We have written many times over the past few years about how the bankruptcy courts are off-limits to state-legalized cannabis businesses. This past year brought no new relief to the cannabis industry, and the doors to the bankruptcy courts remain shut. Are the other federal courts off-limits as well? A recent district court decision from the Southern District of California sheds some light on this issue, and indicates that the district courts are at least partially open to participants in legal cannabis businesses.

Factual Background

Directors and Officers (“D&O”) liability policies, like many other liability policies, often have an exclusion that precludes coverage when one insured sues another insured. Coverage, however, can be restored under certain exceptions. One of those exceptions is the bankruptcy exception, which allows a bankruptcy trustee or comparable authority to sue on behalf of the estate against another insured like a director or officer.

On September 11, 2019, the Delaware district court affirmed the bankruptcy court’s decision to expunge a proof of claim filed by a claims trader in the Woodbridge Group of Companies, LLC bankruptcy case.

It will come as no surprise to avid readers of TCPAWorld.com that some folks may take offense to the tactics of Lash & Wilcox.

Can the recipient of an actual fraudulent transfer effectively “cleanse” the transfer if the funds are returned to the debtor? In a recent opinion, the United States Bankruptcy Court for the Eastern District of Pennsylvania answered that question in the affirmative.

On September 22, 2017, the First Circuit Court of Appeals reversed the district court, and overruled its own prior guidance, to hold that a committee of unsecured creditors had the right to be heard in adversary proceedings related to the restructuring of Puerto Rico’s debt. The Court’s decision in Assured Guar. Corp. v. Fin. Oversight & Mgmt. Bd. for P.R. (In re Fin. Oversight & Mgmt. Bd.

This Monday, the U.S. Supreme Court rejected General Motors’ petition for a writ of certiorari, which GM filed in an attempt to overturn a ruling by the Second Circuit Court of Appeals related to the sale of substantially all of GM’s assets in bankruptcy. When we last visited the case in a prior blog post, GM’s petition to the Supreme Court was still pending.

Status: Upcoming/New Filing

Acquirer: Draper Athena

Acquired: ATopTech, Inc. (US)

Industry: Software

Last week, our post “You Can’t Always Get What You Want” discussed a Texas bankruptcy court decision rejecting efforts by debtor Sam Wyly to claim as exempt a number of offshore private annuities.

Can messy be good? Sometimes the answer is yes. The chapter 11 case filed by Limetree Bay Services, LLC and five of its affiliates (“Limetree Bay”) is one example of auction disorder actually bringing increased creditor recoveries. Bankruptcy professionals, financially distressed companies and acquirers of distressed assets can learn valuable lessons from this odd bankruptcy auction process, which shows the importance of (1) debtors preserving their flexibility during an auction, and (2) investors having appropriate expectations and resources before bidding on a debtor’s assets.