In a decision entirely consistent with its ruling in the “Perpetual” adversary proceeding last year, on May 12, 2011, the United States Bankruptcy Court in the Lehman chapter 11 cases endorsed a strict interpretation of certain Bankruptcy Code provisions to the benefit of Lehman, which will result in Lehman having more leverage in its negotiations with derivatives counterparties. See Lehman Brothers Special Financing Inc. v. Ballyrock ABS CDO 2007-1 Limited and Wells Fargo Bank, N.A., Trustee, Adv. Proc. 09-01032 (Bankr. S.D.N.Y. May 12, 2011).
It is important that directors and officers insurance provide the necessary protections. In times of financial turmoil, it is especially advisable for companies to review their D&O insurance coverage to ensure that their directors and officers are adequately protected. Although not exhaustive, set forth below are some of the critical issues to be considered in the context of D&O insurance policies.
The Extent of Coverage
A bankruptcy court in Delaware has ruled that a debtor’s CERCLA claims are “non-core” claims that fall outside the administration of the estate in bankruptcy. NEC Holdings Corp. v. Linde LLC, No. 10-11890 (Bankr. D. Del.
- Learn About Your Client and the Debtor.
Before you accept a collection case, make sure you know your client’s business and the debtor’s business.
The intersection where IP law meets bankruptcy law poses special challenges to licensees and licensors. Imagine the patent licensor whose debtor licensee intends to assign the licensed patent rights to the licensor's chief competitor. Or consider the trademark licensee whose debtor licensor wants to end the license and sell the trademark to a rival. The resolution of these IP issues may prove vitally important to the parties involved.
Executory Contracts in Bankruptcy
A U.S. bankruptcy court has held that the tolling provisions in the U.S. Bankruptcy Code allowing for extensions of the time to file actions are automatically available to foreign representatives trying to marshal assets for distribution to creditors in crossborder cases.
The International Swaps and Derivatives Association, Inc. (“ISDA”) is preparing forms of amendment to its boilerplate master agreements in connection with market practice relating to the suspension of payments by a non-defaulting party. ISDA is also considering a protocol to implement the amendments into existing agreements on a multilateral basis.
Summary
In an 11 page opinion published May 18, 2011, Judge Shannon ruled that, in the context of a motion to dismiss, the officer of a corporation, which is itself a contractor, is not also a contractor by virtue of her position within the corporation. Judge Shannon’s opinion is available here (the “Opinion”).
Background
COMMODITY FUTURES TRADING COMMISSION v. LAKE SHORE ASSET MANAGEMENT LTD. (May 11, 2011)
Judge Carey released an order amending his Memorandum Opinion dated May 10, 2011 in the New Century TRS Holdings, Inc. bankruptcy. His previous opinion had misstated the amount of a settlement between the two parties in the adversary proceeding which gave rise to the opinion.