On April 26, 2011, the Supreme Court approved a number of amendments to the Federal Rules of Bankruptcy Procedure. In particular, the Supreme Court amended Bankruptcy Rule 2019 to clarify the disclosure required of certain parties in interest in a chapter 9 or 11 bankruptcy case.1 These amendments were drafted by a panel of bankruptcy judges and restructuring experts and are intended to resolve a split in decisions concerning the proper application of the current Bankruptcy Rule 2019.

On April 26, 2011, the Supreme Court of the United States adopted amended Federal Rule of Bankruptcy Procedure 2019 (“Rule 2019”). Rule 2019 governs disclosure requirements for groups and committees that consist of or represent multiple creditors or equity security holders, as well as lawyers and other entities that represent multiple creditors or equity security holders, acting in concert in a chapter 9 or chapter 11 bankruptcy case.

In chapter 11 bankruptcy cases, creditors and equity holders with common interests often find it advantageous to pool resources and form an ad hoc group or committee. Because the committee represents a larger amount of claims or interests, it speaks with more authority in the bankruptcy case, and the members are able to save money by sharing the cost of legal and financial advisors.

On April 27, 2011, the United States Supreme Court approved certain amendments to Bankruptcy Rule 2019 requiring disclosures by certain creditors and equity holders in Chapter 11 cases. We expect that amended Rule 20191 (“Amended Rule 2019”) will take effect as a matter of law on December 1, 2011 unless in the interim Congress enacts legislation to reject, modify, or defer the rules, which we view as unlikely.

Plaintiff White Mountains Re, successor in interest to MONY Re, filed an action in the New York Supreme Court against Travelers asserting claims for declaratory judgment and breach of contract arising out of a dispute concerning certain reinsurance contracts. Travelers removed the action to the US District Court for the Southern District of New York and subsequently filed a motion to transfer this action to the District of Connecticut.

Summary

In an 11 page opinion published May 18, 2011, Judge Shannon ruled that, in the context of a motion to dismiss, the officer of a corporation, which is itself a contractor, is not also a contractor by virtue of her position within the corporation. Judge Shannon’s opinion is available here (the “Opinion”).

Background

Most employers know that it is unlawful to terminate the employment of or to discriminate against an individual who has previously filed bankruptcy because of his or her status as a debtor in a bankruptcy proceeding. A recent Federal Court of Appeals decision, however, highlights the distinction between denying employment to an individual based on prior bankruptcy filing and terminating the individual’s employment because of it.

The Supreme Court recently issued its opinion in Stern v. Marshall (Stern), Case No. 10-179, 2011 WL 2472792 (U.S. June 23, 2011), invalidating the relatively common assumption that so called “core” bankruptcy proceedings are all matters in which the bankruptcy courts are permitted to enter final judgment, and undoubtedly fostering heightened jurisdictional scrutiny in the future.

The US Supreme Court has ruled in Stern v. Marshall (June 23, 2011) that a bankruptcy court lacks jurisdiction to render final judgment on a bankruptcy estate’s compulsory counterclaim against a creditor arising under common law, despite a statutory grant of jurisdiction.

In a decision that may create serious problems for bankruptcy case administration, the Supreme Court this morning invalidated part of the Bankruptcy Court jurisdictional scheme. Stern v. Marshall, No. 10-179, 564 U.S. ___ (June 23, 2011). Specifically, the Court held that the Bankruptcy Courts cannot issue final judgments on garden variety state law claims that are asserted as counterclaims by the debtor or trustee against creditors who have filed proofs of claim in the bankruptcy case.