The ability of a bankruptcy trustee to avoid fraudulent or preferential transfers is a fundamental part of U.S. bankruptcy law. However, when an otherwise avoidable transfer by a U.S. entity takes place outside the U.S. to a non-U.S. transferee—as is increasingly common in the global economy—courts disagree as to whether the Bankruptcy Code’s avoidance provisions apply extraterritorially to avoid the transfer and recover the transferred assets. Several bankruptcy and appellate courts have addressed this issue in recent years, with inconsistent results.

A ruling recently handed down by the U.S. Court of Appeals for the Third Circuit may provide significant flexibility to debtors in that circuit who are implementing sales of substantially all of their assets. In In re LCI Holding Company, Inc., 2015 BL 295784 (3d Cir. Sept.

In In re Tribune Co. Fraudulent Conveyance Litig., 946 F.3d 66 (2d Cir. 2019), the U.S. Court of Appeals for the Second Circuit reaffirmed, notwithstanding the U.S. Supreme Court's ruling in Merit Mgmt. Grp., LP v. FTI Consulting, Inc., 138 S. Ct. 883, 200 L. Ed. 2d 183 (2018), its 2016 decision that creditors' state law fraudulent transfer claims arising from the 2007 leveraged buyout ("LBO") of Tribune Co. ("Tribune") were preempted by the safe harbor for certain securities, commodities, or forward contract payments set forth in section 546(e) of the Bankruptcy Code.

Courts disagree as to whether the amount that a bankruptcy trustee or chapter 11 debtor-in-possession ("DIP" ) can recover in fraudulent transfer avoidance litigation should be capped at the total amount of unsecured claims against the estate. A Delaware bankruptcy court recently weighed in on this issue in PAH Litigation Trust v. Water Street Healthcare Partners, L.P. (In re Physiotherapy Holdings, Inc.), 2017 WL 5054308 (Bankr. D. Del. Nov. 1, 2017). Noting the absence of any guidance on the question from the U.S.

A “structured dismissal” of a chapter 11 case following a sale of substantially all of the debtor’s assets has become increasingly common as a way to minimize costs and maximize creditor recoveries. However, only a handful of rulings have been issued on the subject, perhaps because bankruptcy and appellate courts are unclear as to whether the Bankruptcy Code authorizes the remedy.

In Short

The Situation. In Ritzen Group, Inc. v. Jackson Masonry, LLC, the U.S. Supreme Court considered whether bankruptcy court orders conclusively denying relief from the Bankruptcy Code's automatic stay are immediately appealable.

The Result. On January 14, 2020, the Court unanimously ruled that an order conclusively resolving a motion for relief from the automatic stay was immediately appealable, such that a later-filed appeal was untimely and must be dismissed.

On April 5 and June 8, 2017, the U.S. House of Representatives passed bills (the Financial Institution Bankruptcy Act of 2017 ("FIBA") and the Financial CHOICE Act of 2017) that would allow financial institutions to seek protection under Chapter 11 of the Bankruptcy Code.

Even after the U.S. Supreme Court in RadLAX Gateway Hotel, LLC v. Amalgamated Bank, 132 S. Ct. 2065 (2012), pronounced in no uncertain terms that a secured creditor must be given the right to “credit bid” its claim in a bankruptcy sale of its collateral, the controversy over restrictions on credit bidding continues in the courts. A ruling recently handed down by the Fifth Circuit Court of Appeals has added a new wrinkle to the debate. InBaker Hughes Oilfield Operations, Inc. v. Morton (In re R.L. Adkins Corp.), 2015 BL 116996 (5th Cir. Apr.

In an important decision issued at the end of August, the United States Court of Appeals for the Third Circuit, in In re Tribune Co., Case No. 18-2909 (3d Cir. Aug. 26, 2020), held that subordination agreements need not be strictly enforced when confirming a chapter 11 plan pursuant to the Bankruptcy Code’s cramdown provision in section 1129(b)(1). In its decision, the Third Circuit also encouraged bankruptcy courts to apply “a more flexible unfair-discrimination standard” and set forth eight guiding principles to aid in that effort.

With data privacy issues constantly in the news, what do businesses need to know about handling personal information when they’re considering bankruptcy, especially if some personal information – like customer records – may be a valuable asset?