The U.S. Bankruptcy Court for the Southern District of New York issued a decision earlier this year that is likely to have a significant impact on bankruptcy sales of property. In In re New 118th, Inc., 398 B.R. 791 (Bankr. S.D.N.Y. 2009), the court held that certain tax exemptions available pursuant to section 1146(a) of the Bankruptcy Code in connection with transfers of property that occur "under a plan," apply to pre-confirmation sales that close after confirmation and are necessary to the consummation of the debtor's plan.

United States Supreme Court

Washington, D.C.

November 3, 2009

In a decision that will be of great interest to the creditor community, the US Court of Appeals for the Second Circuit held, on November 5, 2009, that the Bankruptcy Code does not bar an unsecured claim for post-petition attorneys’ fees that was authorized under a valid prepetition contract. The case, Ogle v. Fidelity & Deposit Company of Maryland,1 extends and clarifies the US Supreme Court’s March 2007 decision in the Travelers case,2 which opened the door for such a ruling.

In a recent holding that a creditor may collect, on an unsecured basis, post-petition attorneys’ fees under an otherwise enforceable pre-petition contract, the Second Circuit Court of Appeals followed a similar ruling by the Ninth Circuit earlier this year, adding to a conflict among the circuits on this issue.

On December 1, 2009, numerous changes to the time periods applicable in bankruptcy cases took effect. These changes, which will impact creditors and debtors alike, are relatively straightforward but must be carefully reviewed and thoroughly understood. Time plays a critical role in the administration of bankruptcy cases, affecting the degree of notice a party is required to give before certain actions can be taken or approved by the bankruptcy court as well as deadlines for filing various documents, asserting various rights and satisfying certain statutory obligations.

The Supreme Court declines to review a circuit court decision in Oneida Ltd., which held that a debtor cannot discharge in bankruptcy, as a prepetition claim, premiums it owes to the Pension Benefit Guaranty Corporation in connection with the termination of a pension plan.

Introduction

On June 23, 2011, the US Supreme Court issued a narrowly-divided decision in Stern v. Marshall, limiting Bankruptcy Court jurisdiction over certain types of claims. The Court found that while the Bankruptcy Court was statutorily authorized to enter final judgment on a tortious interference counterclaim (as a core proceeding under 28 U.S.C. § 157(b)(2)(C)), it was not constitutionally authorized to do so.

The United States Supreme Court recently ruled in Stern v. Marshall1 that a bankruptcy court lacks constitutional authority to render a final judgment on a bankruptcy estate’s counterclaim against a creditor based on state common law, despite an express statutory grant of jurisdiction. This ruling is the most significant decision regarding bankruptcy court jurisdiction since the Court’s 1982 decision in Northern Pipeline v. Marathon2 and it could significantly affect the administration of bankruptcy cases.

Root of the Constitutional Problem

During her lifetime, Vickie Lynn Marshall, publicly known as Anna Nicole Smith (“Vickie”), was hardly a stranger to the prying eyes of the media. Today, the late Vickie is again the subject of media coverage, this time in the context of a fifteen-year legal saga that has twice reached the United States Supreme Court.

The Bottom Line: