The debtors' legal malpractice claim was "not property of their bankruptcy estate," held a split Ninth Circuit on June 30, 2020. In re Glaser, 816 Fed. Appx. 103, 104 (9th Cir. June 30, 2020) (2-1). But the U.S. District Court for the District of Minnesota one week later affirmed a bankruptcy court judgment that "the [debtor's] estate was the proper owner" of such a claim. In re Bruess, 2020 WL3642324, 1 (D. Minn. July 6, 2020).

There is longstanding controversy concerning the validity of release and exculpation provisions in non-asbestos trust chapter 11 plans that limit the potential exposure of various parties involved in the process of negotiating, implementing and funding the plan. The U.S. Bankruptcy Court for the Eastern District of Washington recently contributed to the extensive body of case law addressing these issues in In re Astria Health, 623 B.R. 793 (Bankr. E.D. Wash. 2021).

On June 11, 2020, the U.S. Court of Appeals for the 9th Circuit in Blixseth v. Credit Suisse, 961 F.3d 1074 (2020), held that a chapter 11 plan may contain a “narrow exculpation clause” that releases claims against non-debtor parties for actions relating to the plan approval process. Although the opinion does not endorse broad nonconsensual third party releases that are available in certain other circuits under limited circumstances, it nevertheless opens the door to additional protections for creditors that typically take an active role in chapter 11 cases.

The U.S. Court of Appeals for the Ninth Circuit recently held that bankruptcy courts could confirm Chapter 13 plans proposing estimated time periods to complete the plan if unsecured creditors and the trustee did not object, reversing a contrary ruling from its Bankruptcy Appellate Panel.

A copy of the opinion in In re Nanette Sisk is available at: Link to Opinion.

InIn re Juarez, 603 B.R. 610 (9th Cir. BAP 2019), the Bankruptcy Appellate Panel of the U.S. Court of Appeals for the Ninth Circuit addressed a question of first impression in the circuit with respect to property that is exempt from creditor reach: it adopted the view that, under the "new value exception" to the "absolute priority rule," an individual Chapter 11 debtor intending to retain such property need not make a "new value" contribution covering the value of the exemption.

Background

On November 25, the U.S. Court of Appeals vacated summary judgment in favor of defendants in an action alleging the defendants violated the FDCPA by attempting to collect a debt that was discharged in a bankruptcy proceeding and no longer owed.

On October 7, 2020, the United States Court of Appeals for the Ninth Circuit (“Ninth Circuit”) vacated, as moot, two FERC orders asserting concurrent jurisdiction to review the disposition of certain Pacific Gas & Electric Corporation (“PG&E”) power purchase agreements (“PPAs”) that PG&E sought to reject through bankruptcy. In a brief memorandum decision, a three-judge Ninth Circuit panel explained that the orders had become moot when the bankruptcy court confirmed a reorganization plan that had PG&E assume, rather than reject, the PPAs.

Can state regulatory agencies move ahead with lawsuits against businesses who file for bankruptcy in order to enforce consumer protection and business laws, or does the automatic stay’s broad injunctive sweep capture those actions? The answer depends on whether the state is acting in its regulatory capacity or simply like another creditor – and the distinction is not always clear.

The Ninth Circuit, in Blixseth v. Credit Suisse, 961 F.3d 1074, 1078 (9th Cir. 2020), issued a significant decision on the issue of whether nonconsensual third-party releases are ever permitted in Chapter 11 plans. Distinguishing its prior decisions on the topic, the Ninth Circuit permitted a nonconsensual third-party release that was limited to the exculpation of participants in the reorganization from claims based on actions taken during the case.

Statutory Background

The Ninth Circuit Bankruptcy Appellate Panel has held that a bankruptcy trustee appointed in a non-U.S. bankruptcy case did not need authority from a U.S. court to take possession and control of a foreign debtor’s assets located in the United States, and transfer them.