The United States District Court for the Central District of California has granted motions by eight directors and officers liability insurers to withdraw the reference to the bankruptcy court of two coverage actions involving coverage for claims against former directors and officers of a bank holding company. In re IndyMac Bancorp, Inc., Nos. CV11-02600; CV11-02605; CV11-02950; CV11-02988 (C.D. Cal. May 17, 2011). Wiley Rein LLP represents an excess insurer and the primary Side A insurer in the litigation.
Trustees play a critical role in the bankruptcy process.
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.
Pursuant to § 1104 of the United States Bankruptcy Code, the court may appoint a bankruptcy examiner to investigate the debtor with respect to allegations of fraud, dishonesty, incompetence, misconduct or mismanagement. A qualified examiner, with a clearly defined mission, can drastically affect the outcome of the bankruptcy case and directly impact the return to creditors. The difference between a successful financial restructure or liquidation and an investigation yielding little value to the creditors often depends on the approach taken by the examiner and his professionals.
The U.S. Bankruptcy Code provides for the appointment of a bankruptcy examiner to investigate the debtor with respect to allegations of fraud, dishonesty, incompetence, misconduct or mismanagement. The right examiner, with a clearly defined mission, will have a major influence on the bankruptcy process. The difference between a successful financial restructuring or liquidation-resulting in substantial recoveries for the key constituencies-and a time-consuming (and asset-consuming) meltdown, can depend on the approach of the examiner and the examiner's support team.
Applying Texas law, the United States Bankruptcy Court for the Northern District of Texas has held that a primary insurer that "exhausted" its policy limits by agreeing to pay the insured's bankruptcy estate its remaining policy limits, while stipulating that a significant portion of this payment would be returned to the insurer by the estate's bankruptcy trustee, was required to reimburse the excess insurer the value of the returned payments made by the trustee. Yaquinto v. Admiral Ins. Co., Inc. (In re Cool Partners, Inc.), 2010 WL 1779668 (Bankr. N.D. Tex. Apr. 30, 2010).
The Bankruptcy Appellate Panel of the Ninth Circuit has affirmed the bankruptcy court’s grant of a motion by a debtor’s sole director to modify the automatic stay to allow payment of defense costs under the A-side coverage of the debtor’s directors and officers liability insurance policy. In re MILA, Inc., 2010 WL 455328 (B.A.P. 9th Cir. Jan. 29, 2010).
United States Supreme Court
Washington, D.C.
November 3, 2009
The Ninth Circuit Court of Appeals has held that an insured vs. insured exclusion bars coverage for a suit by a debtor-in-possession against former directors and officers of the company. Biltmore Assocs. v. Twin City Fire Ins. Co., No. 06-16417, 2009 WL 1976071 (9th Cir. July 10, 2009). The court rejected the argument that the debtor-in-possession was a different legal entity from the pre-bankruptcy company insured under the policy.
When H. Jason Gold was appointed liquidating trustee for the bankruptcy estate of Dornier Aviation (North America), Inc., (DANA) in early 2003, creditors were expected to receive as little as three cents per claim dollar. Despite these daunting prospects, Mr.