In a decision that may have significant practical implications to the practice of bankruptcy law, the U.S. Supreme Court recently declared, on constitutional grounds, that a bankruptcy court cannot exercise jurisdiction over a debtor’s state law counterclaims, thus considerably limiting the ability of the bankruptcy court to fully and finally adjudicate claims in a bankruptcy case. Stern v. Marshall, No. 10-179 (June 23, 2011).

Until recently, courts in the Ninth Circuit have generally followed the minority view that non-debtor releases in a bankruptcy plan are prohibited by Bankruptcy Code Section 524(e), which provides that the “discharge of a debt of the debtor does not affect the liability of any other entity on, or the property of any other entity for, such debt.” In the summer of 2020, the Ninth Circuit hinted that its prohibition against non-debtor releases was not absolute, when the court issued its decision in Blixseth v. Credit Suisse, 961 F.3d 1074 (9th Cir.

Transfers and transactions up to ten years old may be scrutinized, unwound and recovered by a trustee, the bankruptcy court sitting in Massachusetts recently held in the NECCO (think chalky wafer candy) bankruptcy case. The ruling, in a case of first impression in Massachusetts, expands the reach back period from the typical four-year period for fraudulent transfer recovery, so long as the IRS is a creditor in the case.

It is very common for bankruptcy court orders to provide that the court retains jurisdiction to enforce such orders. Similarly, chapter 11 confirmation orders routinely provide that the bankruptcy court retains jurisdiction over all orders previously entered in the case. The enforceability of these “retention of jurisdiction” provisions, however, will not rest on the plain language in the order but on the bankruptcy court’s statutory jurisdiction.

In the Ultimate Escapes bankruptcy case, the U.S. District Court for the District of Delaware recently held that the “business judgment rule” may protect fiduciaries who negotiate and enter into unconventional financing agreements in an attempt to save the company. In short, a failed business strategy by itself does not lead to liability for breach of fiduciary duty.

Debtors must provide known creditors with actual notice of a claims bar date if they want the bar date to apply to those creditors. Such was the holding in In re Majorca Isles Master Association, Inc., Case No. 12-19056-AJC, Dkt. No. 222 (Bankr. S.D. Fla. March 27, 2014), where the bankruptcy court stated that when both a debtor and a creditor are “guilty in the handling of a claim and the [d]ebtor is aware of the creditor’s claim, then a tie goes to the creditor[,]” and the creditor’s claim will be allowed.

Since it was decided in June 2011, countless scholars and courts have weighed in on the impact and implications of the Supreme Court’s seminal opinion in Stern v. Marshall.

As discussed in previousposts, the Consolidated Appropriations Act of 2021 (the “Act”) was signed into law on December 27, 2020, largely to address the harsh economic impact of the COVID-19 pandemic.

This past May, in a highly-anticipated decision, the Supreme Court held in Mission Product Holdings, Inc. v. Tempnology, LLC that a debtor’s rejection of an executory contract under Section 365 of the Bankruptcy Code has the same effect as a breach of contract outside of bankruptcy.

Earlier this month, the Supreme Court announced that it will review the scope of Bankruptcy Code section 546(e)’s safe harbor provision. Section 546(e) protects from avoidance those transfers that are made “by or to (or for the benefit of)” a financial institution, except where there is actual fraud. The safe harbor is intended to ensure the stability of the securities market in the event of corporate restructurings.