Baker Hostetler serves as court-appointed counsel to Irving H. Picard, SIPA Trustee for the liquidation of Bernard L. Madoff Securities LLC (“BLMIS”). In January of 2011, the SIPA Trustee obtained approval from the United States Bankruptcy Court for a $5 billion settlement for BLMIS customers with allowed claims. At the same time, the Bankruptcy Court also issued a permanent injunction with respect to claims that were duplicative or derivative of the SIPA Trustee’s claims. After an appeal, the District Court affirmed the settlement and the injunction in March of 2012.

In a unanimous decision, the U.S. Supreme Court held that debtors may not obtain confirmation of a Chapter 11 cramdown plan that provides for the sale of collateral free and clear of a creditor’s lien but does not permit the creditor to credit-bid at the sale. InRadlax Gateway Hotel, LLC et al. v.

The United States Court of Appeals for the Third Circuit recently issued an important decision on the valuation of collateral of secured creditors and “lien-stripping” in Chapter 11 cases. In In re Heritage Highgate, Inc.,¹ the court held that in a Chapter 11 case, the value of a secured creditor’s collateral under §506(a) of the Bankruptcy Code² was the fair market value of the property as established by expert testimony and it was permissible to “strip the lien” of the creditor where it was unsupported by collateral value.

Section 541(a) of the Bankruptcy Code creates a worldwide estate comprising all of the legal or equitable interests of the debtor, “wherever located,” held by the debtor as of the filing date.¹ The Bankruptcy Code’s automatic stay, in turn, applies “to all entities” and protects the debtor’s property and the bankruptcy court’s jurisdiction by barring “any act to obtain possession of property of the estate . . .

On March 28, 2012, the Minnesota Legislature gave final passage to HF 382, a comprehensive revision of Minnesota statutes governing receiverships and assignments for the benefit of creditors (ABCs) in the state. Following signature by the governor (which is expected), the new statutes will take effect on August 1, 2012. Sponsored by the Minnesota State Bar Association and its Business Law and Real Property Sections, the new statutes are the product of more than two years of work by a committee of Minnesota lawyers and receivers.

Receiverships

A court affirmed the denial of W.R. Grace & Co.’s asbestos insurance claims against the liquidation estate of Grace’s insolvent excess-of-loss insurer, on the ground that Grace failed to submit timely “absolute” claims under New Jersey’s version of the Uniform Insurers Liquidation Act. Grace, which has been undergoing bankruptcy restructuring, had established a plan with a creditor’s committee to create a trust to pay asbestos claims.

The usual Friday release of a large number of letter rulings by the IRS included several rulings of interest on reorganizations and consolidated return issues.

Chapter 15 of the Bankruptcy Code was enacted in 2005 to create a procedure to recognize an insolvency or debt adjustment proceeding in another country and to, in essence, domesticate that proceeding in the United States. Once a foreign proceeding is “recognized,” a step which cannot be achieved without a foreign representative satisfying various requirements, the foreign representative may obtain certain protections from a United Stated bankruptcy court, including the imposition of the automatic stay to protect the foreign debtor’s property in the United States.

Reliance Insurance Company in Liquidation (the “Liquidator”) petitioned a Pennsylvania state court for a declaratory judgment holding that Aramark Corporation must reimburse certain state guaranty associations (“GAs”) for claims allegedly improperly paid to Aramark and subsequently presented to the Reliance Estate by the GAs for payment. The Liquidator also sought a declaration that Aramark’s claims against the Estate should be given low priority.

Many creditors have had the unfortunate experience of receiving a demand letter or adversary complaint alleging that they received avoidable transfers—commonly known as "preferential payments" or "preferences"—during the 90 days preceding a customer's federal bankruptcy filing. Such claims arise under section 547 of the Bankruptcy Code, and can result in a creditor having to return certain payments made during the 90-day preference period.