Executive Summary

Executive Summary

A recent decision from the United States Bankruptcy Court for the Northern District of Texas, In re Care Ctrs., LLC, No. 18-33967, 2020 Bankr. LEXIS 3205 (Bankr. N.D. Tex. Nov. 12, 2020), examined (1) the scope of bankruptcy court subject-matter jurisdiction for post-confirmation actions filed in state court and removed to bankruptcy court; and (2) when the court must or should abstain and remand a proceeding back to the court where the action was originally brought.

Before ingesting too much holiday cheer, we encourage you to consider a recent opinion from the United States Court of Appeals for the Second Circuit.

Weil Bankruptcy Blog connoisseurs will recall that, in May 2019, we wrote on the Southern District of New York’s decision in In re Tribune Co. Fraudulent Conveyance Litigation, Case No. 12-2652, 2019 WL 1771786 (S.D.N.Y. April 23, 2019) (Cote, J.) (“Tribune I”).

Executive Summary

On December 27, 2018, the United States Bankruptcy Court for the District of Delaware issued an opinion in In re La Paloma Generating Co., Case No. 16-12700 (Bankr. D. Del. Dec. 27, 2018) [Docket No. 1274], that should raise substantial concerns for junior secured creditors.

In particular, the La Paloma opinion determined that:

In a recent decision, the Fifth Circuit narrowly held that federal law does not prevent a bona fide shareholder from exercising its voting right in the company’s charter to prevent the filing by the company of a bankruptcy petition merely because it is also an unsecured creditor. In re Franchise Servs. of N. Am., Inc., 891 F.3d 198, 203 (5th Cir. 2018).

Cancellation of debt a key element of most restructurings generally triggers taxable income. The German tax authorities had issued an administrative decree (the "Tax Restructuring Decree" - Sanierungserlass), however, declaring that, upon the satisfaction of certain requirements and conditioned on forfeiture of any loss carry forwards, the cancellation of debt income ("CODI") would not be taxed.

The High Court in London handed down judgment on Part C of the Lehman Waterfall II Application on 5 October 2016.

The judgment examines the extent of creditors’ entitlements to Default Rate interest on debts arising under ISDA Master Agreements governed by English law and New York law. As some £4.4 billion of LBIE’s admitted claims arise under ISDA Master Agreements and the debts were outstanding for more than five years, this judgment will materially influence the amount of money which must be applied in satisfaction of creditors’ entitlements to statutory interest.

On June 30, 2016, Congress passed and President Obama signed into law a new piece of federal legislation that will govern the restructuring of U.S. territories: Public Law No: 114-187. Although not limited to the Commonwealth of Puerto Rico, enactment of the new law, entitled the Puerto Rico Oversight, Management, and Economic Stability Act or “PROMESA,” represents a bipartisan achievement in the context of a worsening fiscal crisis in Puerto Rico.

Creditors seeking to file an involuntary petition against a debtor may want to consider doing their due diligence before using it as a tool in their ongoing disputes with a debtor.

Today we’ll begin with a two-part question: When do you suppose you could (i) hold a debtor’s property hostage without running afoul of the automatic stay and (ii) also collect on an administrative expense for postpetition rent for leased space used to store such property?

If you don’t already know the answers to the above questions, perhaps an overview of a recent decision from the Bankruptcy Court for the District of New Jersey will provide some insight.