In a decision that is expected to have wide-ranging implications for secured lenders and reorganization plan sales nationwide, the Seventh Circuit’s June 28, 2011 opinion in In re River Road1 marks a jurisdictional split on the contours of credit bidding in bankruptcy. While this decision is squarely at odds with decisions of the Courts of Appeals for the Third and Fifth Circuits, its holding is in many respects a validation of Judge Ambro’s robust dissent in Philadelphia News,2 and is arguably more aligned with mainstream bankruptcy thinking on credit bidding issues.
On June 28, 2011, the United States Court of Appeals for the Seventh Circuit became the latest circuit to weigh in on the hotly contested question of whether a debtor can deny a secured creditor the right to credit bid as part of a Chapter 11 plan providing for the sale of assets encumbered by the secured creditor’s liens. InIn re River Road Hotel Partners, LLC,1 the Seventh Circuit upheld the right of secured creditors to credit bid, a decision that runs directly contrary to recent opinions in the Third and Fifth Circuits.
The Bottom Line:
An Illinois circuit court entered an order for the liquidation of Reinsurance Company of America based upon a finding of insolvency. The court appointed Michael T. McRaith, Illinois Director of Insurance, as liquidator, vesting him with broad powers to take action as required to serve the interests of RCA, its policyholders, beneficiaries, creditors, and the public. RCA’s sole stockholder consented to the entry of the order.
Last month, Jeoffrey Burtch, the Chapter 7 Trustee (the "Trustee") in the Opus East bankruptcy filed approximately 90 preference actions against various defendants. As stated in his complaints, the Trustee "seeks to avoid and recover ... all preferential transfers of property made for or on account of an antecedent debt made to or for the benefit of the Defendant by the Debtor during the ninety-day period prior to the filing of the Debtor's bankruptcy petition under 11 U.S.C. sec.
REEDSBURG UTILITY COMMISSION v. GREDE FOUNDRIES (July 13, 2011)
On June 28, 2011, in In re Enron Creditors Recovery Corp. v. Alfa,1 the Second Circuit Court of Appeals held that Enron’s redemption of its commercial paper prior to maturity fell within the definition of a “settlement payment” and was protected from avoidance under § 546(e)’s safe harbor provision in Title 11 of the United States Code.2
In its recent decision, Continental Cas. Co. v. Sycamore Springs Homeowners Association, 2011 U.S. App. LEXIS 15005 (July 22, 2011), the United States Court of Appeals for the Seventh Circuit, applying Indiana law, had occasion to consider whether an underlying suit demanding that the insured undertake measures to prevent future “property damage” triggered coverage under a general liability policy.
While 90 percent of life may be just showing up, showing up late may be just as bad as never showing up at all. Just ask two creditors who were told for the second time they cannot file claims in the Lehman Brothers bankruptcy case because they filed their claims too late.