On January 25, 2011, Lehman Brothers filed an amended version of its plan of liquidation (the Plan). Contrasted against its predecessor version, the Plan creates some winners and some losers in terms of the percentage of projected payouts to creditors of various Lehman entities. More important than the percentage distribution, however, may be the means by which the debtors seek to fix a creditor’s claim amount. With regard to claims based on derivatives contracts, Lehman proposes to take a novel – and for holders of those claims, potentially alarming – approach.

In a 113-page decision issued on February 11 (the "District Court Decision"), the United States District Court for the Southern District of Florida (Gold, J.) delivered a blistering rebuke to the Florida Bankruptcy Court (Olson, J.) when it quashed the portions of the famous / infamous 2009 TOUSA decision (the "Trial Decision") holding the so-called "Transeastern Lenders" liable for fraudulent transfers in connection with T

Introduction

Last year, the Liquidating Trustee (the "Trustee") in the Midway Games bankruptcy began filing avoidance actions against creditors of the bankruptcy estate. Midway Games ("Midway" or the "Debtor") filed petitions for bankruptcy in the United States Bankruptcy Court for the District of Delaware on February 12, 2009. For those not familiar with this bankruptcy proceeding, Midway developed and distributed video games throughout the North America, Europe and Asia.

In a 113-page decision issued earlier today, the United States District Court for the Southern District of Florida (Gold, J.), quashed the famous / infamous decision of the Florida Bankruptcy Court holding the so-called “Transeastern Lenders” liable for fraudulent transfers in connection with TOUSA’s July 31, 2007 financing transactions (the “July 31 Loans”). In re TOUSA, Inc., Slip Op., Case No. 10-60017-CIV/GOLD (S.D. Fla. Feb. 11, 2011).

On February 7, 2011, in a highly anticipated decision, the Second Circuit Court of Appeals held that in Chapter 11 reorganizations, senior creditors may not “gift” recoveries to junior creditors and/or equity interest holders over the objection of an intervening class. In In re DBSD N.A., Inc., __ F.3d __, 2011 WL 350480 (2d Cir. 2011), the majority ruled that such “gift plans” run afoul of the “absolute priority rule,” which is codified in Section 1129(b) of Bankruptcy Code. The decision has significant implications for future bankruptcy cases in New York.

The United States Bankruptcy Court for the District of Delaware recently dismissed equitable subordination and fraudulent transfer claims filed by the Official Committee of Unsecured Creditors of Champion Enterprises, Inc. ("Champion") against more than 100 prepetition lenders to Champion (collectively, the "Defendants")1.

The U.S. Court of Appeals for the Second Circuit, on Feb. 7, 2011, held that senior creditors could not “gift” part of their reorganization plan recovery to existing shareholders of the debtor.In re DBSD N. Am., Inc., __ F.3d __, 2011 WL 350480 (2d Cir. Feb. 7, 2011) (2-1) (Lynch, J.) (explainingIn re DBSD N. Am., Inc., 627 F.3d 496 (2d Cir. 2010) (summary opinion)). Its extensive 62-page opinion explained the court’s previous two-page summary ruling of Dec.

United States District Court Judge Alan S. Gold, on February 11, 2011, reversed a Florida bankruptcy court’s controversial October 2009 fraudulent transfer judgment1 against a group of lenders based on their receipt of a $421 million loan repayment in July 2007. 3V Capital Master Fund, et al., v. Official Committee of Unsecured Creditors of Tousa, Inc., et al, Case No. 10-60017-CIV (S.D. Fla. Feb.

On February 11, 2011, in a decision that represents a significant victory for institutional lenders and other proponents of capital market financing, Judge Alan S. Gold of the United States District Court for the Southern District of Florida (the District Court) issued a 113 page opinion overturning a $480 million fraudulent transfer judgment entered by the United States Bankruptcy Court for the Southern District of Florida (the Bankruptcy Court) against the so-called “Transeastern Lenders” in the TOUSA, Inc. (TOUSA) chapter 11 bankruptcy cases.i