A.   Where We Left Off

This Alert is one of a series published by Schulte Roth & Zabel that analyzes the report released on Dec. 8, 2014 (“Report”) by the American Bankruptcy Institute Commission to Study the Reform of Chapter 11 (“Commission”), which recommended numerous changes to Chapter 11 of the Bankruptcy Code (“Bankruptcy Code”).

In the case of Isaac, et al. v. RMB, Inc., et al., No. 14-11560 (11th Cir. March 17, 2015), the Eleventh Circuit recently upheld summary judgment in favor of a debt collector based on the affirmative defense of bona fide error.  The case presents a good opportunity to see what type of evidence is needed to prevail on the defense.

KRS Summary on Fraudulent Transfers

A fraudulent transfer (fraudulent conveyance) is an attempt to avoid debt by transferring money to another person or company. It is often an issue in debtor/creditor relations, particularly in bankruptcy when referring to insolvent debtors.

Judge Christopher Sontchi issued a notable opinion last week in the bankruptcy case of Energy Future Holdings Corp., et al. (“EFH”), Case No. 14-10979 (D. Del.), ruling that the repayment in full of certain senior secured notes did not trigger an obligation by the debtors to pay a make-whole premium.

In Hosking v. TPG Capital Management LP (In re Hellas Telecommunications (Luxemburg) II SCA), 2015 BL 21823 (Bankr. S.D.N.Y. Jan. 29, 2015), the U.S. bankruptcy court presiding over the chapter 15 case of London-based Hellas Telecommunications (Luxemburg) II SCA ("Hellas II"), which formerly owned one of the largest mobile phone operators in Greece, dismissed fraudulent transfer claims asserted by Hellas II's U.K. liquidators against private equity giants TPG Capital Management LP and Apax Partners LLP as well as various affiliates (collectively, the "defendants").

Bankruptcy courts appear to be increasingly sending state law claims to the district court for final review, as illustrated by a recent decision from the bankruptcy court for the Southern District of Texas. In Gomez v. Lone Star National Bank (In re Saenz), Jose Gomez financed his acquisition of a restaurant from Humberto Saenz. When the restaurant failed, Gomez sued his lender and Saenz on various claims, but Saenz filed for bankruptcy protection. The lender then moved for summary judgment against Gomez’s claims for common-law fraud and negligence.

Rev Op Group v. ML Manager LLC (In re Mortgages Ltd.), 771 F.3d 623 (9th Cir. 2014) –

Under the terms of a debtor’s confirmed plan of reorganization, an entity (ML Manager) was designated to manage the debtor’s portfolio of mortgage loans.  The issue in this appeal was whether ML Manager was authorized to act as an agent for pass-through investors in selling loans over the objection of some of the investors.

Bankruptcy can be a lifeline to those individuals trying to get out from under a mountain of debt, but it becomes a point of frustration for the companies forced to move on without collecting the money they were owed.

 In the previous blog post, we discussed the ongoing bankruptcy litigation between Crystal Cathedral Ministries and its founder Dr. Robert Schuller over the rejection of his Transition Agreement.  That contract purported to spell out the relationship between the parties as Dr.