Early evening on February 23, 2021, Belk Inc. and its affiliates (collectively, “Belk”) filed their Chapter 11 bankruptcy petitions in the Bankruptcy Court for the Southern District of Texas. Less than seventeen hours later, Judge Marvin Isgur confirmed Belk’s pre-packed plan of reorganization. Belk is not the first Chapter 11 bankruptcy case to accomplish plan confirmation within the first twenty-four hours after filing a petition, and it certainly won’t be the last. In 2019, Sungard Availability Services Capital, Inc.
Contrary to the Bankruptcy Court’s ruling, the District Court concluded that California's liquidated damages statute does not apply to the default interest rate provision.
The United States Bankruptcy Code, pursuant to 11 U.S.C. Section 502(b)(6), caps a landlord's claim in bankruptcy for damages resulting from the termination of a real property lease. See In re PPI EnterprisesU.S., 324 F.3d 197, 207 (3rd Cir. 2003). Under Section 502(b)(6), a landlord-creditor is entitled to rent reserve from the greater of one lease year or 15 percent, not to exceed three years, of the remaining lease term.
Pursuant to Section 727 of the U.S. Bankruptcy Code, an individual Chapter 7 debtor may receive a discharge "from all debts that arose before the date of the order for relief under this chapter." A Chapter 11 or Chapter 13 debtor may receive similar relief pursuant to Sections 1141 and 1328(b), respectively. Under any chapter, this discharge serves the Bankruptcy Code's principal goal of relieving a debtor from his or her prepetition obligations and providing the debtor with a "fresh start" on emergence from bankruptcy.
On April 14, in In re Free Lance-Star Publishing, 512 B.R. 798 (Bankr. E.D. Va. 2014), the U.S. Bankruptcy Court for the Eastern District of Virginia considered the objection of Chapter 11 debtors to a secured creditor's right to credit bid at a sale of the debtors' assets pursuant to 11 U.S.C. Section 363.
Two recent opinions from separate federal courts of appeal upheld the dismissal of lawsuits by sophisticated investors that suffered losses in the auction rate securities ("ARS") market against the securities broker-dealers that allegedly fraudulently induced the purchase of the ARS.1
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The Court’s decision provides greater certainty for creditors who passively retain estate property that they obtained pre-petition.
This is a favorable decision for commercial secured lenders. Although the ruling is not controlling on other bankruptcy courts as it is a trial court level ruling, courts may certainly consider it when presented with similar issues.
In In re 1111 Myrtle Avenue Group, LLC (Bankr. S.D.N.Y. 2019), a New York bankruptcy court held that a default interest rate provision of 7 percent was enforceable and not a penalty against a debtor, which retained significant equity postbankruptcy.
Background
Recently, in a split (2-1) decision, the United States Court of Appeals for the Second Circuit overturned the United States District Court for the Southern District of New York’s decision in Marblegate Asset Management, LLC v. Education Management Finance Corp., 111 F. Supp.3d 542 (S.D.N.Y. 2015) (“Marblegate II”). The Second Circuit held in Marblegate Asset Management, LLC v. Education Management Finance Corp., No. 15-2124, 2017 U.S. App. LEXIS 782 (2d Cir. Jan.
A Delaware bankruptcy judge recently ruled that information concerning the compensation and performance of “hand-picked” directors of a private equity firm’s portfolio company was discoverable in an action for breach of fiduciary duty against the private equity firm.