On Feb. 18, 2011, the Seventh Circuit Court of Appeals (the “Circuit Court”) held that (i) an assignment of unsecured contract claims from AT&T to ReGen Capital I, Inc. (“ReGen”) was broad enough to include right to receive “cure” payments in the event the debtor, UAL Corporation (“United”), assumed the underlying executory contracts, but (ii) ReGen could not successfully assert a “cure” claim because United had not assumed the executory contracts, even though United’s confirmed plan of reorganization included them on a list of assumed contracts. ReGen Capital I, Inc. v. UAL Corp.

In a recent decision, the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”) granted protection over the U.S. assets of a Cayman Islands exempted company in liquidation. See Revised Order Recognizing Foreign Proceeding (the “Order”), In re Saad Investments Finance Company (No.5) Limited (“SIFCO5”), Case No. 09-13985 (KG) (Bankr. D. Del. Dec. 17, 2009) (Docket No. 47). The company, SIFCO5, is subject to official liquidation proceedings in the Cayman Islands, which the Bankruptcy Court found was eligible for relief under chapter 15 of the U.S.

Lehman Brothers Holdings Inc. and its affiliated debtors (collectively, the “Debtors”) filed a motion in the bankruptcy court on Nov. 13, 2008, asking the court to approve procedures for (i) assuming (affirming) and assigning derivative contracts entered into before the Debtors commenced their bankruptcy cases, including resolving cure amounts; and (ii) entering into settlement agreements that may establish termination payments and the return of collateral under terminated derivative contracts.

Debtors’ Derivative Contracts

The U.S. Court of Appeals for the Eleventh Circuit held on July 26, 2007, that a bankruptcy court properly calculated an investment bank's advisory fee under a reasonableness standard. In re Citation Corp., ___ F.3d ___ 2007 WL 2128165 (July 26, 2007).

A bankruptcy court gave "unnecessary and likely incorrect" reasoning to support its "excessively broad proposition that sales free and clear under [Bankruptcy Code ("Code")] Section 363 override, and essentially render nugatory, the critical lessee protections against a debtor-lessor under [Code] 365(h)," said the U.S. Court of Appeals for the Fifth Circuit on Feb. 16, 2022. In re Royal Bistro, LLC, 2022 WL 499938, *1-*2 (5th Cir. Feb. 16, 2022).

A secured lender's "mere retention of property [after a pre-bankruptcy repossession] does not violate" the automatic stay provision [362(a) (3)] of the Bankruptcy Code, held a unanimous U.S. Supreme Court on Jan. 14, 2021. City of Chicago v. Fulton, 2021 WL 125106, 4 ( Jan. 14, 2021). Reversing the Seventh Circuit's affirmance of a bankruptcy court judgment holding a secured lender in contempt for violating the automatic stay, the Court resolved "a split" in the Circuits. Id. at 2. The Second, Eighth and Ninth Circuits had agreed with the Seventh Circuit.

“[A] secured creditor [has no] affirmative obligation under the automatic stay to return a debtor’s [repossessed] collateral to the bankruptcy estate immediately upon notice of the debtor’s bankruptcy,” held the U.S. Court of Appeals for the Third Circuit on Oct. 28, 2019. In re Denby-Peterson, 2019 WL 5538570, *1 (3d Cir. Oct. 28, 2019). Affirming the lower courts, the Third Circuit joined “the minority of our sister courts – the Tenth and D.C. Circuits” with its holding.

The Bankruptcy Code (“Code”) “does not limit the allowability of unsecured claims for contractual post-[bankruptcy] attorneys’ fees,” held the U.S. District Court for the District of Delaware on Nov. 26, 2018. In re Tribune Media Company, 2018 WL 6167504 (D. Del. Nov. 26, 2018). In a short and sensible opinion, the district court reversed the bankruptcy court’s disallowance of an undersecured lender’s fees.

The securities safe harbor protection of Bankruptcy Code (“Code”) § 546(e) does not protect allegedly fraudulent “transfers in which financial institutions served as mere conduits,” held the U.S. Supreme Court on Feb. 27, 2018. Merit Management Group LP v. FTI Consulting Inc., 2018 WL 1054879, *7 (2018). Affirming the Seventh Circuit’s reinstatement of the bankruptcy trustee’s complaint alleging the insolvent debtor’s overpayment for a stock interest, the Court found the payment not covered by §546(e) and thus recoverable. The district court had dismissed the trustee’s claim.

An undersecured mortgagee’s “release of [its entire underlying claim] was value obtained ‘in exchange for’ the [pre-bankruptcy] sale of the [debtor’s] property,” held the U.S. Court of Appeals for the Tenth Circuit on Dec. 6, 2016. In re Expert South Tulsa LLC, 2016 U.S. App. LEXIS 21704, at *11 (10th Cir. Dec. 6, 2016). The Tenth Circuit flatly rejected the debtor’s attempt “to set aside as a fraudulent transfer its own sale of real estate that was encumbered by a mortgage far exceeding the sale price.” Id. at *1.