The U.S. Court of Appeals for the Second Circuit, on Feb. 7, 2011, held that senior creditors could not “gift” part of their reorganization plan recovery to existing shareholders of the debtor.In re DBSD N. Am., Inc., __ F.3d __, 2011 WL 350480 (2d Cir. Feb. 7, 2011) (2-1) (Lynch, J.) (explainingIn re DBSD N. Am., Inc., 627 F.3d 496 (2d Cir. 2010) (summary opinion)). Its extensive 62-page opinion explained the court’s previous two-page summary ruling of Dec.

The Joint Administrators (the “Administrators”) of Lehman Brothers International (Europe) (“LBIE”) have issued a notice, dated December 4, 2009 (the “Notice”), pursuant to Rule 2.95(1) of the U.K. Insolvency Rules 1986, announcing their intent to make a distribution (by payment of an interim dividend) to preferential creditors (if any) and unsecured, non-preferential creditors of LBIE. The Notice was authorized on December 2, 2009, by an order of the High Court of Justice (Companies Court) in London (the “U.K. Court Order”).

The Administrators of Lehman Brothers International (Europe) (in administration) (“LBIE”), acting as LBIE’s agent and without personal liability, have advised that they will be filing an omnibus claim on behalf of LBIE and LBIE’s customers against Lehman Brothers Inc. (“LBI”) in its liquidation proceedings under the Securities Investor Protection Act of 1970 (“SIPA”).  

The buyer of a Chapter 11 debtor's coal supply contract was not liable for the seller's obligations to the sales agent who secured the contract for the debtor-seller, according to a recent decision by the U.S. Court of Appeals for the Sixth Circuit. Al Perry Enterprises, Inc. v. Appalachian Fuels, LLC, 2007 U.S. App. LEXIS 22808 (6th Cir. Sept. 27, 2007). As the court explained, the buyer could not be liable to the sales agent "absent an express assumption of the [debtor's prior] obligations." Id. at *17.

Background

Courts frequently dismiss creditor appeals of bankruptcy confirmation orders as equitably moot. However, the Eighth Circuit Court of Appeals recently departed from this historic practice. In reversing a District Court determination that confirmation of a plan rendered a creditor’s appeal equitably moot, the Eighth Circuit held that motions to dismiss for equitable mootness should be “rarely granted,” and it reversed and remanded the lower courts’ dismissal of a creditor’s appeal of a Plan Confirmation Order on equitable mootness grounds.

A secured lender’s “mere retention of property [after a pre-bankruptcy–repossession] does not violate” the automatic stay provision [§ 362(a)(3)] of the Bankruptcy Code (“Code”), held a unanimous U.S. Supreme Court on Jan. 14, 2021. City of Chicago v. Fulton, 2021 WL 125106, *4 (Jan. 14,2021). Reversing the Seventh Circuit’s affirmance of a bankruptcy court judgment holding a secured lender in contempt for violating the automatic stay, the Court resolved “a split” in the Circuits. Id., at *2. The Second, Eighth and Ninth Circuits had agreed with the Seventh Circuit.

The Bankruptcy Code (“Code”) permits “a creditor [to] assert an unsecured claim for post-[bankruptcy] attorneys’ fees based on a pre-[bankruptcy] promissory note,” held the U.S. Court of Appeals for the Fourth Circuit on Feb. 8, 2019. SummitBridge Nat’l Investments III, LLC v. Faison, 2019 WL 490573, *2 (4th Cir. Feb. 8, 2019). In a sensible opinion, the Fourth Circuit reversed the lower courts’ disallowance of an undersecured lender’s claim for legal fees. The court thus “join[ed] other federal courts of appeals” with its holding. Id.

A bankruptcy trustee could not “avoid [a] debtor’s transfer” of encumbered asset sale proceeds when the debtor holds the funds “as a mere disbursing agent [under] a contract that” restricted its use, held the U.S. Court of Appeals for the First Circuit on April 18, 2018. Keach v. Wheeling & Lake Erie Railway Co. (In re Montreal, Me. & Atl. Ry.), 2018 U.S. App. LEXIS 9772 *14 (1st Cir. Apr. 18, 2018).

“[C]ourts may account for hypothetical preference actions within a hypothetical [C]hapter 7 liquidation” to hold a defendant bank (“Bank”) liable for a payment it received within 90 days of a debtor’s bankruptcy, held the U.S. Court of Appeals for the Ninth Circuit on March 7, 2017.In re Tenderloin Health, 2017 U.S. App. LEXIS 4008, *4 (9th Cir. March 7, 2017).

An individual Chapter 11 debtor’s “estate was diminishing” with no “reasonable likelihood of rehabilitation,” held the U.S. Court of Appeals for the First Circuit on July 5, 2016. In re Hoover, 2016 WL 3606918, *2 (1st Cir. July 5, 2016), affirming the bankruptcy court’s conversion of the case to a Chapter 7 liquidation. In a rare appellate decision on the conversion issue, the First Circuit affirmed the finding that the debtor had sold “inventory without replacing it with new inventory or retaining cash sufficient to offset the diminution.” Id. at *3.