On April 3, 2024, the Eleventh Circuit Court of Appeals (comprised of Federal Courts in Alabama, Florida and Georgia), affirmed the decision of the District Court for the Middle District of Florida in Al Zawawi v. Diss (In re Al Zawawi). The Court held that eligibility requirements for a “debtor” contained in section 109(a) of the Bankruptcy Code do not apply to foreign recognition proceedings under chapter 15 of the Bankruptcy Code.
The opinion is Bruce v. Citigroup Inc., Case No. 22-1000, decided August 2, 2023, by the U.S. Second Circuit Court of Appeals.
The opinion addresses this question:
A disclosure statement and a plan are critical documents in Chapter 11 cases, representing the culmination of a case and a roadmap of the debtor's path forward. A Chapter 11 plan can be either a plan of reorganization, pursuant to which a debtor emerges from bankruptcy as a new, reorganized entity, or a plan of liquidation, pursuant to which a debtor's remaining assets are liquidated and the proceeds are distributed to creditors. Plans of liquidation are common in Chapter 11 cases, where the debtor sells substantially all of its assets.
On April 12, 2024, the U.S. Supreme Court issued an important decision in the case of Macquarie Infrastructure Corp. v. Moab Partners, L.P., No. 22-1165. Justice Sotomayor, writing for a unanimous Court, ruled that “pure omissions are not actionable under Rule 10b-5(b).” In other words, a pure omission (i.e., where a speaker says nothing) cannot support a private claim under Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b–5, even if such an omission could constitute a violation of Item 303 of Regulation S-K (“Item 303”).
Over the years, I’ve heard lots of people say, “Bankruptcy abuse is a huge problem,” as a self-evident and undeniable proposition.
But here’s the thing. Debtors who try to abuse the bankruptcy system rarely get away with it. That’s because there are too many gatekeepers—and no debtor can fool them all!
The gatekeepers are debtor’s counsel, creditors and their attorneys, U.S. Trustees, bankruptcy courts, and appellate courts.
The Bankruptcy Code provides that, in chapter 11 cases where the court does not find "cause" for the appointment of a trustee, the court "shall" appoint an examiner, upon a request from the Office of the U.S. Trustee (the "UST") or any party-in-interest prior to confirmation of a chapter 11 plan. The examiner's role is to investigate the debtor's affairs or allegations of management misconduct, if either: (i) the court determines that the appointment would be in the best interests of stakeholders and the estate; or (ii) the debtor has qualifying unsecured debt exceeding $5 million.
One of the fundamental goals of a chapter 11 bankruptcy is the maximization of value available for distribution to creditors. The "absolute priority rule" generally applicable in chapter 11 requires that each class of impaired and unaccepting creditors be paid in full before any junior class of claims or interests may receive distributions under the plan. Courts recognize a limited exception to the absolute priority rule, however, allowing prepetition shareholders to retain their interest in the debtor where they contribute new value toward the debtor's reorganization.
On March 11, 2024, Judge Colm F.
In Short
The Situation: For the first time ever, a court in France has examined the compatibility of the statutory netting safe harbor with the French Constitution. The French High Court of Justice (Cour de cassation) addressed the preliminary question of constitutionality in the context of an insolvency proceeding and handed down its decision on March 6, 2024.
The scope of the Bankruptcy Code's "safe harbor" shielding certain securities, commodity, or forward-contract payments from avoidance as fraudulent transfers has long been a magnet for controversy, particularly after the U.S. Supreme Court suggested (but did not hold) in Merit Mgmt. Grp., LP v. FTI Consulting, Inc., 138 S. Ct.