Section 363 of Title 11 of the United States Code (“Bankruptcy Code”) authorizes trustees (and Chapter 11 debtors-in-possession) to use, sell, or lease property of a debtor’s bankruptcy estate outside of the ordinary course of business upon bankruptcy court approval. Some of the key benefits for purchasers are the ability to purchase assets free and clear of liens under Section 363(f) and obtain protections from adverse consequences of any appeal under Section 363(m).

On June 13, 2017, The Original Soupman, Inc. and its affiliates (collectively “Debtors” or “Original Soupman”) commenced voluntary bankruptcy proceedings under Chapter 11 of the Bankruptcy Code. According to its petition, Original Soupman estimates that its assets are between $1 million and $10 million, and its liabilities are between $10 million and $50 million.

In an important decision for secured creditors, the Ninth Circuit recently held that the proper “cramdown” valuation of a secured creditor’s collateral is its replacement value, regardless of whether the foreclosure value would generate a higher valuation of the collateral. The appellate court’s decision has the potential to significantly impact lenders that include certain types of restrictions on the use of the collateral (such as low income housing requirements) in their financing documents.

The U.S. Court of Appeals for the Sixth Circuit recently concluded that Michigan’s assignment of rents statute sufficiently deprived the assignor of the ownership of the rents such that the rents could not be included in the assignor’s bankruptcy estate.

Part 1 of this blog series examined a bankruptcy court’s subject matter jurisdiction over a debtor’s legal malpractice claims. See, Part 1. Recognizing that bankruptcy courts typically retain related to jurisdiction over legal malpractice claims against a debtor’s pre-petition counsel, this blog now turns to abstention considerations for a legal malpractice strategy.

Keystone Tube Company, LLC and four affiliates, including A.M. Castle & Co. (OTC: CASL), HY-Alloy Steels Company, Keystone Service, Inc. and Total Plastics, Inc., have filed chapter 11 petitions before the United States Bankruptcy Court for the District of Delaware (Lead Case No. 17-11330). The debtors are a specialty metals distribution company.

The U.S. Court of Appeals for the Second Circuit recently affirmed the dismissal of LIBOR-manipulation fraud claims brought by a group of hotel-related entities and their investor against a bank and two of its subsidiaries.

In so ruling, the Second Circuit held that:

(a) the borrower and related entities lacked standing to sue because they failed to list their potential claims in their bankruptcy case and the claims were barred by the doctrine of judicial estoppel; and

(b) the claims of the investor and guarantors were untimely and barred by the law of the case.

The Supreme Court of the United States inMidland v. Johnson reversed the Eleventh Circuit Court of Appeals and held that a debt collector that files a proof of claim for debt that is barred by the applicable statute of limitations does not violate the Fair Debt Collection Practices Act (FDCPA) if the face of the proof of claim makes clear that the statute of limitations has run. The Supreme Court refused to accept the debtor's argument that Midland's proof of claim was "false, deceptive, or misleading" under the FDCPA.

"The Parent Bank entered into this insurance contract with its eyes wide open and its wallet on its mind."

It is very common for bankruptcy court orders to provide that the court retains jurisdiction to enforce such orders. Similarly, chapter 11 confirmation orders routinely provide that the bankruptcy court retains jurisdiction over all orders previously entered in the case. The enforceability of these “retention of jurisdiction” provisions, however, will not rest on the plain language in the order but on the bankruptcy court’s statutory jurisdiction.