Yes, says the Third Circuit. The Third Circuit recently held that the Bankruptcy Court has the authority to confirm a chapter 11 plan which contains nonconsensual, third-party releases when such releases are integral to the successful reorganization. The court’s decision in In re Millennium holds that, when the third-party releases are integral to the restructuring of the debtor-creditor relationship, the Bankruptcy Court has the constitutional authority to approve nonconsensual, third-party releases.
Background
In 2007, Philadelphia Entertainment and Development Partners, LP dba Foxwoods Casino Philadelphia (“Plaintiff”) secured a gaming license from Pennsylvania for $50,000,000 with the understanding that it open its casino business within one year. Plaintiff failed to do so and, despite a number of extensions, Pennsylvania cancelled and revoked the gaming license in December 2010. Without a gaming license, Plaintiff found itself in chapter 11 by spring of 2014.
As we had anticipated in our prior client alerts,1 the “customer” safe harbor defense to constructive fraudulent conveyance claims challenging securities transactions — which was flagged by the U.S.
A version of this article previously appeared in the December 2019 issue of the Receiver, a publication of the National Association of Federal Equity Receivers.
The work of a receiver can be a difficult balancing act. With various creditors and debts that need to be paid, there can be a long and meticulous resolution process. In order for receivers to protect themselves from the risk of personal liability for claims made by the government, it is imperative that receivers understand the Federal Priority Act (“FPA”).
A secured lender’s “mere retention of property [after a pre-bankruptcy–repossession] does not violate” the automatic stay provision [§ 362(a)(3)] of the Bankruptcy Code (“Code”), held a unanimous U.S. Supreme Court on Jan. 14, 2021. City of Chicago v. Fulton, 2021 WL 125106, *4 (Jan. 14,2021). Reversing the Seventh Circuit’s affirmance of a bankruptcy court judgment holding a secured lender in contempt for violating the automatic stay, the Court resolved “a split” in the Circuits. Id., at *2. The Second, Eighth and Ninth Circuits had agreed with the Seventh Circuit.
The U.S. Court of Appeals for the Fifth Circuit recently reversed the denial of a lender’s motion to compel arbitration in an adversary bankruptcy proceeding for allegedly violating the federal Truth in Lending Act (TILA), holding that — despite conflicting clauses in two different relevant agreements — the parties had entered into a valid arbitration agreement that delegated the threshold issue of arbitrability to the arbitrator.
The U.S. Supreme Court set new precedent on January 14, 2020 when it decided that a ruling from a bankruptcy court enforcing a Chapter 11 automatic stay is a final order that must be appealed within 14 days as set forth in the Federal Rules of Bankruptcy Procedure.
In re Markus, 607 B.R. 379 (Bankr. S.D.N.Y. 2019) [click for opinion]
A party who believes that a bankruptcy court erred in either granting or denying relief from the automatic stay needs to act fast to appeal such a decision. In the recently decided case of Ritzen Group, Inc. v. Jackson Masonry, LLC, the U.S. Supreme Court held that: “[A]djudication of a motion for relief from the automatic stay forms a discrete procedural unit within the embracive bankruptcy case” which “yields a final, appealable order when the bankruptcy court unreservedly grants or denies relief.”
On December 20, 2019, Judge Marvin Isgur in the U.S. Bankruptcy Court for the Southern District of Texas (Houston Division) entered a memorandum opinion which held that debtors' midstream gathering agreements formed real property covenants "running with the land" under Oklahoma law - and such agreements could not be subject to rejection under section 365 of the Bankruptcy Code. See 11 U.S.C. section 365(a) (allowing a debtor-in-possession, "subject to the court's approval," to "assume or reject any executory contract.").