Legal Update
September 27, 2013
In re Tribune: Defendants Successfully Challenge Individual
Creditors Standing But District Court Rules that Section 546(e)
Safe Harbor Does Not Bar Individual Creditors’ State Law Based
Constructive Fraudulent Conveyance Claims
On September 23, 2013, the US District Court
for the Southern District of New York in In re
Tribune1 held that the individual creditor suits at
issue were stayed because the Creditors’
Committee was in the process of prosecuting
claims for intentional fraudulent conveyance

The District Court for the Southern District of New York recently issued an opinion in Picard v. Katz, et al., (In re Bernard L. Madoff Investment Securities LLC),1 which limits avoidance actions against a debtor-broker’s customers to those arising under federal law based on actual, rather than constructive, fraud. The decision was issued by US District Judge Rakoff in the Trustee’s suit against the owners of the New York Mets (along with certain of their friends, family and associates).

Overview

On September 1, 2021, Judge Robert Drain issued a much-anticipated oral ruling approving Purdue Pharma L.P.’s plan of reorganization. The plan, which has garnered significant attention from the media, legislators, academics, and practitioners, releases current and future members of the Sackler family and many of their associates and affiliated companies – none of whom filed for bankruptcy themselves – from liability in connection with any possible harm caused by OxyContin and other opioids that Purdue Pharma manufactured and distributed.

Just after 5:00 p.m. Central Time on February 23, 2021, Belk, Inc. and its affiliates filed chapter 11 petitions in the U.S. Bankruptcy Court for the Southern District of Texas, along with a proposed “prepackaged” plan of reorganization. Before midnight, the US Trustee objected to Belk’s plan, and, by 8:00 a.m. the next day, the parties were in court to decide plan confirmation. Two hours later, Bankruptcy Judge Marvin Isgur confirmed the plan, and it became effective that afternoon, just 20 hours after the Chapter 11 cases were filed.

Can state regulatory agencies move ahead with lawsuits against businesses who file for bankruptcy in order to enforce consumer protection and business laws, or does the automatic stay’s broad injunctive sweep capture those actions? The answer depends on whether the state is acting in its regulatory capacity or simply like another creditor – and the distinction is not always clear.

The below chart summarizes the modifications to certain protocol and procedures of major US Bankruptcy Courts in light of the recent COVID-19 outbreak. At the moment, the chart includes the US Bankruptcy Courts for the District of Delaware, the Southern District of New York, the Northern District of Illinois, the Eastern District of Virginia, and the Southern District of Texas. Mayer Brown will continue to monitor the situation in the days and weeks to come, and will update the chart accordingly.

BANKRUPTCY COURT

STATUS

ACCESS & ENTRY RESTRICTIONS

When executing public M&A transactions, dealmakers need to understand local market practice as well as the local regulatory environment.

A bankruptcy judge in the Eastern District of California recently issued a decision that is sure to raise appellate eyebrows.

Section 506(a) of the Bankruptcy Code provides that a creditor’s claim is a “secured claim to the extent of the value of such creditor’s interest in the estate’s interest in such property”—that is, it is a secured claim for an amount equal to the present value of the collateral—and is an “unsecured claim” for the remainder. Section 506(d) provides that, “[t]o the extent that a lien secures a claim against the debtor that is not an allowed secured claim, such lien is void.”