HIGHLIGHTS:

A defendant bank (“Bank”) in a fraudulent transfer suit “could not prove” its “good faith” defense for loan repayments it received after its “investigator discovered [the] fraudulent past” of the Ponzi scheme debtor’s principal but “failed to disclose that past to [the Bank’s account] manager,” held the U.S. Court of Appeals for the Sixth Circuit on Feb. 8, 2017. Meoli v. Huntington Nat’l Bank, 2017 U.S. App. LEXIS 2248, *28 (6th Cir. Feb. 8, 2017).

Serving as an illustration of the principal that a financial restructuring won’t save a business that has ceased to be frequented by customers, RadioShack has filed for bankruptcy for the second time in as many years. The prior case was filed in the Bankruptcy Court for the District of Delaware as case no. 15-10197. This case is also in the Bankruptcy Court for the District of Delaware, and is case no. 17-10506.

In a recent opinion, the U.S. Bankruptcy Court for the District of Oregon reminds all finance lawyers (and participants trying to document a finance transaction without legal assistance) that recording an “assignment” of a deed of trust is not always sufficient to perfect an interest in the real property.

The new owner of the RadioShack brand, General Wireless Operations Inc., just filed for Chapter 11 in the United States Bankruptcy Court for the District of Delaware. This is the second Chapter 11 filing for the brand in two (2) years (a chapter 22 filing, like the recent EMS brand filing).

The Company is reportedly closing about 200 stores and evaluating options on the remaining 1,300 stores. The Company cited poor performance of mobility sales as one reason for the bankruptcy filing.

The U.S. Court of Appeals for the Sixth Circuit recently held that a bankruptcy trustee seeking to recover fraudulent transfers could recover direct and indirect loan repayments made after the bank had knowledge of the debtor’s Ponzi scheme, but could not recover deposits not applied to pay back the bank’s debt because the bank was not a “transferee” under the Bankruptcy Code as to ordinary bank deposits.

More specifically, in a Chapter 9 bankruptcy proceeding, the debtor must allege that it negotiated in good faith at a pre-petition mediation. In Lake Lotawana, the mediation failed and the debtor alleged as a prerequisite to filing a Chapter 9 proceeding that it had negotiated in good faith. In response, the creditor sought the debtor’s mediation statement and argued that the mediation statement was not privileged.

(Bankr. W.D. Ky. Mar. 9, 2017)

The bankruptcy court grants the secured creditor’s motion for stay relief because it was inadequately protected as a result of there being insufficient funds to make the first payment to the creditor under the confirmed Chapter 12 plan. Opinion below.

Judge: Lloyd

Atttorneys for the Debtor: Kaplan & Partners LLP, James Edwin McGhee, III, Charity Bird Neukomm

Attorneys for Creditor: Andrews Law Firm, PLLC, Ashley Sanders Cox

The Appellate Court of Illinois, Second District, recently affirmed summary judgment in favor of a mortgagee that failed to meet the FHA requirement to either have a face-to-face meeting with the borrowers or to make “a reasonable effort” to arrange a face-to-face meeting before filing foreclosure, because doing so would have been a futile act after the borrowers’ mortgage loan debt was discharged in bankruptcy and they did not reaffirm the debt.

(6th Cir. B.A.P. Mar. 9, 2017)