The ability of a bankruptcy trustee or chapter 11 debtor-in-possession ("DIP") to obtain credit or financing during the course of a bankruptcy case is often crucial to the debtor's prospects for either maintaining operations pending the development of a confirmable plan of reorganization or facilitating an orderly liquidation designed to maximize asset values for the benefit of all stakeholders. In a chapter 11 case, financing (and/or cash infusions through recapitalization) also is often a key component of the reorganized debtor's ability to operate post-bankruptcy.
For nearly 25 years, courts in the Ninth Circuit have consistently refused to sanction nonconsensual third-party releases as part of chapter 11 plans. A ruling recently handed down by the U.S. District Court for the District of Washington reaffirms and extends that proposition. In In re Fraser’s Boiler Serv., Inc., 2019 WL 1099713 (D. Wash. Mar.
On May 1, 2017, the U.S. Supreme Court agreed to hear Merit Management Group v. FTI Consulting, No. 16-784, on appeal from the U.S. Court of Appeals from the Seventh Circuit. See FTI Consulting, Inc. v. Merit Management Group, LP, 830 F.3d 690 (7th Cir. 2016) (a discussion of the Seventh Circuit's ruling is available here).
Overview
In Asarco, LLC v. Noranda Mining, Inc., the Tenth Circuit Court of Appeals held that representations made to the bankruptcy court that the Debtor’s settlement of environmental claims reflected only the Debtor’s share of the cleanup costs did not judicially estop the Debtor from brining a contribution claim against another potentially responsible party for those same costs.
When Can a Subsidiary Be Liable for the Actions of Its Owners?
In a typical application of the veil piercing remedy, an equity holder is held liable for the debts of the corporate entity it owns and controls. The tests courts use for determining when the remedy is available vary, but generally veil piercing may occur only where the equity holder has abused the corporate form, by using its control over an entity to commit a fraud or other injustice.
We recently blogged about Weinman v. Walker (In re Adam Aircraft Industries, Inc.), a decision from the U.S.
For those readers who have a sophisticated understanding of bankruptcy law, the holdings of Jester v. Wells Fargo Bank, N.A. (In re Jester) will not be surprising.
Payments made by a debtor within 90 days of a bankruptcy petition are generally avoidable as preferences under section 547 of the Bankruptcy Code. Many exceptions and defenses exist, however, to ensure that creditors are not discouraged from conducting business with companies that may be at risk of filing