The United States Court of Appeals for the Tenth Circuit, applying Oklahoma law, has held that a bankruptcy or insolvency exclusion may bar coverage for the insured broker’s claim, where the broker’s actions were connected to the bankruptcy of its client’s former insurer. C.L. Frates & Co. v. Westchester Fire Ins. Co., 2013 WL 4734093 (10th Cir. Sept. 4, 2013).
In Virginia Broadband, LLC (Bankr. W.D. Va. Sept. 9, 2013), the unsecured creditors committee moved to dismiss an LLC’s chapter 11 bankruptcy case alleging a flaw in the authorization of the LLC’s bankruptcy filing caused by an authorizing member’s individual bankruptcy filing. Specifically, the committee alleged that when the authorizing member filed his individual bankruptcy case, Virginia law divested him of his non-economic (voting) rights in the LLC.
In In re Charles A. Grogan and Sarah A. Grogan, No. 11-65409 (Bankr. D. Ore. Sept. 10, 2013), the United States Bankruptcy Court for the District of Oregon confirmed the Debtors’ Third Amended Chapter 11 plan. The Debtors are Christmas tree farmers and their plan proposed to liquidate the majority of their Christmas tree farm and sell six major parcels of land. While the two main secured creditors were deemed to have rejected the plan, the court found the cram down standards of section 1129(b)(2)(A) were applicable.
A make-whole premium is a lump-sum payment that becomes due under a financing agreement when repayment occurs before the stated maturity date, thereby depriving the lender of all future interest payments bargained for under the agreement. Make-whole provisions, ubiquitous in the bond market, are becoming more prevalent in commercial loan transactions, including in the distressed context. That trend is spurred by favorable court rulings for lenders enforcing make-whole premiums when the borrower files for bankruptcy protection.
Legal Update
September 27, 2013
In re Tribune: Defendants Successfully Challenge Individual
Creditors Standing But District Court Rules that Section 546(e)
Safe Harbor Does Not Bar Individual Creditors’ State Law Based
Constructive Fraudulent Conveyance Claims
On September 23, 2013, the US District Court
for the Southern District of New York in In re
Tribune1 held that the individual creditor suits at
issue were stayed because the Creditors’
Committee was in the process of prosecuting
claims for intentional fraudulent conveyance
The Seventh Circuit has explicitly adopted the Second Circuit’s broad interpretation of the terms “transfer” and “settlement payment” in the Bankruptcy Code’s safe harbor provisions. See Peterson v. Somers Dublin Ltd., No. 12-2463, --- F.3d ----, 2013 WL 4767495 (7th Cir. Sept.
On September 12, 2013, in the American Airlines case, the US Court of Appeals for the Second Circuit affirmed an order of the United States Bankruptcy Court for the Southern District of New York (a) authorizing the debtor to use proceeds of postpetition financing to repay prepetition debt without payment of amake-whole amount, and (b) denying a creditor’s request for relief fromthe automatic stay.
Background Facts
On August 8, 2013, the Executive Life Insurance Company of New York (ELNY) Restructuring Agreement closed, following the denial of the last relevant appeal of the trial court’s Order of Liquidation and Approval of the Restructuring Agreement in May 2013.
The Ninth Circuit recently held that an employer who failed to pay $170,045 in withdrawal liability could discharge the liability in bankruptcy. Carpenters Pension Trust Fund v. Moxley, No. 11-16133 (9th Cir. August 20, 2013). In so ruling, the Court rejected the Fund’s argument that unpaid withdrawal liability constituted a plan asset.