Lending credence to the old adage “if it’s too good to be true, then it probably is,” the Seventh Circuit Court of Appeals recently held that a secured lender was on inquiry notice of possible fraud by its borrower in impermissibly pledging customers’ assets to secure loans. And the penalty was steep—the Court determined the pledge to be a fraudulent transfer to the lender and the lender’s failure to act upon inquiry notice destroyed the lender’s good faith defense. As a result, the lender’s $300 million secured claim was reduced to a near-worthless general unsecured claim. 

The Commonwealth of Puerto Rico and the Puerto Rico Electric Power Authority (PREPA) yesterday filed separate motions to dismiss the federal court complaint filed last month by some PREPA bondholders seeking to invalidate the recently-enacted Puerto Rico Public Corporation Debt Enforcement and Recovery Act.&n

The Ninth Circuit in In re Fitness Holdings Int’l, 2013 U.S. App. LEXIS 8729 (9th Cir. April 30, 2013) recently reversed precedent and established that bankruptcy courts in the Ninth Circuit have the power to determine whether a transaction creates a debt or equity interest for purposes of § 548 of the Bankruptcy Code. In doing so, the Ninth Circuit joins the Third, Fourth, Fifth, Sixth and Tenth Circuits in expressly recognizing bankruptcy courts’ ability to recharacterize claims in bankruptcy proceedings.

In a much anticipated opinion,In re TOUSA, Inc., --- F.3d ----, 2012 WL 1673910 (11th Cir. May 15, 2012), the Eleventh Circuit Court of Appeals has resolved a disagreement between the Bankruptcy Court and District Court for the Southern District of Florida by upholding the Bankruptcy Court’s findings—to the chagrin of lenders, who are now arguably exposed to new liabilities and higher standards of due diligence.

As expected a number of objections to the Chapter 9 bankruptcy petition filed by the Harrisburg city council were filed on Friday October 28, the deadline set by the Bankruptcy Court for such objections. As expected both the Commonwealth of Pennsylvania and the Harrisburg Mayor’s Office filed objections.

Over the past year, the Covid-19 pandemic upended many industries. While the construction industry has largely been able to operate throughout the pandemic, albeit with increased and ever-changing restrictions on jobsites, one consequence of these disruptions may be an increase in construction-related bankruptcy filings. Already in 2021, there have been over 70 construction-related bankruptcy filings across the country. For many property owners and real estate developers, these filings create a nightmare scenario where work may slow or even stop entirely.

With courts and government agencies around the world enacting emergency measures in response to the Covid-19 pandemic – ranging from complete shutdowns to delays and limitations – advancing the ball in dispute resolution is more challenging than ever. Because fraud investigations and complex asset recovery matters are typically managed by litigation counsel and often follow litigated claims, clients have a tendency to see the effort through a litigation lens.

A recent Ninth Circuit Court of Appeals decision provides insight into “bad faith” claims-buying activity; specifically whether a creditor’s purchase of claims for the express purpose of blocking plan confirmation is permissible. In In re Fagerdala USA-Lompoc, Inc., the Court found it was—the secured creditor did not act in bad faith when it purchased a subset of all general unsecured claims and voted those claims against confirmation because it was acting to further its own economic interest as a creditor, without some extrinsic ulterior motive.

One of the most powerful and oft used devices in bankruptcy is the sale of assets “free and clear” of liens, claims and interests. One issue a buyer at a bankruptcy sale must consider, however, is whether due process has been met with respect to parties whose liens, claims and/or interests are released through such sale. Indeed, a lack of due process could foil a “free and clear” sale, leaving a buyer with an encumbered purchase and nowhere to turn for recourse.

It is a familiar scenario: a company is on the verge of bankruptcy, bound by the terms of a collective bargaining agreement (CBA), and unable to negotiate a new agreement.  However, this time, an analysis of this distressed scenario prompted a new question: does it matter if the CBA is already expired, i.e., does the Bankruptcy Code distinguish between a CBA that expires pre-petition versus one that has not lapsed?