The Bottom Line

Banks regularly enter into commercial relationships with their customers such as opening new depository accounts.  These relationships are often contractual in nature and seem relatively straightforward until an unexpected incident occurs that causes the relationship to unravel. What then are the duties owed by each party to each another?  The default rule seems to be that the terms and conditions that the parties agreed to at first govern the parties’ actions throughout their banking relationship.

As any financial or legal professional will advise, a promise, representation or agreement should be in writing. This sound advice applies equally in the bankruptcy context, as the Supreme Court recently held.[1] When extending credit to an individual who makes a statement about her financial condition—whether it be her overall financial status or as to a specific asset (such as using a tax refund to repay a debt)—the creditor must get that statement in writing.

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.

In Momentive Performance Materials, the Second Circuit declined to dismiss as equitably moot the appeals of certain noteholders.

The Bankruptcy Code contains an array of provisions designed to encourage lenders to provide debtor-in-possession ("DIP") financing in chapter 11 cases, including authorization of "superpriority" administrative expense claims and "priming" liens designed to ensure that DIP loans are repaid. However, as illustrated by a ruling recently handed down by the U.S.

Sancilio Pharmaceuticals Company, Inc., along with two subsidiaries and affiliates, has filed a petition for relief under Chapter 11 in the Bankruptcy Court for the District of Delaware (Lead Case No. 18-11333).

In December 2017, Congress passed and President Trump signed the Tax Cuts and Job Act of 2017 (TCJA). Effective as of Jan. 1, 2018, the TCJA is a wide-ranging change to the Internal Revenue Code of 1986 (the Tax Code) affecting individual, corporate, and international taxation.

Lost amongst the many commentaries are two changes that have a negative impact on business debtors under the Bankruptcy Code: (1) reduction of the corporate tax rates and (2) elimination of the ability to carry back net operating losses.

Under section 523(a)(2)(B) of the Bankruptcy Code, a debtor can discharge a debt obtained by a false statement “respecting the debtor’s financial condition,” as long as that false statement was not made in writing. On June 4, 2018, in Lamar, Archer & Cofrin, LLP v. Appling, the U.S. Supreme Court held that an oral statement about a single asset may constitute such a statement, and therefore comes within section 523(a)(2)(B)’s exception. The provision does not, the Court held, require a statement about the debtor’s overall financial state.

In yet another of the many cases against Residential Mortgage Backed Securities (RMBS) trustees for their alleged responsibility for losses suffered by investors, Judge Jesse Furman of the Southern District of New York precluded inquiry into the conduct of the trustee where a bankruptcy plan intervened. The plaintiffs were caught in a bind. Alleging misfeasance by the trustee prior to the commencement of the bankruptcy case would have been barred by the statute of limitations. Allegations of misfeasance subsequent to the commencement of the case were swept away by confirmation of the plan.