In 2015, Distressing Matters reported on the Third Circuit’s decision in In re Jevic Holding Corp., wherein that panel ruled that, in rare circumstances, bankruptcy courts may approve the distribution of settlement proceeds in a manner that violates the Bankruptcy Code’s statutory priority scheme.

The linked Mintz Levin client advisory discusses a recent Third Circuit Court of Appeals ruling that held a “make-whole” optional redemption premium to be due upon a refinancing of corporate debt following its automatic acceleration upon bankruptcy.

It is a familiar scenario: a company is on the verge of bankruptcy, bound by the terms of a collective bargaining agreement (CBA), and unable to negotiate a new agreement.  However, this time, an analysis of this distressed scenario prompted a new question: does it matter if the CBA is already expired, i.e., does the Bankruptcy Code distinguish between a CBA that expires pre-petition versus one that has not lapsed?

It is a familiar scenario: a company is on the verge of bankruptcy, bound by the terms of a collective bargaining agreement (CBA), and unable to negotiate a new agreement.  However, this time, an analysis of this distressed scenario prompted a new question: does it matter if the CBA is already expired, i.e., does the Bankruptcy Code distinguish between a CBA that expires pre-petition versus one that has not lapsed?

In a recent decision by the influential Third Circuit Court of Appeals, In re KB Toys Inc., 2013 U.S. App. LEXIS 23083 at *17 (3d Cir. Nov. 15, 2013), the Court decided that “the cloud on the claim” stemming from a preferential payment made to the original claimant continues with the claim, which then could be disallowed.

The United States Court of Appeals for the Third Circuit, applying New York law, has held that an inadequate consideration exclusion unambiguously bars coverage for a lawsuit arising out of a debt restructuring transaction. Delta Financial Corp. v. Westchester Surplus Ins. Co. (In re Delta Financial Corp.), 2010 WL 1784054 (3d Cir. May 5, 2010).

On March 22, 2010, the United States Court of Appeals for the Third Circuit affirmed a lower court decision which held that secured creditors do not have an absolute right to credit bid at an auction of assets conducted in connection with a bankruptcy reorganization plan. The court ruled that secured creditors are only entitled to the "indubitable equivalent" of their claims under a specific subsection of the Bankruptcy Code. The "indubitable equivalent" could be the cash value of the assets upon which the creditor holds liens as determined through an auction process.

United States Supreme Court

Washington, D.C.

November 3, 2009

The United States District Court for the Western District of Pennsylvania dismissed an appeal of an order in Federal Insurance Co. v. Le-Nature's, Inc., 380 B.R. 747 (Bankr. W.D. Pa. 2008), in which the bankruptcy court granted the insurer's motion to compel discovery and ruled that the defendant waived all of his discovery objections, including objections based upon the Fifth Amendment's protection against self-incrimination, for failing timely to assert them. Federal Ins. Co. v. Le-Nature's, Inc., Civil Action No. 08-269 (W.D. Pa. July 25, 2008).

The United States District Court for the Western District of Pennsylvania has affirmed two final orders of the bankruptcy court finding that (1) the debtor's insurers lacked standing to object to confirmation of the bankruptcy plan; (2) a channeling injunction for silica claims was appropriately included in the debtor's plan; (3) an assignment of the debtor's rights under its insurance policies to the personal injury trust was authorized by bankruptcy law; and (4) the debtor's reorganization plan was confirmable under the Bankruptcy Code. Hartford Accident & Indemnity Co. v.