The Issue

U.S. District Judge Jed S. Rakoff of the Southern District of New York, applying the swap agreement safe harbor provision of the Bankruptcy Code (the "Code") §546(g), dismissed a Chapter 11 litigation trustee's state law fraudulent transfer complaint against a bank on June 11, 2013. Whyte v. Barclays Bank, PLC, 2013 WL2489925 (S.D.N.Y. June 11, 2013).

On the afternoon of July 18, 2013, the City of Detroit filed its highly anticipated petition for relief under Chapter 9 of the Bankruptcy Code in the Bankruptcy Court for the Eastern District of Michigan. This marks the largest municipal bankruptcy filing in United States history.¹As a result of the Chapter 9 filing, all actions by creditors to collect prepetition claims against the City are enjoined through the imposition of an automatic stay, except for the application of special revenues pledged to indebtedness.

On July 8, 2013, Ohio’s 5th District Court of Appeals issued an opinion that will be of interest to commercial equipment lessors in Ohio.  This case concerns the commercial lease of a beverage caddy and the status of the “middle man” lessee when the vendor undergoes bankruptcy.

Georgia court rejects “replacement lien” as adequate protection.

A federal district court in Georgia recently ruled that a financial institution creditor in a Chapter 11 case had separate, distinct security interests in both the rental property on which it had accepted a mortgage and that property’s rental income by virtue of an assignment of rents from the debtor.

“Do not pass Go, do not collect $200” is a phrase we all remember from the childhood game Monopoly.  Like Monopoly, state franchise sales laws have rules and regulations that must be followed.  A franchisor’s failure to follow these basic procedural rules for selling franchises can result in self-destruction. 

The Issue

In a much-awaited judgment, the UK Supreme Court has decided that the liability of a company in administration or liquidation to contribute to an under-funded pension fund following a Financial Support Direction or a Contribution Notice is a provable debt ranking equally with other unsecured creditors. Crucially, it is not an expense of the administration or liquidation which would cause it to rank ahead of all creditors (except fixed charge holders) and even the administrator's or liquidator's own remuneration.

Fiduciaries who breach their duties may pay the consequences far longer than they may think, for they may not even be able to escape liability through personal bankruptcy.  In Raso v. Fahey (In re Fahey), No. 11-1118 (June 11, 2013), the U.S Bankruptcy Court for the District of Massachusetts became the first court to apply the new defalcation guidelines laid down by the Supreme Court in Bullock v. BankChampaign, NA, 133 S. Ct.

In the last edition of the CRABS E-Newsletter we discussed the steps that were taken by Wells Fargo Bank, N.A. to protect records in its possession during the course of bankruptcy litigation with a Chapter 7 Trustee by using the attorney client privilege in McCarthy v. Wells Fargo Bank, N.A. (In re El-Atari), 2013 WL 593705 (Bankr. Va. 2013).