Earlier this month, a New Jersey appellate court affirmed a lower court’s ruling that the insured, not solvent insurers, was responsible for the liability apportioned to policies not covered by New Jersey’s Property Liability Insurance Guaranty Association (PLIGA). The insured, Ward Sand and Materials Company (Ward), was sued by the New Jersey Department of Environmental Protection related to cleanup of municipal waste accepted at a sand mining facility from 1970 to 1991.

In the case of Domistyle, Inc., 14-41463 (5th Cir. Dec. 29, 2015), the United States Court of Appeal for the Fifth Circuit affirmed an order of the bankruptcy court requiring a secured creditor to reimburse the trustee for expenses paid to preserve real property subject to the creditor’s lien until the debtor’s eventual surrender of the property to the creditor.

The U.S. Court of Appeals for the Second Circuit recently held that a debtor in bankruptcy can pursue claims under the federal Fair Debt Collection Practices Act ("FDCPA") in district court for trying to collect a discharged debt, reversing a judgment dismissing the FDCPA claims and requiring the plaintiff seek relief in bankruptcy court.

In Garfield v. Ocwen Loan Servicing, LLC, 15-527 (2d Cir. Jan. 4, 2016), the Second Circuit Court of Appeals examined whether a debtor who has been discharged in a bankruptcy can sue in a district court under the Fair Debt Collection Practices Act (“FDCPA”), as opposed to seeking relief in the bankruptcy court.

The U.S. District Court for the Middle District of Florida recently dismissed allegations that a debt buyer violated the federal Fair Debt Collection Practices Act by filing a proof of claim on time-barred debt, holding that such claims are precluded by the Bankruptcy Code, and that the FDCPA does not provide a private right of action against debt collectors who file time-barred proofs of claim in bankruptcy court.

The District Court for the Southern District of New York recently affirmed the Bankruptcy Court’s decision to approve the method used by trustee of the estate of Bernard L. Madoff Investment Securities LLC (BLMIS) to value the net equity of transfers between BLMIS accounts. See In re BLMIS (Melton Tr. v. Picard), Case No. 1:15-cv-01195-PAE (S.D.N.Y. Jan. 14, 2016).

Background

We all know that courts want to read contracts as a whole to effectuate the intent of the parties.  This case provides a textbook illustration of the principle.

In the latest ruling in the long-running dispute in Sentinel Management’s bankruptcy case, the Seventh Circuit recently held that a bank employee’s suspicions about the source of the bank’s collateral should have put the bank on inquiry notice, thus precluding the bank from asserting a “good faith” defense to a fraudulent transfer claim that a liquidating trustee brought against the bank.

Lenders and secured creditors often require that debtor-customers direct all receivable collections into a lockbox, hoping to wrangle any available proceeds to apply to their debtors’ outstanding debt. In requiring a debtor or its customer to remit payments to a lockbox, however, creditors may be overlooking a potential source of significant liability. A creditor using a lockbox may unwittingly expose itself to greater risk and liability than just a debtor’s default if it receives funds that were collected as sales tax on a debtor’s goods or services.

Last week, the United States Court of Appeals for the Sixth Circuit issued a decision in the case of Cyber Solutions International LLC v. Pro Marketing Sales, Inc. Although the decision blazes no new legal territory, the facts of the case and rulings offer important lessons for both lenders and licensees.