When doing business with a foreign company, it is important to identify the company’s “center of main interests” (“COMI”) as creditors may find themselves bound by the laws of the COMI locale. If a company initiates insolvency proceedings outside the U.S., it must petition a U.S. court under Chapter 15 of the Bankruptcy Code for recognition of the foreign proceeding.

With an increasing number of businesses operating without regard to borders in today’s global economy, the importance of understanding Chapter 15 — the Bankruptcy Code provisions instructing the cooperation between the United States and courts of foreign lands involved in cross-border insolvency cases — has never been greater. This advisory will touch on the scope of Chapter 15 and its attempt to balance comity and domestic legal policy, as highlighted in the recent Fifth Circuit Court of Appeals decision, Ad Hoc Group of Vitro Noteholders v. Vitro SAB de CV, No.

In a client advisory sent by our office a few months ago, we described a decision in the Madoff saga in which the District Court for the Southern District of New York (the Court) closed off a potential avenue of significant recovery for the Madoff Trustee (the Trustee) and the Ponzi scheme victims by denying the Trustee standing to pursue certain claims against feeder funds – firms that sent investors’ funds to Madof

Since it was issued three years ago by the Ninth Circuit Bankruptcy Appellate Panel, the Clear Channel decision (Clear Channel Outdoor, Inc. v. Knupfer (In re PW, LLC), 391 B.R. 25 (9th Cir. B.A.P. 2008)) has been widely criticized as “an aberration in well-settled bankruptcy jurisprudence.” Before Clear Channel, conventional wisdom (and what most people perceived to be the law) supported the notion that a bankruptcy sale order that contained a good faith finding under Section 363(m) could not be disturbed on appeal.

The City of Harrisburg, Pennsylvania—the state's capital—filed for bankruptcy under Chapter 9 of the United States Bankruptcy Code on Wednesday October 12, 2011, indicating that it owed fewer than 50 creditors more than $545 million.

The nature of online commerce requires the collection of information from individuals to identify the parties to individual transactions, transfer funds for payment, and ensure the delivery of the goods or services being acquired. Public concern about the potential for abuse of such information by online merchants gave rise to the development of so-called "privacy policies" that provide a measure of reassurance that information collected will be protected from unauthorized use and disclosure.

In a case illustrating the effective use of a bankruptcy examiner, the examiner appointed by the court in the North General Hospital bankruptcy case has concluded that the hospital made over $3 million in unauthorized post-bankruptcy filing payments to the detriment of unsecured creditors. Prior to its bankruptcy filing, North General Hospital and certain related corporate debtors operated a hospital in the Harlem section of Manhattan.

With the recent decline in housing and real estate generally, companies in the homebuilding and construction markets face serious challenges. Some projects have already been forced into Chapter 11 and others will almost certainly require either a bankruptcy filing or out-of-court restructure. In the event a bankruptcy is filed, vendors, contractors, subcontractors and other interested parties should be aware of the impact of important bankruptcy code provisions on their relationship with troubled companies.

Automatic Stay

In November of 2010, the trustee for the Circuit City Stores, Inc., liquidating trust filed more than 500 adversary proceedings against creditors seeking the recovery of alleged preferential payments. The extent of the trustee's success in recovering these payments will impact the overall distribution to creditors. Creditors in bankruptcy cases should be aware that preference litigation allows a trustee or debtor-in-possession to recover payments received by a creditor during the period immediately preceding the bankruptcy filing.

A federal district court in Illinois has held that a policyholder failed to provide sufficient notice of circumstances that could potentially give rise to a claim to trigger coverage under a D&O policy where the policyholder informed the insurers that it was "contemplating" filing for bankruptcy and expected claims to be filed against its directors and officers. Chatz v. Nat'l Union Fire Ins. Co. of Pittsburgh, PA, 2007 WL 1119282 (N.D. Ill. Apr. 12, 2007).