The United States Bankruptcy Court for the District of Massachusetts has denied injunctive relief requested by two bankruptcy trustees seeking to stay the prosecution and settlement of shareholder actions proceeding against various former officers and directors of a bankrupt corporation. In re Enivid, 2007 WL 806627 (Bankr. D. Mass. Mar. 16, 2007).

The United States Bankruptcy Court for the Southern District of New York granted preliminary injunctions ordering a directors and officers liability insurer to advance defense costs, despite the fact that the insurer had denied coverage, and without adjudicating the coverage defense. Axis Reinsurance Co. v. Bennett et al., Adv. No. 07-01712 (S.D.N.Y. Bankr. Aug. 31, 2007); Grant v. Axis Reinsurance Co., Adv. No. 07-2005 (S.D.N.Y. Bankr. Sep. 11, 2007). The bankruptcy court applied New York law and relied heavily on the case In re WorldCom, Inc.

A company attempting to reorganize its affairs in bankruptcy may seek to enjoin its creditors or other third parties from suing members of the company's senior management team during the course of the reorganization proceedings, so that the senior management members can devote their time and resources to the reorganization effort without distraction. Courts throughout the country have applied differing standards in determining when the granting of an injunction of proceedings against a non-debtor is appropriate.

While Bankruptcy Code section 105 grants broad powers to issue injunctions, most bankruptcy courts are reluctant to enjoin litigation in other venues. A recent ruling by the U.S. Court of Appeals for the Ninth Circuit follows this trend, reversing a preliminary injunction issued by a bankruptcy court staying arbitration proceedings between two nondebtor parties.

However, the Ninth Circuit also articulated specific standards for when such a section 105 injunction may be obtained. In re Excel Innovations, Inc., 502 F.3d 1086, 2007 WL 2555941 (9th Cir. Sept. 7, 2007).

Congress enacted amendments to the United States Bankruptcy Code in 2005 designed to increase certainty in the marketplace for mortgage loan repurchase agreements and other financial contracts.1 The contours – and limits – of these amendments were recently explored by the Delaware bankruptcy court in Calyon New York Branch v. American Home Mortgage Corp.

The United States Bankruptcy Court for the Southern District of New York has granted another preliminary injunction ordering an excess directors and officers liability insurer to advance defense costs, despite the fact that the insurer had denied coverage on the basis of a prior knowledge exclusion and three of the insured entity's principals have pled guilty to various offenses, including violations of the securities laws. Murphy v. Allied World Assurance Co. (U.S.), Inc. (In re Refco, Inc.), No. 08-01133 (Bankr. S.D.N.Y. Apr. 21, 2008).

The United States Supreme Court has denied a petition for certiorari in a case in which the U.S. Court of Appeals for the Ninth Circuit had articulated when a bankruptcy court should stay arbitration proceedings between non-debtor parties. In re Excel Innovations, Inc., 502 F.3d 1086, (9th Cir. 2007), cert. den., __ U.S. __ (Dkt. No. 07-963, April 28, 2008).

In ABN Amro Bank N.V. v. Parmalat Finanziara S.p.A. (In re Parmalat Finanziara S.p.A.),1 the United States District Court for the Southern District of New York affirmed the Bankruptcy Court’s entry of an injunction pursuant to former section 304 of the Bankruptcy Code (the precursor to current chapter 15, applicable in crossborder insolvency proceedings), which prevented the beneficiary of a guaranty governed by New York law from asserting its guaranty claim against Italian debtor (and guarantor) Parmalat S.p.A. (“Parmalat”) in the United States.

C.A. No. 4499-VCL (Del. Ch. Apr. 27, 2009) (Lamb, V.C.) (Letter opinion).

The U.S. Bankruptcy Court for the Southern District of New York recently prohibited insurers from terminating debtors' insurance contracts based on so-called "cesser" clauses, which provided for the automatic termination of insurance coverage upon the commencement of proceedings under any bankruptcy or insolvency law. LaMonica v. N. of Eng. Protecting & Indem. Ass'n Ltd. (In re Probulk Inc.), 407 B.R. 56 (Bankr. S.D.N.Y. 2009).