A federal district court recently rejected the Pension Benefit Guaranty Corporation’s attempt to hold a buyer of assets liable for the seller’s unfunded defined benefit plan liabilities under a successor liability theory.[1] While the court decided the issue in favor of the buyer, it is a cautionary tale for buyers as it appears to be the first time the PBGC has argued for the application of successor liability in this context and is a depar

Although there has been much discussion of the Second Circuit’s recent decision in Marblegate, this article addresses a question other commentators have yet to tackle: namely, how the Second Circuit’s decision impacts the Trust Indenture Act’s protection of guarantee obligations included in an indenture. Below we provide our view on how Marblegate affects indenture guarantees. More specifically, we discuss how the decision is consistent with provisions of the TIA that expressly protect a noteholder’s payment rights under a guarantee.

Synopsis

The decision of the United States Court of Appeals for the Second Circuit in In re Motors Liquidation Company is yet the latest case to show the difficulty in using the bankruptcy process to resolve tort claims.[1]

The Background Basics

While significant energy here at the Bankruptcy Cave is devoted to substantive bankruptcy matters, not all aspects of a general insolvency practice are always fun and litigation. Oftentimes insolvency lawyers add the most value by helping clients avoid a bankruptcy filing, or by successfully resolving a case through a consensual transactional restructuring.

(7th Cir. Jan. 30, 2017)

Wednesday, February 1 brought a welcome development for the many correspondent lenders currently defending against claims filed by (or threatened with future lawsuits by) Residential Funding Company (“RFC”) and its successor-in-interest, the ResCap Liquidating Trust (“ResCap”).

Why are so many chapter 11 retailers squeezed into liquidation?

In chapter 11 bankruptcy cases, it is not uncommon for secured parties/lenders to provide a “carve-out” for various professional fees. Frequently there may be a “carve-out” for “all chapter 11 professionals” or the “carve-out” may be broken out in different amounts for the debtor’s professionals as opposed to, for example, Creditors’ Committee professionals. These “carve-outs” can often be in a Cash Collateral Order (assuming the debtor is using the secured party’s collateral) or in a DIP Order (debtor-in-possession financing). So what does a carve-out mean?

(Bankr. E.D. Ky. Feb. 2, 2017)

The bankruptcy court enters summary judgment in favor of the plaintiff trustee. The trustee sought to obtain title to a truck sold to the debtor prepetition by the defendant dealer. The dealer had not provided a certificate of title, but the debtor did receive physical possession of the truck pursuant to a bona fide sale. The court finds in favor of the trustee after applying Kentucky’s comprehensive automated motor vehicle registration and titling system contained in KRS §§ 186A.010-186A.990. Opinion below.

Judge: Schaaf

(Bankr. W.D. Ky. Feb. 1, 2017)

The bankruptcy court denies the creditor’s request for default rate interest on the secured claim. The value of the real property securing the claim was in excess of the claim amount. Case law establishes that there is a presumption in favor of the contractual rate of interest, but it is subject to rebuttal when evidence establishes the default rate is significantly higher without justification. Here, the default rate doubled the non-default rate and the court finds there was no justification under the evidence presented. Opinion below.