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Third Circuit: Pre-Bankruptcy Commercial Lease Termination Not Fraudulent Transfer
2023-06-06

Is an insolvent debtor’s pre-bankruptcy termination of a commercial lease a fraudulent transfer? The Third Circuit said no when it held that a lessor’s pre-bankruptcy termination of the debtors’ lease and purchase option “was not a transfer under Bankruptcy Code §548(a) (1)(B).” In re Pazzo Pazzo Inc., 2022 WL 17690158 (3d Cir. Dec. 15, 2022). But the Seventh Circuit held that a chapter 11 debtor’s pre-bankruptcy “surrender of [two] … leases to [its landlord] could be regarded as a preferential [or fraudulent] transfer.” In re Great Lakes Quick Lube L.P., 816 F.3d 482 (7th Cir. 2016).

Filed under:
USA, Company & Commercial, Insolvency & Restructuring, Litigation, Schulte Roth & Zabel LLP, Clawback/avoidance/preferences/fraudulent transfers, Insolvency, Third Circuit
Authors:
Michael L. Cook
Location:
USA
Firm:
Schulte Roth & Zabel LLP
View Original Article
A Split Resolved: The Supreme Court Holds Section 363(m) To Be Non-Jurisdictional - and Maybe Casts a Shadow on the Doctrine of Equitable Mootness
2023-04-20

On April 19, 2023, the Supreme Court, in a unanimous opinion written by Justice Ketanji Brown Jackson in MOAC Mall Holdings LLC, ruled Bankruptcy Code section 363(m) to be non-jurisdictional, i.e. just a “mere restriction on the effects of a valid exercise” of judicial power “when a party successfully appeals a covered authorization.” Before MOAC, the Third, Sixth, Seventh, Ninth, Tenth and Eleventh Circuits held section 363(m) to be non-jurisdictional, but the Fifth and Second Circuits had diverged.

Reasoning

Filed under:
USA, Insolvency & Restructuring, Litigation, Reed Smith LLP, Bankruptcy, US Congress, Supreme Court of the United States, Second Circuit, Fifth Circuit, Eleventh Circuit, Third Circuit, Sixth Circuit, Seventh Circuit, Tenth Circuit
Location:
USA
Firm:
Reed Smith LLP
View Original Article
Third Circuit Dismisses J&J Affiliate LTL’s Talc Liability Chapter 11 Filing “Good Faith” Under 1112(b) Requires Financial Distress
2023-02-09

Executive Summary:

Filed under:
USA, Insolvency & Restructuring, Litigation, Cadwalader Wickersham & Taft LLP, Good faith, Third Circuit, U.S. Court of Appeals
Authors:
Ingrid Bagby , Michele C. Maman , Casey Servais
Location:
USA
Firm:
Cadwalader Wickersham & Taft LLP
View Original Article
Third Circuit Dismisses J&J Affiliate LTL’s Talc Liability Chapter 11 Filing; “Good Faith” Under 1112(b) Requires Financial Distress
2023-02-09

Executive Summary:

Filed under:
USA, Insolvency & Restructuring, Litigation, Cadwalader Wickersham & Taft LLP, Good faith, Third Circuit, U.S. Court of Appeals
Authors:
Ingrid Bagby , Michele C. Maman , Casey Servais
Location:
USA
Firm:
Cadwalader Wickersham & Taft LLP
View Original Article
Texas Divisive Mergers Remain Viable After Third Circuit Appellate Decision
2023-02-08

The recent decision by the US Third Circuit Court of Appeals in In re LTL Management, LLC did not address or negate the viability of divisive mergers of entities under the Texas Business Organizations Code (the “TBOC”). Various news articles concerning the decision have reported that the court disapproved of the so-called “Texas Two-Step” transactions undertaken by Johnson & Johnson (“J&J”) in the face of its mounting talc tort litigation.

Filed under:
USA, Texas, Insolvency & Restructuring, Litigation, Hunton Andrews Kurth LLP, Third Circuit
Location:
USA
Firm:
Hunton Andrews Kurth LLP
View Original Article
The Music Stops on the Texas Two-Step: Third Circuit Dismisses LTL Bankruptcy Case
2023-02-06

The United States Court of Appeals for the Third Circuit wasted no time getting the new year off to a roaring start through its ruling in In re LTL Mgmt., LLC, Case No. 22-2003, 2023 WL 1098189 (3d Cir. Jan. 30, 2023). In LTL, the Third Circuit affirmatively dismissed the so-called “Texas Two-Step” by which a solvent corporation had tried to cabin potentially billions of dollars of mass tort liability through an internal corporate restructuring.

In that ruling, the Third Circuit determined that:

Filed under:
USA, Insolvency & Restructuring, Litigation, Ropes & Gray LLP, Third Circuit, U.S. Court of Appeals
Location:
USA
Firm:
Ropes & Gray LLP
View Original Article
Third Circuit Dismisses J&J Bankruptcy Case for Lack of Good Faith
2023-02-06

“The theme is clear: absent financial distress, there is no reason for Chapter 11 and no valid bankruptcy purpose.”

Filed under:
USA, Insolvency & Restructuring, Litigation, Schulte Roth & Zabel LLP, Bankruptcy, Good faith, Johnson & Johnson, Third Circuit
Authors:
Douglas S. Mintz , Kelly (Bucky) Knight
Location:
USA
Firm:
Schulte Roth & Zabel LLP
View Original Article
Put down your fiddle: Third Circuit halts Johnson & Johnson’s Texas two-step
2023-02-03

On January 30, 2023, the Third Circuit Court of Appeals dismissed the bankruptcy filing by Johnson & Johnson’s subsidiary, LTL Management, LLC (“LTL”). The Circuit Court reversed the New Jersey Bankruptcy Court and held that LTL did not file the bankruptcy case in good faith and therefore was ineligible to petition the bankruptcy court for relief.

Filed under:
USA, Insolvency & Restructuring, Litigation, Third Circuit
Location:
USA
View Original Article
Third Circuit Dismisses Talc Bankruptcy
2023-01-31

On Monday, January 30, 2023, the Third Circuit in In re LTL Management, LLC1 ordered debtor LTL Management, LLC’s (“LTL”) chapter 11 petition dismissed for failure to demonstrate that the petition was filed in good faith pursuant to the Bankruptcy Code.2 The dismissal of LTL’s bankruptcy will also result in the termination of an injunction staying numerous lawsuits against third-parties—including lawsuits against certain third-party retailers being sued for allegedly having sold certain allegedly contaminated products.

Filed under:
USA, Insolvency & Restructuring, Litigation, Hunton Andrews Kurth LLP, Bankruptcy, United States bankruptcy court, Third Circuit
Authors:
Gregory G. Hesse , Brandon Bell
Location:
USA
Firm:
Hunton Andrews Kurth LLP
View Original Article
Opinion Alert: Third Circuit Dismisses LTL Mass Tort Bankruptcy, Holding “Good Faith” Requires “Immediate” Financial Distress
2023-01-30

In a decision likely to have significant impact on certain types of bankruptcy filings going forward, this morning, the Third Circuit Court of Appeals ordered the dismissal of the Chapter 11 bankruptcy case filed by Johnson & Johnson affiliate LTL Management LLC.

Filed under:
USA, Insolvency & Restructuring, Litigation, Mayer Brown, United States bankruptcy court, Third Circuit
Authors:
Sean T. Scott , Aaron Gavant , Joshua R. Gross
Location:
USA
Firm:
Mayer Brown
View Original Article

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