A lender’s state law tort claims against “non-debtor third-parties for tortious interference with a contract” were “not preempted” by “federal bankruptcy law,” held the New York Court of Appeals on Nov. 24, 2020. Sutton 58 Associates LLC v. Pilevsky, 2020 WL 6875979, *1 (N.Y. Ct. Appeals, Nov. 24, 2020) (4-3). In a split opinion, the Court of Appeals reversed the Appellate Division’s dismissal of a lender’s complaint against the debtors’ non-debtor insiders. The lender will still have to prove its case at trial.

The Asserted Claims

The Third Circuit recently took a “pragmatic approach” when affirming lower court orders denying a stay of bankruptcy settlement distributions pending appeal. In re S.S. Body Armor I, Inc., 2019 WL 2588533 (3d Cir. June 25, 2019). After holding that the district court’s “stay denial order” was “final” for jurisdictional purposes, it also confirmed “the applicable standard of review” on motions for stays pending appeals.

Relevance

A bankruptcy court properly dismissed a creditor’s involuntary bankruptcy petition “for cause” when it “would serve none of the Bankruptcy Code’s goals or purposes . . . and [when] the sole [petitioning] creditor is not substantially prejudiced by remedies available under state law,” held the U.S. Court of Appeals for the Second Circuit on Aug. 14, 2018. In re Murray, 2018 WL 3848316, *7 (2d Cir. Aug. 14, 2018). In its view, the bankruptcy court “declined to serve as a ‘rented battle field’ or ‘collection agency’” for a single creditor. Id., at *7.

“Officers and directors of [an operating corporate debtor] have fiduciary duties to the corporation — not the corporation’s creditors” under Texas law, held the U.S. Court of Appeals for the Fifth Circuit on Oct. 27, 2017. In re ATP Oil & Gas Corp., 2017 U.S. App. LEXIS 21337, *7 (5th Cir. Oct. 27, 2017). In affirming the district court’s dismissal of a Chapter 7 bankruptcy trustee’s complaint, the Fifth Circuit rejected the trustee’s breach of fiduciary claims against officers and directors for permitting “the payment of . . .

“Equitable mootness” prevented the U.S. Court of Appeals for the Sixth Circuit from “unravel[ing] the entire Plan, … forc[ing] the City [Detroit] back into emergency oversight, and requir[ing] a wholesale recreation of the vast and complex web of negotiated settlements and agreements.” In re City of Detroit, 2016 U.S. App. LEXIS 17774, *14, *17 (6th Cir. Oct. 3, 2016) (2-1).

The release provisions in a corporate debtor’s Chapter 11 plan were “not sufficiently specific to release” a plaintiff’s Fair Labor Standards Act (“FLSA”) claim against the debtor’s president (“P”), held the U.S. Court of Appeals for the Fifth Circuit on Jan. 6, 2016. Hernandez v. Larry Miller Roofing, Inc., 2016 WL 67217, at *4 (5th Cir. Jan. 6, 2016).

An insolvent corporate subsidiary’s payment of its parent’s contractual obligations was not a fraudulent transfer when “the [subsidiary] Debtor received reasonably equivalent value in exchange for [its cash] transfers,” held the U.S. Court of Appeals for the Eleventh Circuit on Sept. 4, 2015. In re PSN USA, Inc., 2015 WL 5167803, at *7 (11th Cir. Sept. 4, 2015) (per curiam).

“A corporate insider who personally guaranteed” the debtor’s loan was not liable on a bankruptcy trustee’s preference claim when the corporate debtor repaid its lender, held the U.S. Court of Appeals for the Ninth Circuit on May 6, 2015. In re Adamson Apparel, Inc., 2015 WL 2081575 (9th Cir. May 6, 2015) (2-1).

The United States Supreme Court, on July 1, 2014, granted a petition for certiorari in an important Seventh Circuit case limiting the power of bankruptcy courts to decide property disputes. Wellness International Network, Ltd. et al. v. Sharif, 727 F.3d 751 (7th Cir. 2013). The Seventh Circuit had held last year that the bankruptcy court lacked the constitutional authority to determine whether purported trust assets were property of the debtor’s estate.

The U.S. Court of Appeals for the Third Circuit held on July 30, 2013, that a reorganized Chapter 11 debtor could reopen its closed case, enabling the debtor assignee to enforce a purchase option in a real property lease despite the lease’s “anti-assignment provisions.” In re Lazy Days’ RV Center Inc., 2013 WL 3886735, *5 (3d Cir. July 30, 2013).