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    Thou Shall Not Interfere With Special Purpose Entities’ Contractual Obligations
    2021-01-04

    A recent decision of the New York Court of Appeals, Sutton v. Pilevsky held that federal bankruptcy law does not preempt state law tortious interference claims against non-debtors who participated in a scheme that caused a debtor—in this case a bankruptcy remote special purpose entity—to breach contractual obligations intended to ensure that the entity remains a Special Purpose Entity (SPE) and to facilitate the lenders’ enforcement of remedies upon a future bankruptcy filing, if any.

    Filed under:
    USA, New York, Insolvency & Restructuring, Litigation, Dechert LLP
    Authors:
    Shmuel Vasser , Eric Hilmo
    Location:
    USA
    Firm:
    Dechert LLP
    The Importance of Loan Underwriting When Restrictions on Bankruptcy Cannot Singlehandedly Save the Day: Sutton 58 Associates LLC v. Phillip Pivelsky, et al.
    2020-12-23

    In sophisticated real estate financing transactions, most prudent lenders attempt to deter borrowers from filing for bankruptcy before loans are paid in full by providing in loan documents that such a filing constitutes an event of default. Many lenders will insist that their borrowers remain “bankruptcy remote” in the form of a so-called “single asset real estate” entity during the term of the loan.

    Filed under:
    USA, New York, Insolvency & Restructuring, Litigation, Patterson Belknap Webb & Tyler LLP
    Authors:
    Daniel A. Lowenthal
    Location:
    USA
    Firm:
    Patterson Belknap Webb & Tyler LLP
    Court of Appeals Holds Bankruptcy Law Does Not Preempt Lender’s Tortious Interference Claims Against Third-Party Non-Debtors
    2020-12-17

    1In Sutton 58 Associates LLC v.

    Filed under:
    USA, New York, Insolvency & Restructuring, Litigation, Patterson Belknap Webb & Tyler LLP
    Authors:
    Muhammad U. Faridi
    Location:
    USA
    Firm:
    Patterson Belknap Webb & Tyler LLP
    Don’t Lend No Hand to Raise No Flag Atop No Ship of Fools: Breach of SPE Provisions by Non-Borrower Exposes Non-Borrower to Potential Tort Liability
    2020-12-11

    A recent decision of New York’s highest court potentially strengthens the ability of lenders to bring suits against third parties for participation in a borrower’s breach of single purpose entity/bankruptcy remote loan document covenants.

    Filed under:
    USA, New York, Insolvency & Restructuring, Litigation, Cadwalader Wickersham & Taft LLP
    Authors:
    Steven M. Herman , Michael S. Anglin
    Location:
    USA
    Firm:
    Cadwalader Wickersham & Taft LLP
    New York District Court Expands the Scope of the Bankruptcy Safe Harbor for LBO Payments
    2020-12-11

    In 2019, the U.S. Court of Appeals for the Second Circuit made headlines when it ruled that creditors' state law fraudulent transfer claims arising from the 2007 leveraged buyout ("LBO") of Tribune Co. ("Tribune") were preempted by the safe harbor for certain securities, commodity or forward contract payments set forth in section 546(e) of the Bankruptcy Code. In In re Tribune Co. Fraudulent Conveyance Litig., 946 F.3d 66 (2d Cir. 2019), petition for cert. filed, No. 20-8-07102020, 2020 WL 3891501 (U.S.

    Filed under:
    USA, New York, Insolvency & Restructuring, Litigation, Jones Day, Private equity, Second Circuit, U.S. Court of Appeals
    Authors:
    Mark G. Douglas
    Location:
    USA
    Firm:
    Jones Day
    Court of Appeals Preserves Lenders’ Tort Claims Against Debtors’ Insiders
    2020-12-04

    A lender’s state law tort claims against “non-debtor third-parties for tortious interference with a contract” were “not preempted” by “federal bankruptcy law,” held the New York Court of Appeals on Nov. 24, 2020. Sutton 58 Associates LLC v. Pilevsky, 2020 WL 6875979, *1 (N.Y. Ct. Appeals, Nov. 24, 2020) (4-3). In a split opinion, the Court of Appeals reversed the Appellate Division’s dismissal of a lender’s complaint against the debtors’ non-debtor insiders. The lender will still have to prove its case at trial.

