v. Coughlin, 481 F.3d 458 (7th Cir., March 14, 2007).

The Worker Adjustment and Retraining Notification Act (“WARN”) requires an employer to give 60 days’ advance written notice prior to a plant closing or mass layoff. Frequently, as a company encounters financial distress—a situation that often leads to a plant closing or mass layoff— creditors exercise greater control over the entity in an attempt to recover debts owed to them. When the faltering company fails to provide the requisite WARN notice, terminated employees often assert that WARN liability should attach to such creditors. In Coppola v. Bear, Stearns & Co.

On April 9, 2008, the US Bankruptcy Court for the District of Delaware issued its opinion in Miller v. McDonald, et al., 2008 WL 1002035 (Bkrtcy.D.Del.), in which it held that the general counsel of a public company had a duty to implement a system that would provide reasonable monitoring to prevent corporate wrongdoing. The court found that the general counsel’s duty arose from two sources. First, Delaware law imposes a duty on directors and senior officers to implement a system that would provide reasonable monitoring of corporate activity.

Customers dealing with troubled automotive suppliers often decide to resource production to other suppliers rather than facilitate a true restructuring of the troubled supplier's business. Such resourcing, however, generally cannot be done overnight. Tier 1 suppliers or original equipment manufacturers ("OEMs") often take months to resource production. Because of the "just in time" production process, Tier 1 suppliers and OEMs often cannot afford to be without component parts or tooling for the period of time that it may take to resource.

For the third time in as many years, the Delaware Chancery Court has handed down an important ruling interpreting the interaction between federal bankruptcy law and Delaware corporate law. The thorny question this time was whether a bankruptcy court’s determination that the directors of a corporation acted in good faith when they authorized a chapter 11 filing precluded a subsequent claim that the directors breached their fiduciary duties by doing so. The Delaware Chancery Court concluded that it did, ruling in Nelson v.

The United States Bankruptcy Court for the District of Delaware on May 30, 2008, issued a memorandum opinion in which it refused to dismiss claims of breach of fiduciary duty against directors and officers of a company who approved the sale of the company’s assets on the eve of its filing for bankruptcy protection. In issuing its opinion inIn re Bridgeport Holdings Inc., the court provided some guidelines for directors and officers, particularly during challenging economic times.

In the wake of recent bankruptcy filings by several prominent financial institutions, there’s a growing interest in changing standard credit documentation to address the risks of defaulting lenders and nonperforming administrative agents. Here are credit agreement provisions that financial institutions, acting as swingline lenders and letter of credit issuers, can require to protect themselves against the risk of a defaulting lender.

Introduction