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)

Crude oil and natural gas prices reached multiyear lows of approximately $26 per barrel for crude oil (as of January 2016) and $1.50 per million British thermal units (mmbtu) for natural gas (as of March 2016). This represented a 75 percent decline in the price of oil from its peak of approximately $105 per barrel in mid-2014 and an 80 percent decline in the price of natural gas from its early 2014 peak of over $8 per mmbtu. At the time, many industry observers predicted that depressed commodity prices would result in numerous bankruptcy filings and an uptick in M&A activity.

In chapter 11 reorganizations, Federal Rule of Bankruptcy Procedure 3003(c)(3) provides that “[t]he court shall fix and for cause shown may extend the time within which proofs of claim or interest may be filed” (commonly known as the bar date). For a creditor or interest holder to be subject to this bar date, they must have received notice to satisfy due process. A known creditor, one that is reasonably ascertainable, must receive “actual notice.” Simply receiving a court-approved bar date notice from the debtor is enough to satisfy this requirement for due process.

The bankruptcy court enters judgment in favor of the debtor, dismissing claims under 11 U.S.C. § 523(a)(6) and § 727(a)(2)(A). The plaintiff argued that the debtor executed a scheme that intentionally injured the plaintiff because the debtor became unable to pay on promissory notes. The Court finds that the plaintiff did not establish that the debtor willfully and maliciously injured the plaintiff.

Judge Christopher Sontchi recently issued an important opinion in the Molycorp chapter 11 case.

Addressing a circuit split over a trademark licensee’s rights following a debtor/licensor’s bankruptcy, the US Bankruptcy Appellate Panel (BAP) for the First Circuit held that, although trademarks and trade names are not included in bankruptcy law’s definition of “intellectual property,” the licensee’s rights to use the licensor’s trademarks as set forth in the agreement were not terminated by the debtor’s rejection of the agreement. Mission Prod. Holdings, Inc. v. Tempnology LLC, Case No. 15-065 (BAP, 1st Cir., 2016) (Hoffman, J).

Roust Corporation (“Roust”) caught everyone’s attention when, on January 6, 2017, Southern District of New York Bankruptcy Judge Robert Drain held a joint first day and confirmation hearing and confirmed the prepackaged plan of reorganization of Roust Corporation and certain affiliates (collectively, the “Debtors”) only six (6) days after the Debtors commenced their chapter 11 cases. In re Roust Corporation, et al., Ch. 11 Case No. 16-23786 (RDD) (Bankr. S.D.NY. Dec. 30, 2016). You’re a seasoned bankruptcy attorney.

In less than a week after its bankruptcy filing, a debtor was able to obtain confirmation of its prepackaged plan of reorganization in the Bankruptcy Court for the Southern District of New York. In allowing the case to be confirmed on a compressed timeframe that was unprecedented for cases filed in the Southern District of New York, the Bankruptcy Court held that the 28-day notice period for confirmation of a chapter 11 plan could run coextensively with the period under which creditor votes on the plan were solicited prior to the commencement of the bankruptcy case.