The appellate courts are usually the last stop for parties in business bankruptcy cases. The courts issued at least three provocative, if not questionable, decisions in the past six months. Their decisions have not only created uncertainty, but will also generate further litigation over reorganization plan manipulation, arbitration of routine bankruptcy disputes and the treatment of trademark licenses in reorganization cases. Each decision apparently disposes of routine issues in business cases. A closer look at each case, though, reveals the sad truth: they are anything but routine.
The Supreme Court held that a statement about a single asset can be a “statement respecting the debtor’s financial condition” for purposes of determining the application of the exception to discharge set forth in Section 523(a)(2) of the Bankruptcy Code. Lamar, Archer & Cofrin LLP v. Appling, 2018 WL 2465174 (June 4, 2018).
The Bottom Line
In a case decided on March 28, 2018, the Ninth Circuit Court of Appeals held that a maritime lien on a vessel for the "maintenance and cure" of an injured seaman was not subject to the "automatic stay" that generally arises as the result of a bankruptcy filing by the owner of the vessel. In the case entitled Barnes v. Sea Hawaii Rafting, LLC, 886 F.3d 758, the Ninth Circuit Court of Appeals considered whether the special rules invoked by maritime law trumped the rules and equitable principles set out in the Bankruptcy Code, or whether bankruptcy law triumphed.
Alerts and Updates
The Supreme Court’s opinion is significant because it will encourage creditors to rely on written, rather than oral, statements of debtors as to both their assets and overall financial status, which are better evidence in a nondischargeability case.
In the recent case of Garcia v. Garcia, the guarantor of a loan (Morris) is sued by the bank to honor his guarantee obligation of about $1.5 million. The debtor was not able to pay under the guarantee, so the bank obtained a charging order against the debtor member’s 50% LLC interest. The bank wanted access to the funds in that LLC, but the third-party manager of the LLC refused to pay any distribution to the debtor member. As a result, the debtor member filed Chapter 7 bankruptcy.
Even if a U.S. court has jurisdiction over a lawsuit involving foreign litigants, the court may conclude that a foreign court is better suited to adjudicate the dispute because either: (i) it would be more convenient, fair, or efficient for the foreign court to do so (a doctrine referred to as "forum non conveniens"); or (ii) the U.S. court concludes that it should defer to the foreign court as a matter of international comity. Both of these doctrines were addressed in a ruling recently handed down by the U.S.
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?