The economic fallout from the COVID-19 pandemic will leave in its wake a significant increase in commercial chapter 11 filings. Many of these cases will feature extensive litigation involving breach of contract claims, business interruption insurance disputes, and common law causes of action based on novel interpretations of long-standing legal doctrines such as force majeure.

In Millenium Lab Holdings, Delaware District Court Judge Leonard Stark, on an appeal from a bankruptcy court order confirming a plan of reorganization, recently upheld a challenge to the bankruptcy court’s constitutional authority to release claims against non-debtor third parties under the plan.

The Supreme Court has not handled its recent major bankruptcy decisions well. The jurisdictional confusion engendered by its 2011 decision in Stern v.

The chapter 9 bankruptcy case of the City of Detroit has been as complex and litigious as anticipated.  Nevertheless, Emergency Manager Kevyn Orr has kept plodding forward, and last week filed a proposed plan of adjustment, the road map for the Motor City to emerge from bankruptc

A recent Pennsylvania case, Graystone Bank v. Grove Estates, LP, upheld the enforceability of a confessed judgment provision even in light of alleged inconsistencies. In most cases, a confessed judgment is a debtor’s statement signed prior to a default that a stipulated amount is owed to a creditor and permits bypassing certain legal proceedings.

U.S.

The U.S. Supreme Court will rule this term in RadLAX Gateway Hotel Inc. v. Amalgamated Bank on whether the Bankruptcy Code permits a debtor in a chapter 11 case to sell encumbered assets without providing the secured lender an opportunity to credit bid its debt. Determination of this question will require the Court essentially to choose between two opposing approaches to statutory interpretation, and decide whether the so-called “plain meaning” of a highly formalistic reading of the Bankruptcy Code should trump decades of established commercial practice.   

UNITED STATES OF AMERICA v. ROGAN (May 12, 2011)

REDMOND v. FIFTH THIRD BANK (October 20, 2010)

Last week, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law, implementing broad relief for individuals and businesses affected by COVID-19. One of the sections of the CARES Act receiving less attention is a temporary amendment to the Bankruptcy Code to provide streamlined reorganization procedures for businesses with debt of less than $7.5 million.