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.

On June 13, 2017, Judge Kevin Gross of the Delaware Bankruptcy Court issued an opinion granting in part and denying in part BMW’s motion to dismiss a complaint filed by Emerald Capital Advisors Corp., in its capacity as trustee for FAH Liquidating Trust – established in the Fisker bankruptcy proceedings. A copy of the Opinion is available here.

The Bankruptcy Court for the District of Delaware recently issued a decision that will undoubtedly influence strategies in bankruptcy cases involving plugging and abandonment liabilities. The court’s ruling in Venoco, LLC v. City of Beverly Hills illuminates the Bankruptcy Code’s rehabilitative purposes by explaining that financial harm, without more, is not sufficient to enjoin a debtor’s actions.

What Happened

Because the number of unsatisfied clients who find themselves in bankruptcy are filing malpractice lawsuits against their pre-bankruptcy counsel is on the rise so, too, is the number of attorneys who find themselves on the defending end of such claims. Debtors and Trustees pursuing such claims, as well as attorneys defending against a bankruptcy debtor’s malpractice lawsuit, should consider the pros and cons of adjudicating these claims through an adversary proceeding in the bankruptcy court or via a state court action outside the bankruptcy realm.

The U.S. Eleventh Circuit Court of Appeals, applying Florida law, recently held that a professional services exclusion, which excluded coverage for any loss arising out of any insured’s performance of professional services, barred coverage for claims arising from an alleged Ponzi scheme. Stettin v. Nat’l Union Fire Ins. Co. of Pittsburgh, Pa., 2017 WL 2858768 (11th Cir. July 5, 2017).

On June 15, 2017, Curtis R. Smith, as Liquidating Trustee of the Hastings Creditors’ Liquidating Trust, filed approximately 69 complaints seeking the avoidance and recovery of allegedly preferential and/or fraudulent transfers under Sections 547, 548 and 550 of the Bankruptcy Code. The Liquidating Trustee also seeks to disallow claims of such defendants under Sections 502(d) and (j) of the Bankruptcy Code.

Predictions that retailers would increasingly find themselves filing bankruptcy, whether for the first or second time, are proving true mid-year. See January 2017 Alix Partners Survey at p. 2.

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.