(6th Cir. B.A.P. June 1, 2016)
The Sixth Circuit B.A.P. reverses the bankruptcy court’s sua sponte granting of summary judgment in favor of the trustee. The trustee brought the action to avoid the appellants’ liens in the debtor’s aircraft. The bankruptcy court abused its discretion in granting summary judgment because its decision was not based on undisputed facts. Instead, the bankruptcy court based its decision on assumptions derived from the appellants’ inability to produce sufficient documentation. Opinion below.
Judge: Harrison
In a 10-page decision dated June 6, 2016, Judge Carey of the Delaware Bankruptcy Court denied a motion to dismiss filed by a holder of a “Golden Share” of Intervention Energy Holdings, LLC (the “Debtor”). Judge Carey’s opinion is available here (the “Opinion”). A “Golden Share” is “A type of share that gives its shareholder veto power over changes to the company’s charter.
On June 5th and 6th, 2016, Houston-based energy firm Hercules Offshore Inc. and its affiliated debtors (“Hercules” or “Debtors”) filed for Chapter 11 bankruptcy protection before the United States Bankruptcy Court for the District of Delaware.
Essentially all securitization structures utilize a bankruptcy remote entity, a/k/a special purpose entity (“SPE”), to reduce the lenders’ or investors’ exposure to a bankruptcy of the sponsor. A standard feature of SPEs is the appointment of an independent person (director, member, manager) to the body managing the SPEs. That independent person’s consent is required for “major decisions,” one of which is the filing of, or consenting to a bankruptcy of the SPE (hence the court’s reference to them as “blocking directors”).
Even before Congress added section 365(c)(3) to the Bankruptcy Code in 1984, it was generally understood that a nonresidential real property lease which has been validly terminated under applicable law prior to a bankruptcy filing by the debtor-former tenant cannot be assumed or assigned in bankruptcy. Moreover, the terminated leasehold interest is excluded from the debtor’s bankruptcy estate, and any action by the landlord to obtain possession of the formerly leased premises is not prohibited by the automatic stay.
The courts have long struggled with the question of whether particular orders entered by a bankruptcy court are final, and therefore appealable as a matter of right. It is generally recognized that a bankruptcy case is distinctly different from the usual civil case in that it is a framework within which a variety of disputes arise and are resolved. That distinction is recognized in 28 U.S.C. §158(d)(1), which provides that appeals as of right maybe taken not only from final judgments in cases but from “final judgments, orders, and decrees…in cases and proceedings….”
Many vendors have had the unfortunate experience of a customer filing for bankruptcy. If it hasn’t happened to you yet, it probably will at some point in the future. There are certain steps a vendor should (or must) take to protect itself and maximize its opportunity to collect any debts owed by the customer.
Sabine Bankruptcy Judge Authorizes Rejection of Gas Gathering Agreements
In In re Sabine Oil & Gas Corp., 2016 BL 70494 (Bankr. S.D.N.Y. Mar. 8, 2016), Judge Shelley C. Chapman of the U.S. Bankruptcy Court for the Southern District of New York permitted Sabine Oil & Gas Corporation (“Sabine”) to reject three gas gathering and handling agreements with Nordheim Eagle Ford Gathering, LLC (“Nordheim”) and HPIP Gonzales Holdings, LLC (“HPIP”). All of the agreements are governed by Texas law.
On May 16, the U.S. Supreme Court decided Husky International Electronics, Inc. v. Ritz[1], ruling that the term “actual fraud” in section 523(a)(2)(A) of the Bankruptcy Code includes forms of fraud that do not involve a fraudulent misrepresentation.
The Eleventh Circuit has made it clear: it will not back down from its decision in Crawford v. LVNV Funding, a decision it issued in 2014 and one which has been the subject of hot debate ever since.In Crawford, the Eleventh Circuit ruled that the filing of a proof of claim was an attempt to collect a debt and that the filing of a proof of claim on time barred debt violated the FDCPA. Crawford v. LVNV Funding, LLC, 758 F.3d 1254 (11th Cir. 2014).