As a result of the sheer number of legal and factual issues involved in many chapter 11 cases, bankruptcy judges can sometimes find themselves as captives of the parties; they may not appreciate the significance of an issue or a provision buried in a longer document unless it is properly presented. Thus, it is imperative that counsel flag the key issues for the court.

Section 502(b)(6) of the Bankruptcy Code caps the amount of a lessor’s claim against a debtor-lessee for damages arising from the termination of a real property lease. The statutory cap is calculated according to a formula that considers, among other things, the date on which the lessor “repossessed” or the debtor-lessee “surrendered” the leased property. Because those terms are not defined in the Bankruptcy Code, however, courts disagree as to whether state or federal law should determine their meanings for the purpose of calculating the allowed amount of the lessor’s claims.

In Official Committee of Unsecured Creditors v. Baldwin (In re Lemington Home for the Aged), 659 F.3d 282 (3d Cir. 2011), the Third Circuit Court of Appeals held, among other things, that the “deepening insolvency” cause of action, which the Third Circuit previously recognized in Official Committee of Unsecured Creditors v. R.F. Lafferty & Co., 267 F.3d 340 (3d Cir. 2001), remains an independent cause of action under Pennsylvania law.

Background

Pennsylvania’s legislature recently approved House Bill No. 1773, an overhaul to its Municipalities Financial Recovery Act, commonly known as “Act 47.”  HB 1773 was signed into law by Governor Tom Corbett on October 31, 2014.

The bankruptcy court ruled today that the City of Harrisburg’s Chapter 9 petition filed by the Harrisburg City Council was not specifically authorized under Pennsylvania law.  After extensive briefing from the parties concerning, among other things, the constitutionality of Act 26 – the law passed in June 2011 to prohibit “third class” cities like Harrisburg from filing Chapter 9 -- the court ruled the law was constitutional and prohibited Harrisburg from becoming a Chapter 9 debtor.  The case has been dismissed.

As expected the Harrisburg City Council has filed a reply to the numerous objections to the Chapter 9 filing of Harrisburg initiated by the City Council.  The City Council’s brief (harrisburg response.pdf) appears to be the only timely filed reply to the objections to the Chapter 9 filing. 

The Bankruptcy Court held a status conference in the Harrisburg Chapter 9 earlier today.  The principal purpose of the hearing was for the court to set a schedule for objections to Harrisburg’s chapter 9 eligibility.  Objections to eligibility and supporting briefs are to be filed by October 28, a response by the City Council is to be filed by November 7, and replies on behalf of the objecting parties are to be filed by November 12.  The judge made it clear that the City Council has the burden of showing eligibility.  Th

As many are already aware, the City of Harrisburg, Pennsylvania filed a Chapter 9 bankruptcy late Tuesday evening, October 11 in advance of a Pennsylvania state senate vote that may have put the city on the path to a receivership.  The Chapter 9 petition (http://www.publicfinancematters.com/Harrisburg%20Petition%20.pdf) is the result of a 4-3 vote “authorizing” the filing by the Harrisburg city council without the support of Harrisburg’s Mayor Linda Thompson.  Pr

The Commonwealth Court of Pennsylvania, which is overseeing the liquidation of the insurer in the coverage dispute, entered an order approving the insurer’s denial of coverage under an excess policy for a $20 million settlement that two individual insureds paid into a Federal Trade Commission (FTC) redress fund. The court adopted the recommendation of the referee appointed to hear the coverage dispute, who applied California law and concluded that the insurer was entitled to summary judgment following briefing and oral argument. Wiley Rein represented the insurer before the referee.

The United States District Court for the Western District of Pennsylvania dismissed an appeal of an order in Federal Insurance Co. v. Le-Nature's, Inc., 380 B.R. 747 (Bankr. W.D. Pa. 2008), in which the bankruptcy court granted the insurer's motion to compel discovery and ruled that the defendant waived all of his discovery objections, including objections based upon the Fifth Amendment's protection against self-incrimination, for failing timely to assert them. Federal Ins. Co. v. Le-Nature's, Inc., Civil Action No. 08-269 (W.D. Pa. July 25, 2008).