The United States Bankruptcy Court for the District of Delaware (the “Court”) recently upheld a $23.7 million make-whole payment (the “Make-Whole Payment”) in In re School Specialty (Case No. 13-10125), denying the assertion by the Official Committee of Unsecured Creditors (the “Committee”) that the fee is unenforceable under the United States Bankruptcy Code and applicable state law.

Thanks to Anna Nicole Smith and the June 2011 landmark Supreme Court decision in Stern v. Marshall, there are seemingly more questions regarding a bankruptcy judge’s authority to enter final orders (or even proposed orders) than ever before. Those unanswered questions have created considerable uncertainty and, not surprisingly, lengthier and costlier litigation in bankruptcy. Thankfully, the Supremes decided on June 24, 2013 that they will address two of the many questions left unanswered by Stern.

When a court awards a judgment to a party, it might seem as though the process of recovery has concluded. The successful party expects to collect and return to business. Yet, in some cases, the collection of the award begins another dispute, which companies should anticipate. Because many judgment awards include a total for damages plus an amount for interest set at a certain percentage to accrue per annum from the payment due date, an additional dispute may arise over the collection of interest owed.

Overview

Unsecured creditors in chapter 11 cases face the prospect of two financial blows: the possibility of not receiving full payment of their claims and the cost of attorney's fees for defending their interests. But these creditors may be able to take comfort in a small but growing trend -- the ability to have the attorney's fees paid from the debtor's assets under the debtor's chapter 11 plan. This outcome occurs in only a small number of cases, and unsecured creditors would be advised to not assume their attorney's fees will be reimbursed by the debtor.

Buyers of assets through the bankruptcy court process seek comfort and solace in the entry of a sale order providing for the transfer of assets “free and clear” of all liabilities. Except for those liabilities expressly assumed by the buyer and new owner, the bankruptcy court order typically includes exacting and precise language transferring those assets, under the imprimatur of the United States Bankruptcy Court, free and clear of all liabilities.

If you are, or have interest in becoming, a director of any organization, you should heed the May 17, 2013, decision in the United States District Court for the Western District of Pennsylvania in Official Comm. Of Unsecured Creditors ex rel. Lemington Home for the Aged, (the Lemington Home Case). The Lemington Home Case upheld a jury’s award to the plaintiff creditors’ committee of

On June 20, 2013, a three-member panel of the United States Court of Appeals for the Second Circuit issued an important decision that significantly curtails the authority of Irving Picard, as Trustee for the liquidation of Bernard L.

The Colorado LLC Act prohibits an insolvent LLC from making a distribution to a member. Insolvency is defined as the LLC’s liabilities exceeding its assets, with minor exceptions. Colo. Rev. Stat. § 7-80-606. The Act also mandates that a member who receives a distribution and who knows at the time that the LLC is insolvent is personally liable to the LLC for the amount of the distribution. Id.

On June 11, Southern District of New York Judge Jed Rakoff dismissed the complaint of the Trustee for the SemGroup estate seeking to avoid a novation made to Barclays pre-bankruptcy under a swap agreement. The Court held that the pre-bankruptcy transaction constituted a safe harbored transfer made in connection with a swap agreement and thus could not be avoided by the estate. This case is one of a number in recent years that treats the safe harbors, and particularly the section 546 safe harbors, as broadly protective of non-debtor transferees in financial transactions.