In re Patriot Coal Corporation, et al., 492 B.R. 718 (2012)

CASE SNAPSHOT

544(b) of the Bankruptcy Code empowers a bankruptcy trustee to avoid any transfer of an interest of the debtor in property that is voidable under "applicable law" by an unsecured creditor. Under the plain language of section 544(b), before a trustee can maintain an avoidance action, the trustee must demonstrate the existence of a qualified creditor, i.e., one who: (i) has a right to avoid the transfers; and (ii) holds an "allowable" unsecured claim. Importantly, the scope of "applicable law" is undefined.

In re GAC Storage Lansing, LLC, No. 11-40944 (Bankr. N.D. Ill., Feb. 27, 2013)

CASE SNAPSHOT

The court denied confirmation of the debtor’s plan, finding that: (i) the debtor failed to demonstrate that it would be able to obtain financing to pay off the balloon payment; (ii) the proposed transfer of new equity to an individual with indirect ownership interest violated the absolute priority rule; and (iii) the plan’s injunction barring actions by the secured creditor against the guarantors was overly broad.

FACTUAL BACKGROUND

In re Zota Petroleums, LLC, 482 B.R. 154 (Bankr. E.D. Va. 2012)

CASE SNAPSHOT

In re RAG East, LP– Case no. 12-04545-CMB (Bankr. W.D. Pa. March 4, 2013)

CASE SNAPSHOT

The court granted summary judgment in favor of a defrauded lender in a lien priority dispute with subsequent third-party lenders. The court determined that the lien of a purchase money mortgage that was allegedly released pursuant to a fraudulent satisfaction piece nonetheless had priority over the liens held by innocent third parties who provided loans to the debtor without notice of the fraud.

FACTUAL BACKGROUND

The Unsecured Creditors Comm. v. Community Bank(In re Stinson Petroleum Co., Inc.), Case No. 12-60234 (5th Cir., Jan. 7, 2013)

CASE SNAPSHOT

Teed v. Thomas & Betts Power Solutions, LLC, (7th Cir., No. 12-2440, Mar. 26, 2013)

CASE SNAPSHOT

In re WEB2B Payment Solutions, Inc., 2013 WL 1188041 (8th Cir. BAP, Mar. 26, 2013)

CASE SNAPSHOT

The bank, which held a possessory lien in the deposit account of the debtor, lost its lien when it turned over the funds in the account to the trustee upon his turnover demand, because the bank failed to seek adequate protection prior to turning over the funds.

FACTUAL BACKGROUND

Dill Oil Company, LLC v. Stephens, No. 11-6309 (10th Cir., Jan. 15, 2013)

CASE SNAPSHOT

The Court of Appeals for the Tenth Circuit, in a case of first impression before the court, joined the Fourth Circuit in holding that the absolute priority rule remains applicable in individual chapter 11 cases.

FACTUAL BACKGROUND

On a matter of first impression, the Fourth Circuit issued an opinion in the Derivium Capital, LLC bankruptcy case on May 24, 2013,1 affirming the District Court’s ruling that Grayson Consulting Inc. ("Grayson"), the chapter 7 Trustee’s assignee, could not avoid as fraudulent conveyances Wachovia’s2 commissions, fees, and margin interest payments because those payments were protected from recovery by the safe harbor of United States Bankruptcy Code (the "Bankruptcy Code") section 546(e).