In Lodge v. Kondaur Capital Corp., Case No. 13-10919 (decided May 8, 2014), the United States Court of Appeals for the Eleventh Circuit decided an issue that it never previously addressed: whether a party could recover damages under 11 U.S.C. § 362(k) for emotional distress resulting from another party’s violation of the automatic stay in bankruptcy. In Lodge, the Court held that such damages were recoverable but could not be recovered in the particular circumstances of that case.

The District Court for the Southern District of New York recently issued an opinion in Davis v. Elliot Management Corp. (In re Lehman Brothers Holdings Inc.), 2014 U.S. Dist. LEXIS 48102 (S.D.N.Y. Mar. 31, 2014) that will have important implications for individual members of official creditor committees in future cases. 

In a novel decision, the United States Court of Appeals for the Third Circuit held, in its ruling In re Emoral, Inc., 740 F.3d 875 (3d Cir. 2014), that personal injury claims of individuals allegedly harmed by a bankrupt debtor’s products cannot be asserted against a pre-petition purchaser of the debtor’s assets, as they are “generalized claims” which belong to the debtor’s bankruptcy estate rather than to the individuals who suffered the harm.

Background

On June 4, 2014, the New York Court of Appeals will hear arguments arising from the bankruptcies of two law firms—Thelen and Coudert Brothers—as to whether the former partners of the bankrupt law firms must turn over profits earned on billable-hour client matters they brought to their new firms.

Often times indenture trustees seek to sit on creditors committees in furtherance of their fiduciary duties to holders. Obviously, the professional fees and expenses can be paid as a first priority pursuant to a charging lien as provided for under the indenture documents. The payment of such fees and expenses becomes an issue, however, when there are no plan distributions to holders or the plan distributions are illiquid or non-cash.

A recent decision from an Oregon bankruptcy court provides a cautionary tale for lenders attempting to “bankruptcy proof” their borrowers. 

Both the Loan Syndications and Trading Association, Inc. (the “LSTA”) and the Loan Market Association (the “LMA”) publish the forms of documentation used by sophisticated financial entities involved in the trading of large corporate syndicated loans in the secondary trading market. The LSTA based in New York was founded in 1995. The LMA based in London was formed in 1996. Both the LSTA and LMA share the common aim of assisting in developing best practices and standard documentation to facilitate the growth and liquidity of efficient trading of syndicated corporate loans.

The inclusion of pre-bankruptcy waivers in “standard issue” credit documents has generated a host of litigation in bankruptcy cases about the enforceability of such provisions.

INTRODUCTION

A federal district court has held that a bankruptcy trustee’s action to compel payment of crop insurance proceeds is time-barred by virtue of the Federal Crop Insurance Act (FCIA) and the insurance policies’ arbitration provisions. The trustee brought the action against the Federal Crop Insurance Corporation (FCIC), as reinsurer, and the U.S. Department of Agriculture’s Risk Management Agency (RMA) seeking payment of policy proceeds for the benefit of the debtor’s estate.