After more than a decade, litigation resulting from the failed leveraged buyout (LBO) of media giant Tribune Company has finally drawn to a close. On Feb. 22, 2022, the U.S. Supreme Court declined to review the latest decision of the U.S. Court of Appeals for the Second Circuit in In re Tribune Co. Fraudulent Conveyance Litig., 10 F.4th 147 (2d Cir.

The US Supreme Court tends to hear a couple of bankruptcy cases per term. Most of these cases deal with interpreting provisions of the Bankruptcy Code. However, every few years or so, the Supreme Court decides a constitutional issue in bankruptcy. Some are agita-inducing (Northern Pipeline, Stern), some less so (Katz). The upcoming case is a little more nuanced, but could have major consequences.

The opinion is Wells Fargo Bank, Indenture Trustee v. The Hertz Corp. (In re The Hertz Corp)

The question is whether (and at what rate) post-petition interest can be recovered on pre-petition unsecured claims, when debtor is solvent, under the “solvent debtor exception.” The answers pit equitable arguments against statutory provisions and even looks back to caselaw under the Bankruptcy Act of 1898.

The Second Circuit Court of Appeals recently issued an opinion that potentially broadens the proximate cause element of claims brought under the Racketeer Influenced and Corrupt Organizations Act (RICO). RICO’s proximate cause element requires a plaintiff to allege facts plausibly establishing that there is a “direct relationship” between the claimed injury and the defendant’s conduct in violation of RICO.

The Ninth Circuit Bankruptcy Appellate Panel (BAP) recently held that merely freezing a debtor’s bank account holding funds that had been garnished by a judgment creditor did not violate the automatic stay. This decision was based on the United States Supreme Court’s ruling last year in City of Chicago v. Fulton, holding that retention of repossessed vehicles that were possessed before a bankruptcy was filed did not violate the automatic stay.

In the First, Sixth (in some districts within the circuit), Eighth, Ninth and Tenth Circuits an appeal from a bankruptcy court order may go either to the district court, as elsewhere in the country, or, uniquely to those five circuits, to a Bankruptcy Appellate Panel (BAP). The BAP is a three-judge panel selected from bankruptcy judges in the circuit but not the same district. Under the statute, presumptively the appeal goes to the BAP but the appellant may elect to go to the district court.

The U.S. Supreme Court, in its Fulton v. City of Chicagoopinion, let Chicago off the automatic stay hook for holding onto impounded vehicles owned by Chapter 13 debtors.

But Fulton is not the last word on that subject.

The new opinion is Cordova, et al. v. City of Chicago, Case No. 19-0684 in the Northern Illinois Bankruptcy Court (issued December 6, 2021, Doc. 154).

Background

Can the foreclosure of a property tax lien on real estate be avoided as a fraudulent transfer under § 584 of the Bankruptcy Code?

That’s the issue before the District Court, on a bankruptcy appeal, in Duvall v. County of Ontario, New York, Case No. 21-cv-06236 in U.S. District Court, WDNY (issued 11/9/2021).

Courts have gone both ways on the issue.

The Difficulty

After reporting its lowest annual recovery from False Claim Act (“FCA”) cases in Fiscal Year (FY) 2020, the Department of Justice (“DOJ”) has reportedly bounced back. On February 1, 2021, DOJ released detailed statistics regarding FCA recoveries during FY 2021, during which DOJ reportedly obtained more than $5.6 billion in civil FCA settlements and judgments, of which $5 billion related to matters involving the health care industry.

The Bankruptcy Protector