In Clear Channel Outdoor, Inc. v.Knupfer (In re PW, LLC),1 the United States Bankruptcy Appellate Panel for the Ninth Circuit (the “BAP”) addressed the issue of whether a secured creditor had purchased estate property free and clear of liens, claims and encumbrances outside of a plan of reorganization.

In Aalfs v. Wirum (In re Straightline Investments, Inc.),1 the United States Court of Appeals for the Ninth Circuit considered whether a post-petition factoring of accounts receivable by the debtor was an avoidable transfer under section 549 of the Bankruptcy Code. The Court of Appeals affirmed the Bankruptcy Court, finding that the post-petition transfer had been properly avoided and that the lower court was justified in allowing the trustee both to recover the accounts receivable and their proceeds and to retain the consideration paid by the transferee.

In In re SNTL Corp.,1 the United States Bankruptcy Appellate Panel of the Ninth Circuit recently decided that if a creditor is required in another proceeding to disgorge as a preference a payment that had been guaranteed by the debtor, the debtor’s liability as guarantor may be revived, provided that the agreement releasing the debtor from its guarantee obligation to the creditor explicitly permits such revival.

Background

On December 4, 2012, the United States Court of Appeals for the Ninth Circuit added to the growing body of case law delineating the extent of bankruptcy courts’ jurisdiction in the wake the Supreme Court’s decision in Stern v. Marshall.

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.

The United States Supreme Court recently ruled in Stern v. Marshall1 that a bankruptcy court lacks constitutional authority to render a final judgment on a bankruptcy estate’s counterclaim against a creditor based on state common law, despite an express statutory grant of jurisdiction. This ruling is the most significant decision regarding bankruptcy court jurisdiction since the Court’s 1982 decision in Northern Pipeline v. Marathon2 and it could significantly affect the administration of bankruptcy cases.

Root of the Constitutional Problem

In JPMCC 2007-C1 Grasslawn Lodging, LLC v. Transwest Resort Props. Inc., et al. (In re Transwest Resort Props. Inc.), Case No. 16-16221, 2018 U.S. App. LEXIS 1947 (9th Cir. Jan. 25, 2018), the Ninth Circuit was the first Circuit court to decide a significant split in the lower courts between the “per plan” or “per debtor” impaired accepting class requirement to confirmation.

A Chapter 11 debtor “cannot nullify a preexisting obligation in a loan agreement to pay post-default interest solely by proposing a cure,” held a split panel of the U.S. Court of Appeals for the Ninth Circuit on Nov. 4, 2016. In re New Investments Inc., 2016 WL 6543520, *3 (9th Cir. Nov. 4, 2016) (2-1).

“[T]he claims of [an individual debtor’s] general unsecured creditors are ‘senior to or equal [to]’” a defrauded investor’s security claim under Bankruptcy Code (“Code”) § 510(b), held the U.S. Court of Appeals for the Ninth Circuit on Aug. 22, 2016. In re Del Biaggio, 2016 WL 4435904, *9 (9th Cir. Aug. 22, 2016). The investor (“F”) had filed a claim against the debtor based on his wrongful failure to fund, through his affiliated limited liability company (“LLC”), his share in an acquisition venture with F.

“A creditor does not become an insider simply by receiving a claim from a statutory insider,” held a split panel of the U.S. Court of Appeals for the Ninth Circuit on Feb. 8, 2016. In re The Village at Lakeridge, LLC, 2016 WL 494592, at *1 (9th Cir. Feb. 8, 2016) (2-1). According to the court, “Insiders are either statutory [per se] [e.g., officers, directors] or non-statutory [de facto].” Id.