On June 4, 2018, the U.S. Supreme Court decided the case of Lamar, Archer & Cofrin, LLP v. Appling, No. 16-1215, which dealt with the dischargeability of debt in bankruptcy proceedings. The Court held that a statement about a single asset can be a “statement respecting the debtor’s financial condition” under section 523(a)(2) of the Bankruptcy Code.

Background Facts

On June 4, 2018, the U.S. Supreme Court reiterated to lenders everywhere, the long-time advice “Get it in writing.” The Court issued its decision in Lamar Archer & Cofrin LLP v. Appling, Case No. 16-1215 (Sup. Ct. June 4, 2018), holding that a false statement by a debtor about a single asset can be cause for holding the debt nondischargeable in bankruptcy only if the statement is in writing.

On April 3, 2018, the U.S. Supreme Court issued an order that, in light of its recent ruling in Merit Management Group LP v. FTI Consulting Inc., 138 S. Ct. 883, No. 16-784 (Feb. 27, 2018), the Court would defer consideration of a petition seeking review of a 2016 decision by the U.S. Court of Appeals for the Second Circuit in the Tribune Co.

On June 4, 2018, the U.S. Supreme Court ruled in Lamar, Archer & Cofrin, LLP v. Appling, No. 16-1215, 138 S. Ct. 1752, 2018 WL 2465174 (U.S. June 4, 2018),  that an individual debtor's false statement about a single asset, as distinguished from the debtor's overall financial status, can make a debt for money, property, services, or credit obtained on the basis of the statement nondischargeable in the debtor's bankruptcy case, but only if the statement is in writing.

On May 25, 2018, the United States Court of Appeals for the Second Circuit confirmed in re Sabine Oil & Gas Corp.1 that a midstream gathering agreement did not create a real covenant that ran with the land,2 and therefore, a debtor may reject the agreement as an “executory contract” under section 365 of the Bankruptcy Code.3

The Supreme Court’s recent decision in Merit Mgmt. Group, LP v. FTI Consulting, Inc., 138 S.Ct. 883 (2018), held that transfers made by and to entities that are not “financial institutions” or other covered entities fall outside of the scope of the § 546(e) safe harbor even if they are made through financial institutions or other covered entities. The Supreme Court’s decision resolves a circuit split over how the § 546(e) safe harbor applies to transactions involving conduit entities and could impact future disputes involving safe harbors under the Bankruptcy Code.

The Supreme Court’s recent decision in Merit Management Group, LP v. FTI Consulting, Inc., 138 S.Ct. 883 (2018), held that transfers made by or to entities that are not “financial institutions” or other covered entities fall outside the scope of 11 U.S.C. § 546(e)’s “safe harbor” from a trustee’s avoidance powers under the Bankruptcy Code, even if those transfers are made through financial institutions or other covered entities.

Here’s an aggregation of some of my Twitter posts from May 7-10, 2018, with links to important cases, articles, and news briefs that restructuring professionals will find of interest. Don’t hesitate to reach out and contact me to discuss any posts.

May 7 – 10, 2018

BK RELATED CASES:

The Supreme Court recently addressed two bankruptcy issues. In its opinion, the Court resolved a circuit split regarding the breadth of the safe harbor provision which protects certain transfers by financial institutions in connection with a securities contract. In Village at Lakeridge, the Court weighed in on the scope of appellate review and whether a bankruptcy court’s factual determination should be reviewed for clear error or de novo. These decisions are notable because they provide guidance on previously murky issues of bankruptcy law.

The Bankruptcy Code gives a bankruptcy trustee, or the debtor in possession, the power to “avoid” certain transfers made by the debtor at various times before filing for bankruptcy relief.