In a recent opinion dated March 29, 2016, the Delaware Bankruptcy Court on remand from, and following the direction of, the Delaware District Court, ruled that only prepetition unpaid invoices may be counted for purposes of the new value defense under 11 U.S.C. § 547(c)(4). The Bankruptcy Court also ruled that the plaintiff Chapter 7 trustee was entitled to prejudgment interest from the date of the filing of the preference avoidance complaint. Further, the District Court, in affirming the Bankruptcy Court on this point, addressed the ordinary course defense under 11 U.S.C.

The U.S. Court of Appeals for the First Circuit held on June 23, 2011, that junior creditors could receive a distribution over the objection of senior creditors who claimed they were entitled to post-petition interest under contractual subordination provisions. In re Bank of New England Corporation, ___ F.3d ___, 2011 WL 2476470 (1st Cir. June 23, 2011). In reaching its decision, based on the bankruptcy court's fact findings, the court stressed "that the parties did not intend to subordinate the Junior Noteholders to post-petition interest."Id. at *5.

The U.S. Court of Appeals for the Tenth Circuit held on Nov. 3, 2009, that a district court had improperly dismissed, on mootness grounds, an appeal from a bankruptcy court’s order confirming a reorganization plan. According to the Tenth Circuit, the appeal was reviewable because reversal of the plan confirmation order (1) would not unduly affect innocent third parties, and (2) would not undo any complex transactions.

The Ninth Circuit held on July 3, 2008, that an oversecured creditor’s claim for payment was entitled to a “presumption in favor of the loan agreement’s default rate (an additional 2% interest), subject only to reduction based upon any equities involved.” General Elec. Capt’l Corp. v. Future Media Productions, Inc., 2008 WL2610459, *2 (9th Cir. 7/3/08). Reversing the lower courts, the Court of Appeals held that the bankruptcy court had improperly applied a questionable Ninth Circuit precedent when denying the lender a default rate of interest. Id., at *4.

The Court of Appeals for the First Circuit recently held that an oversecured lender holds at least an unsecured claim for contractual prepayment penalties against a solvent debtor. UPS Capital Business Credit v. Gencarelli (In re Gencarelli), 2007 BL 91656 (1st Cir., Aug. 30, 2007). As the court explained, "[t]his is a difficult question that has significant ramifications for the commercial lending industry." Id. at 16.

The Supreme Court unanimously held on March 20, 2007, that an unsecured lender could recover contractbased legal fees “incurred in [post-bankruptcy] litigation” on “issues of bankruptcy law.” Travelers Casualty & Surety Co. of America v. Pacific Gas & Elec. Co., __ U.S. __ (March 20, 2007). Op., at 1, 3. In doing so, the court vacated a summary ruling by the Ninth Circuit last year. 167 Fed. Appx. 593 (9th Cir. 2006) (held, “attorney fees… not recoverable in bankruptcy for litigating issues ‘peculiar to federal bankruptcy law.’“), citing In re Fobian, 951 F.2d 1149, 1153 (9th Cir.

A court-approved pre-plan settlement that would have resolved a dispute between a Chapter 11 creditors’ committee and the debtor’s secured lenders over the lenders’ liens was vacated by the U.S. Court of Appeals for the Second Circuit on March 5. Motorola, Inc. v. Official Committee of Unsecured Creditors and J.P. Morgan Chase Bank, N.A. (In re Iridium Operating LLC). The settlement also would have funded massive litigation against the debtor’s former parent, Motorola Inc.

Motorola’s Successful Argument

In 1984 a Third Circuit panel decided that the automatic stay did not apply to a right to payment which arose under applicable state law after a bankruptcy petition was filed. Avellino & Bienes v. M. Frenville Co., 744 F.2d 332 (3d Cir. 1984). The Third Circuit tradition is that the holding of a panel in a precedential opinion is binding on subsequent panels. Until this year Frenville remained good Third Circuit law notwithstanding universal rejection by other circuits.

In a thorough appellate decision, a United States District Court in Florida has reversed the portion of a Bankruptcy Court’s determination that the repayment of over $400 million in loans was a fraudulent transfer. As discussed in more detail below, the decision is significant in the context of complex, multiple entity structures in determining (i) which affiliated entity (or unpaid creditors of that entity) can recover a transfer and (ii) what constitutes reasonably equivalent value for the transfer.

In the recent decision of Century Services Inc. v. Canada (Attorney General), 2010 SCC 60, the Supreme Court of Canada has, for the first time, interpreted key provisions of the Companies’ Creditors Arrangement Act (“CCAA”).

The judgment of the Court, which was pronounced December 16, 2010, overrules appellate authority from Ontario and British Columbia that previously conferred a priority for unremitted GST on the Crown in CCAA proceedings, and endorses the broad discretionary power of a CCAA court.