How real is the threat to the District of Delaware and the Southern District of New York as the prime venue choices for corporate Chapter 11 bankruptcy cases? It appears that both are safe, at least for now.
Commercial landlords in New York often find that their efforts to evict defaulted tenants are frustrated when, after serving the defaulting tenant a notice to cure, the tenant obtains a “Yellowstone” temporary restraining order (TRO) pursuant to First National Stores v. Yellowstone Shopping Center, 21 N.Y.2d 630 (1968). As discussed below, a recent New York decision may allow a landlord to avoid a Yellowstone injunction by including lease language waiving the tenant’s rights to declaratory and injunctive relief.
The Bottom Line
On October 20, 2017, the U.S. Court of Appeals for the Second Circuit issued a long-awaited decision in In re MPM Silicones, LLC (“Momentive”) holding that, with one important exception, that the plan of reorganization confirmed by the bankruptcy court comports with Chapter 11. Case No. 15-1682 (2d Cir. Oct. 20, 2017).
In trotting a path out of Chapter 11, debtors in most cases will need to engage various key stakeholders, some of whom are not entitled to a distribution in the bankruptcy. As a form of remuneration, non-debtors may insist on receiving a release of liability - not only from claims belonging to the debtor, but also the claims of third-parties - in exchange for their support and contribution to the case.
The United States District Court for the Eastern District of New York issued a decision in July, 2017 that holds banks liable for diversion of funds in violation of New York’s lien law, when it should have known of the trust nature of the funds it receives. In Delco Electrical Corp. v. Wells Fargo Capital Finance, Inc., 2017 WL 3311224 (E.D.N.Y. July 31, 2017), Teltronics, Inc. (“Teltronics”) contracted with the New York City Department of Education to make telecommunications-related improvements at public schools from 2007-2011.
In Feltman v. Noor Staffing Grp., LLC (In re Corp. Res. Servs. Inc.), 564 B.R. 196 (Bankr. S.D.N.Y. 2017), the bankruptcy court considered whether section 553 of the Bankruptcy Code creates a right of setoff when no such right is available under applicable nonbankruptcy law. The court concluded that section 553 does not create an independent federal right of setoff, but merely preserves any such right that exists under applicable nonbankruptcy law.
Our two-part article on non-con and true sale issues in insurance contexts continues with a deeper dive into the considerations that distinguish these issues from similar remoteness principles in a Bankruptcy Code context. In Part One, we explained some of the basics of state insurance law that bear on these issues and how these can give rise to different approaches in opinion-giving; in this Part Two, we identify some practical obstacles that arise in these kinds of contexts and opinions.
A Pennsylvania Hypothetical
Indentures and other agreements governing complex, multitiered structured debt products will typically contain a series of reserves, the adequacy of whose funding will take precedence over payments to noteholders. While the funding requirements of the reserve accounts will be set forth in the agreement, the formulation of these provisions will leave administrators considerable leeway in determining the cash maintenance levels appropriate for the various accounts. In a recent case, UMB National Association v. Airplanes Limited (S.D.N.Y.
A recent case in New York State Supreme Court, One Williams Street Capital Management LP v. U.S. Education Loan Trust IV, LLC (Sup. Ct. N.Y. Cty. May 15, 2015), affords a useful opportunity to review the applicability and scope of §13-107 of the New York General Obligations Law, which provides that a transfer of a bond “vests in the transferee all claims or demands of the transferrer.” The court observed that §13-107 extends to all claims, whether in contract or in tort, including fraud.
In Del Forte USA, Inc. v. Blue Beverage Group, Inc. et al., No. 518454/2016, 2017 BL 253248 (Sup. Ct. Jul. 17, 2017), New York Commercial Division Justice Sylvia G. Ash denied plaintiff Del Forte’s preliminary injunction motion that sought, pursuant to N.Y.