The Bankruptcy Code (“Code”) “requires the use of replacement value rather than a hypothetical [foreclosure] value … that the reorganization is designed to avoid,” held a divided U.S. Court of Appeals for the Ninth Circuit on May 26, 2017.

The Bottom Line

The Delaware District Court affirmed the bankruptcy court’s decision that the combination of a narrow arbitration provision and the bankruptcy court’s reservation of jurisdiction warranted denial of a motion to compel arbitration. The specific language of the arbitration provision, combined with the use of an accounting term of art, narrowed the scope of the arbitration provision sufficiently to rebut the presumption of arbitration under the Federal Arbitration Act.

What Happened?

Just one year after Lyondell Chemical Company (Lyondell) and Basell AF (Basell) consummated a nearly $20 billion merger of their businesses, the merged business of LyondellBasell Industries (LBI) “failed in a colossal manner.”1 As part of the bankruptcy process that followed, a court-appointed litigation trust (the Trust) filed suit for the benefit of unsecured creditors against numerous parties involved in the merger, bringing actual a

U.S. courts generally agree that the substantive consolidation should be applied sparingly, and even more so when substantive consolidation of debtors with non-debtors is sought. While many opinions address the grounds for substantive consolidation, very few cases address standing and notice issues when the sought for consolidation is of non-debtor entities. The Oklahoma bankruptcy court recently addressed these two issues in SE Property Holdings, LLC v. Stewart.

On May 17, 2017, GulfMark Offshore, Inc. (“GulfMark” or “Debtor”) filed a voluntary petition for bankruptcy relief under chapter 11 of the Bankruptcy Code in the United States District Court for the District of Delaware.

This week, the United States Supreme Court issued its decision in Midland Funding, LLC v. Johnson, 581 U.S. ___ (2017), holding that a debt collector does not violate the Fair Debt Collection Practices Act (FDCPA) by filing an “obviously time-barred” proof of claim in a bankruptcy proceeding. This case should stem the tide of FDCPA lawsuits against debt collectors for efforts to collect potentially time-barred debts in bankruptcy proceedings.

Published in the Spring 2017 issue of The Bankers' Statement)

In a continuing effort to alert our lender clients and other friends to developments in the bankruptcy, restructuring, workout and creditors’ rights space, provided below is a summary of recent noteworthy court decisions.

Supreme Court Limits Priority-Skipping Structured Dismissals in Chapter 11

In a 5-3 decision written by Justice Stephen G.

Federal appeals courts have been split on whether filing a proof of claim in bankruptcy on old debt, or obligations that have expired under a statute of limitations, violates the Fair Debt Collection Practices Act. In a victory for debt collectors and the debt buying industry, the Supreme Court clarified this issue on May 15, 2017 with its decision in Midland Funding, LLC v. Johnson, No. 16-348.

Under section 1111(b) of the U.S. Bankruptcy Code, a non-recourse secured creditor that holds “a claim secured by a lien on property of the estate” is granted recourse against the bankruptcy estate upon the filing of a chapter 11 bankruptcy petition. But what happens when there has been a post-petition foreclosure on such property, so that it is no longer part of the estate and the liens have been extinguished? Can the creditor still use section 1111(b) to assert a claim against the bankruptcy estate? The Ninth Circuit answered no in Matsan v.