    The Asserted Claims

    Filed under:
    USA, New York, Banking, Insolvency & Restructuring, Litigation, Schulte Roth & Zabel LLP
    Authors:
    Michael L. Cook
    Location:
    USA
    Firm:
    Schulte Roth & Zabel LLP
    New York Court of Appeals Ruling Could Shift Negotiating Leverage to Holdout Noteholders in Out-of-Court Restructurings
    2020-11-18

    The New York Court of Appeals’ recent 4-3 opinion in CNH Diversified Opportunities Master Account, L.P. v. Cleveland Unlimited, Inc., 2020 WL 6163305 (NY Oct. 22, 2020), could provide minority noteholders with additional negotiating leverage in the context of attempted out-of-court restructurings. However, the scope of this decision’s impact, and whether it conflicts with the U.S. Court of Appeals for the Second Circuit’s prior holding in Marblegate Asset Mgmt., LLC v. Educ. Mgmt. Fin. Corp., 846 F.3d 1 (2d Cir.

    Filed under:
    USA, New York, Insolvency & Restructuring, Litigation, Skadden Arps Slate Meagher & Flom LLP, Second Circuit, New York Court of Appeals
    Authors:
    Van C. Durrer II , Evan A. Hill , Bram A. Strochlic
    Location:
    USA
    Firm:
    Skadden Arps Slate Meagher & Flom LLP
    Marblegate Under Attack! Or Not? Out-of-Court Bond Restructurings in Light of NY Court of Appeals Decision in CNH Diversified
    2020-11-03

    In its October 22, 2020, CNH Diversified Opportunities Master Account, L.P. v.

    Filed under:
    USA, New York, Insolvency & Restructuring, Litigation, Mayer Brown, U.S. Court of Appeals
    Authors:
    Samuel R. Rabuck , Aaron Gavant , Craig E. Reimer , Sean T. Scott , Matthew V. Wargin
    Location:
    USA
    Firm:
    Mayer Brown
    New York’s Highest Court Expands Rights of Minority Noteholders to Challenge Out-of-Court Restructurings
    2020-10-28

    In a victory for minority noteholders opposing an out-of-court restructuring of their distressed issuer, New York's highest court ruled last week that a holder's right to receive or sue for payment on its notes survived an exercise of statutory remedies by the trustee, conducted at the direction of a noteholder majority, that would have cancelled the holder's notes without its consent and replaced them with equity securities.

    Filed under:
    USA, New York, Insolvency & Restructuring, Litigation, Milbank LLP
    Authors:
    Alexander B. Lees , Sinjini Saha
    Location:
    USA
    Firm:
    Milbank LLP
    The Best Laid Plans: How a Proposed Sale of NYC Real Estate Under Section 363 of the Bankruptcy Code Went Awry
    2020-10-26

    There are several ways in which property owners can advantageously use the Bankruptcy Code to effectuate strategic dispositions of assets. But the bankruptcy process can be fraught with uncertainty that can upend the best laid plans. The matter of In re Wansdown Properties Corp. N.V., No. 19-13223 (SMB), 2020 WL 5887542 (Bankr. S.D.N.Y. Oct. 5, 2020) provides an instructive and cautionary example.

    Filed under:
    USA, New York, Insolvency & Restructuring, Litigation, Real Estate, Patterson Belknap Webb & Tyler LLP, Title 11 of the US Code
    Authors:
    Daniel A. Lowenthal
    Location:
    USA
    Firm:
    Patterson Belknap Webb & Tyler LLP

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