Coronavirus Aid, Relief, and Economic Security (CARES) Act

In Short

The Situation: Should liquidators be personally liable for the costs of unsuccessful appeals, without an entitlement to reimbursement by the company or its creditors in relation to those costs?

The Conclusion: The general rule providing a liquidator immunity from personal costs orders and entitling a liquidator to be indemnified from the assets of the company for their own costs, and for the costs of the other party, does not apply when a liquidator initiates an unsuccessful appeal.

In SummitBridge Nat’l Invs. III, LLC v. Faison, 915 F.3d 288 (4th Cir. 2019), the U.S. Court of Appeals for the Fourth Circuit ruled that an unsecured or undersecured creditor may include postpetition attorney’s fees and costs as part of its allowed claim in a bankruptcy case.

Unsecured Creditors and Postpetition Attorney’s Fees and Costs

In Short

The Situation: Section 553C of the Corporations Act 2001 (WA) ("Act")provides that if a creditor and a company in liquidation have mutual dealings, the creditor must offset any sum the creditor owes to the company in liquidation against debt owed by the company.

The Question: Does the existence of a third party security interest over circulating assets (floating charge) which are intended to be set off against other debts prevent the dealings from being "mutual"?

In Czyzewski v. Jevic Holding Corp., 137 S. Ct. 973 (2017), the U.S. Supreme Court held that the Bankruptcy Code does not allow bankruptcy courts to approve distributions to creditors in a “structured dismissal” of a bankruptcy case which violate the Bankruptcy Code’s ordinary priority rules without the consent of creditors.

The next few years are expected to see a significant increase in the volume of bankruptcy cases filed by health care providers. Thus far in 2017, the number of bankruptcies in health care-related sectors, including hospitals, physicians’ offices and clinics, specialty outpatient facilities, assisted-living facilities, and other providers, has been surpassed only by bankruptcies in the oil and gas, finance, and retail industries.

Among the required elements of a claim to avoid a preferential transfer under section 547(b) of the Bankruptcy Code is that, if the creditor-transferee were permitted to retain a pre-bankruptcy payment, it would end up being paid more than it would receive in a hypothetical liquidation of the debtor under chapter 7, assuming the transfer did not occur. This requirement and a defense to preference liability predicated on it—the "Kiwi defense"—were the subject of a ruling handed down by a Delaware bankruptcy court. In Pirinate Consulting Grp., LLC v. C. R. Meyer & Sons Co.

The U.S. Supreme Court ruled on March 22, 2017, in Czyzewski v. Jevic Holding Corp., that without the consent of affected creditors, bankruptcy courts may not approve "structured dismissals" providing for distributions that "deviate from the basic priority rules that apply under the primary mechanisms the [Bankruptcy] Code establishes for final distributions of estate value in business bankruptcies."

On June 9, 2016, the New York State Court of Appeals, in Ambac Assur. Corp. v. Countrywide Home Loans, 2016 BL 184648 (N.Y. June 9, 2016), reversed a lower court decision, consistent with the overwhelming majority of federal court decisions, that the common interest doctrine under New York law is not limited to communications made in connection with pending or reasonably anticipated litigation.

On May 16, 2016, the U.S. Supreme Court decided Husky International Electronics, Inc. v. Ritz, No. 15-145, holding that the "actual fraud" bar to discharge under section 523(a)(2)(A) of the Bankruptcy Code encompasses an individual debtor's knowing receipt of fraudulently transferred property.

Statutory Background