In Princeton Office Park, the U.S. Court of Appeals for the Third Circuit affirmed the bankruptcy and district court rulings that the purchaser of a NJ tax sale certificate forfeited its claim and lien because it included the premium it paid to the State when it purchased the tax certificate.
Two recent court decisions may result in a broadening of the range of options available to an equity sponsor in respect of an insolvent portfolio company. The first decision may provide increased flexibility in structuring asset sales in certain chapter 11 settings, by utilizing escrows and other techniques to potentially avoid the need to apply asset-sale proceeds strictly in accordance with creditor priorities under the U.S. Bankruptcy Code.
The Court of Appeals for the Fourth Circuit, in Jaffe v. Samsung Elecs. Co., Ltd.,1 recently held that a U.S. bankruptcy court is not required under principles of comity to blindly apply foreign law to assets located in the U.S. of a foreign debtor whose principal insolvency proceeding is outside the U.S. Instead, bankruptcy courts must balance the interests of the affected U.S. parties with the those of the foreign debtor. In this case, the balancing required the application of U.S. law to the foreign debtor’s U.S. assets, not German law as applied in the foreign proceeding.
The United States Court of Appeals for the Second Circuit (the “Second Circuit”) on February 7, 2011 issued an opinion rejecting the often used gifting doctrine in the context of a plan of reorganization on the one hand, while affirming vote designation for claims not purchased in good faith on the other.In re DBSD N. Am., Inc., __ F.3d __, 2011 WL 350480 (2d Cir. Feb. 7, 2011).
A recent decision of the New York Court of Appeals, Sutton v. Pilevsky held that federal bankruptcy law does not preempt state law tortious interference claims against non-debtors who participated in a scheme that caused a debtor—in this case a bankruptcy remote special purpose entity—to breach contractual obligations intended to ensure that the entity remains a Special Purpose Entity (SPE) and to facilitate the lenders’ enforcement of remedies upon a future bankruptcy filing, if any.
The consequences of an order or judgement being final or interlocutory are enormous. An order from an interlocutory order requires leave since these orders are not appealable as of right. In addition, a failure to obtain leave may result in the issue becoming moot. This is especially so when motions to lift the stay are involved: if the motion is denied and is not immediately appealable, by the time the case is concluded, the issues will most likely be moot.
Shareholder of a Korean corporation (“Cuzco Korea”), the sole member of a chapter 11 limited liability company debtor (“Cuzco USA” or the “Debtor”), brought an adversary proceeding against the Debtor and others, asserting claims directly, derivatively on behalf of Cuzco Korea and “double derivatively” on behalf of the Debtor. On the defendants’ motion to dismiss, the bankruptcy court for the district of Hawaii was required to consider the impact of Korean law on the derivative claims as well as notions of forum non conveniens.
The Worker Adjustment and Retraining Notification (WARN) Act in the U.S. requires that employers give sixty days’ notice to its employees before effecting a mass layoff.
Key points:
While DIP Lenders rightfully negotiate for super-priority administrative expenses which trump post conversion chapter 7 administrative expenses, these provisions are not uniformly enforced.
DIP Lenders should require the inclusion of specific language providing that section 364(c)(1) super-priority claims have priority over chapter 7 administrative expense claims, including those to be incurred by a chapter 7 trustee above the agreed upon “burial expenses.”
It is a basic feature of sales under section 363 of the U.S. Bankruptcy Code, that the purchaser takes free and clear of all claims and interests, such claims and interests attach to the proceeds of the sale in accordance with their priorities.