The Bottom Line

In Gavin/Solmonese LLC, Liquidation Trustee for the Citadel Creditors’ Grantor Trust, successor to Citadel Watford City Disposal Partners, L.P., et al. v. Citadel Energy Partners, LLC, et al., Ch. 11 Case No. 15-11323; Adv. Proc. No. 17-50024 (Bankr. D. Del. May 2, 2019) (“Citadel”), the Bankruptcy Court for the District of Delaware held that creditors of insolvent limited partnerships and limited liability companies do not have standing to sue derivatively on behalf of the company under applicable state law.

When your customer is in bankruptcy, there are two major no-nos that you must remember.

First, don't violate the automatic stay, which prevents a creditor from attempting to collect a debt while the debtor is in bankruptcy unless the creditor gets prior court approval. Second, don't violate the discharge injunction, which absolves a debtor of liability for those debts covered by the bankruptcy court's discharge order. The automatic stay takes effect when the debtor files bankruptcy, while the discharge injunction typically comes at the end of the case.

Delaware Bankruptcy Judge Brendan Shannon granted mechanic’s lien claimants $1.6 million for making a substantial contribution in a case by “demonstrably and materially facilitating the process of reorganization.” In re M & G USA Corp., No. 17-12307, 2019 Bankr. LEXIS 1398 (Bankr. D. Del.

In Travelers Cas. & Sur. Co. of Am. v. PG&E, 549 U.S. 443 (2007), the Supreme Court held that bankruptcy law does not disallow a post-petition unsecured claim for attorney’s fees to the extent such claim is authorized by a pre-petition contract and not otherwise expressly disallowed. That pronouncement should have stopped all future litigation over the issue. That has not been the case.

Under title 11 of the United States Code (the “Bankruptcy Code”), generally speaking, payments by insolvent debtors to an unsecured or undersecured creditor on pre-existing indebtedness (so-called “antecedent debt”) made during the 90-day period before the debtor’s bankruptcy filing (the “Preference Period”) are vulnerable to claw-back in the debtor’s bankruptcy case as voidable preferences.

View original on Law360: https://www.law360.com/articles/1173110/the-upside-of-the-fastest-chapter-11-confirmation-ever

In response to the Federal Energy Regulatory Commission (“FERC”), the U.S. Bankruptcy Court for the Northern District of California held that the rejection of wholesale power purchase agreements “is solely within the power of the bankruptcy court, a core matter exclusively this court’s responsibility.” [1]

In a recent opinion, the Court of Appeals for the Seventh Circuit ruled the City of Chicago must return repossessed and impounded vehicles upon receiving a bankruptcy petition, or run the risk of violating the automatic stay under Section 362 of the Bankruptcy Code.

Background

The Third Circuit recently took a “pragmatic approach” when affirming lower court orders denying a stay of bankruptcy settlement distributions pending appeal. In re S.S. Body Armor I, Inc., 2019 WL 2588533 (3d Cir. June 25, 2019). After holding that the district court’s “stay denial order” was “final” for jurisdictional purposes, it also confirmed “the applicable standard of review” on motions for stays pending appeals.

Relevance

An IRA owner could not rely on a Florida exemption to shield his IRA account from creditors after engaging in prohibited acts of self-dealing with his IRA funds, the Eleventh Circuit held in Yerian v. Webber, 2019 WL 2610751 (11th Cir. June 26, 2019). The IRA owner, Keith Yerian, opened a self-directed IRA. The IRA was governed by two contracts.