Anderson v. Credit One Bank, N.A. (In re Anderson), 884 F.3d 382 (2d Cir. 2018) [click for opinion]

Bankruptcies and other debt restructuring activities for health care providers are on the rise, and recent headlines related to the industry suggest further stormy weather ahead. Please join Dykema attorneys Mark Andrews and Lea Courington as they discuss the intersection of healthcare and insolvency. What is the current state of the industry? Why are nursing homes, hospitals and other healthcare institutions in financial trouble? What factors are changing reimbursement rates? What effect does litigation have on the success or failure of the nursing home industry?

The recent decision from the United States Supreme Court in Lamar, Archer & Cofrin, LLP v. Appling (“Lamar”), further restricts a creditor’s ability to pursue future recovery on its debt through a nondischargeability action in a debtor’s bankruptcy. On June 4, 2018, the Court ruled in Lamar that a debtor’s false statement about a single asset must be in writing before the creditor’s debt can be excepted as nondischargeable in bankruptcy.

Summary

The Bottom Line

In a recent Chapter 11 case and subsequent Chapter 7 case, Judge Timothy Barnes of the N.D. of Illinois allowed counsel for an assignee (“Assignee”) in an Illinois assignment for the benefit of creditors (“ABC”) to recover attorneys’ fees and expenses incurred pre-petition and post-petition. The decision is noteworthy because it addresses a custodian’s counsel’s entitlement to the recovery of both pre- and post-petition fees and expenses as an administrative expense.

In Lagos v. United States, 584 U.S. ___ (2018), the Supreme Court issued a unanimous ruling that limits the ability of corporate victims of fraud to seek reimbursement of legal fees for internal investigations. The case began when GE Capital discovered that Sergio Lagos falsified numerous invoices for his company, which he used as collateral to obtain tens of millions of dollars in loans from GE Capital.

The Bottom Line

A bankruptcy court properly denied a bank's motion to compel arbitration of a debtor's asserted violation of the court's discharge injunction, the U.S. Court of Appeals for the Second Circuit held on March 7, 2018. In re Anderson, 2018 U.S. App. LEXIS 5703, 20 (2d Cir. Mar. 7, 2018). Finding a purported "inherent conflict between arbitration of [the debtor's] claim and the Bankruptcy Code," the Second Circuit reasoned that the bankruptcy court "properly considered the conflicting policies in accordance with law." Id., quoting In re United States Lines, Inc., 197 F.3d 631, 641 (2d Cir.

On June 4, 2018, the U.S. Supreme Court reiterated to lenders everywhere, the long-time advice “Get it in writing.” The Court issued its decision in Lamar Archer & Cofrin LLP v. Appling, Case No. 16-1215 (Sup. Ct. June 4, 2018), holding that a false statement by a debtor about a single asset can be cause for holding the debt nondischargeable in bankruptcy only if the statement is in writing.