The Insolvency and Companies Court has recognised Chapter 11 Proceedings in the US in respect of the manufacturer of controversial surgical mesh products which have generated a significant number of claims worldwide. The British Claimants have had their claims stayed as a result of this recognition.

Re Astora Women’s Health LLC [2022] EWHC 2412 (Ch)

What are the practical implications of this case?

Many years ago, back when mediation is a rarity in bankruptcy disputes, I asked an old-timer this question:

Why is the bankruptcy system a lagging adopter of mediation?”

A Surprising Answer

The old-timer gave this surprising answer:

“At the time of the Bankruptcy Code’s enactment, the bankruptcy judge was viewed as a mediator in the judge’s own court.”

The old-timer added this.  When the Bankruptcy Code was enacted:

The Bankruptcy Protector

The Third Circuit recently affirmed a bankruptcy court’s denial of a defendant’s motion to disqualify the plaintiff’s law firm in a large adversary proceeding, holding that it had not abused its discretion because the plaintiff law firm (W) had “complied with” American Bar Association Model Rule of Professional Conduct 1.10(a)(2). In re Maxus Energy Corp., 2022 WL 4113656, *4 (3d Cir. Sept. 9, 2022). According to the court, a lawyer (B) who “moved from” the defendant’s law firm “to the [plaintiff’s] firm” was not cause for W (the new firm) to be disqualified.

Where a company's liquidation is necessary, deciding who or where is best placed to administer an orderly wind down for the benefit of creditors can be difficult: the shortfall of assets in an insolvency will highlight jurisdictional differences in approach as to questions of priority, frequently territorial rather than universalist.

In October 2018 Judge Glenn of the United States Bankruptcy Court (New York) considered the common law principles of comity and the English common law Gibbs rule to grant recognition of a Croatian company's settlement agreement which modified both New York and English law.

Background

On 5 October 2022 a judgment was handed down by the Supreme Court in the case of BTI 2014 LLC v Sequana SA (Sequana) and others.This judgment relates to an insolvency dispute between BTI, the assignee of AWA’s claims, and Sequana. Principally, it concerns which entity should make the payment for an outstanding liability incurred by AWA, arising out of the National Cash Register Company’s (NCR) pollution of the Fox River in Wisconsin. Through a series of restructurings, AWA became liable to indemnify British American Tobacco (BAT) for these costs.

For a decade or more, restructuring professionals have predicted the coming of a bankruptcy boom. This may be the year those predictions finally come true. Inflation, interest rates, supply chain issues, global conflict and domestic politics have created a challenging macro environment. At the same time, dry powder abounds, with new distressed debt funds cropping up daily. Will this result in a bankruptcy tidal wave, or an increase in workouts and distressed M&A? Perhaps all of the above.

You’ve gotta admire the Debtor in In re Deirdre Ventura.

Debtor has been fighting to save a Bed and Breakfast business through bankruptcy: beginning in 2018 with a regular Chapter 11, and then struggling to get into Subchapter V.

Debtor’s is a you-can’t-make-this-stuff-up story of persistence through adversity.

Debtor has survived, for example, an inexplicably-bad appellate opinion refusing to allow Debtor’s Subchapter V election. The appellate opinion declares:

Over the last two years, courtesy of a once-a-century pandemic, government-mandated business closures, nationwide stay-at-home orders, and—unprecedented—disruptions to the global supply chain have illuminated, previously unknown, vulnerabilities across a whole host of industries. Would anyone have seriously questioned the viability of office space two years ago? Now, inflation, in keeping with the recent chaos, may be upending the viability of another tried-and-tested institution: the supply contract.