Extending credit to a financially shaky customer is risky. When the customer files a chapter 11 bankruptcy case and continues to operate, the risks multiply. Properly understood, some of the inherent risks can be reduced.
In Official Committee of Unsecured Creditors v. Whalen (In re Enron Corp.), the Bankruptcy Court for the Southern District of New York considered whether the debtor’s pre-bankruptcy payment of an employment bonus one day before it became due was “for or on account of an antecedent debt owed by the debtor before such transfer was made” for purposes of determining whether section 547(b) of the Bankruptcy Code made the payment avoidable as a preferential transfer.
In the case of Sherman v. Harbin (In re Harbin), the Ninth Circuit decided that in determining the feasibility of a plan under Bankruptcy Code Section 1129(a)(11), a court must evaluate the possible impact of pending litigation, whether at the trial level or on appeal.
In a significant and somewhat surprising decision, the New York Court of Appeals recently held that, absent an express provision to the contrary, an individual lender in a syndicated loan is prohibited from enforcing its rights under the loan agreement or a related guaranty.
The United States Bankruptcy Court for the Southern District of New York has denied approval of a settlement between Adelphia and its D&O insurers pursuant to which the insurers would have bought back their interests in the relevant policies issued to Adelphia for $32.5 million "with claims of others to policy proceeds...attaching to the proceeds of the sale."
The district court in Hartford Accident & Indemnity Company, et al. v. American Capital Equipment, et al., No. 06-0891 (U.S. Dist. Ct. W.D. Pa. May 11, 2007), affirmed that Skinner Engine Company's insurers have standing to move to dismiss Skinner's chapter 11 bankruptcy case and to challenge its bankruptcy plan. However, the court also affirmed the bankruptcy court's denial of the insurers' motion to dismiss the bankruptcy case.
In a case of apparent first impression, U.S. District Court Judge Alan S. Gold recently held in In re Wellington Vision, Inc., No. 06-80446, __ B.R. ___, 2007 WL 762398 (S.D. Fla. Feb. 20, 2007), that a franchisee in chapter 11 cannot assume (i.e., retain) a franchise agreement that grants a nonexclusive trademark license, leaving the franchisor free to terminate the agreement.
In a groundbreaking, and somewhat surprising decision, the Delaware Supreme Court recently held that creditors of a company that is either in the zone of insolvency or actually insolvent cannot, as a matter of law, directly sue directors of the company for breaches of the directors’ fiduciary duties.
New York, NY – May 21, 2007- On May 21, 2007, the United States Supreme Court agreed to review a decision by the United States Court of Appeals for the Second Circuit that Klein & Co. Futures, Inc., a futures commission merchant, lacked standing under the private remedy provisions of the Commodity Exchange Act to bring a suit for damages against a board of trade and its subsidiaries for failure to enforce rules to prevent a manipulation scheme that led to Klein & Co.’s collapse (Klein & Co. Futures Inc. v. Board of Trade of City of New York, U.S., No.
In the ongoing bankruptcy action involving the Congoleum Corporation (Congoleum), the bankruptcy court refused to approve a settlement and policy buyback between Congoleum and one of its insurers, ruling that the lack of creditor support for the settlement and the lack of evidence regarding the volume and type of claims covered by the settlement precluded the court's ability to approve the settlement. In re Congoleum Corporation, No. 03-51524 (Bankr. D.N.J. May 11, 2004).