In the last several months, there have been some significant legal developments that could impact acquisition finance. This article will survey some of the more notable ones.
In a case with implications for buyers of assets in a bankruptcy court-ordered sale under section 363(b) of the Bankruptcy Code, the Bankruptcy Court for the Southern District of New York recently issued a decision limiting the ability of manufacturers that are debtors in a bankruptcy case to sell assets free and clear of future liabilities.
Senior lenders often insist that subordinate lenders assign to them, under subordination and intercreditor agreements, their right to vote on a plan of reorganization proposed for the borrower should it end up in chapter 11. The intention of such assignments is to prevent junior lenders from facilitating or preventing confirmation of bankruptcy plans contrary to the desires of senior lenders. Lenders should be aware, however, that courts disagree whether such plan voting rights assignments are enforceable. In fact, the United States Bankruptcy Court for the District of Mas
Can a U.S. patent licensee whose license has been rejected by a licensor under foreign law in a foreign bankruptcy rely on the protections of § 365(n) of the U.S. Bankruptcy Code? On October 28, 2011, the United States Bankruptcy Court for the Eastern District of Virginia issued an opinion addressing this in the Chapter 15 case of Qimonda AG (“Qimonda”).5 The bankruptcy court held that the application of § 365(n) to executory licenses to U.S. patents was required to sufficiently protect the interests of U.S.
In re Lehman Brothers Inc., Bankr. Case No. 08-01420 (JMP) (SIPA), 2011 WL 4553015 (Bankr. S.D.N.Y. Oct. 4, 2011)
CASE SNAPSHOT
Grossman v. Lothian Oil Incorporated, 650 F.3d 539 (5th Cir., 2011)
CASE SNAPSHOT
In a case of first impression in the Fifth Circuit, the court recharacterized a claim of a non-insider, declining to create a per se rule that recharacterization could only apply to insiders.
FACTUAL BACKGROUND
In the Matter of Richard Louis Alexander (7th Cir., 2011) U.S. App. LEXIS 17110, (August 16, 2011)
CASE SNAPSHOT
In an Order issued yesterday by the Bankruptcy Court for the Southern District of Texas in the Omega Navigation Enterprises, Inc. (Omega) chapter 11 cases, Judge Karen Brown has denied motions to dismiss or convert Omega’s chapter 11 cases or for relief from stay filed by Omega’s Senior Lenders and supported by Omega’s Junior Lenders and Unsecured Creditors’ Committee. In the view of Lloyd’s List, a leading industry publication:
In the course of the next few weeks, Omega Navigation Enterprises, Inc. and its affiliates (collectively, “Omega”), an international shipping enterprise, will find out if motions by certain of their lenders to, among other things, dismiss Omega’s chapter 11 bankruptcy proceedings have been granted by the U.S. Bankruptcy Court for the Southern District of Texas.1 If not, then Omega may be permitted to continue its attempt to reorganize its business under chapter 11 of the Bankruptcy Code.
The United States Bankruptcy Court for the Southern District of New York issued a memorandum decision in the Lehman Brothers Inc. (LBI) liquidation proceeding confirming the LBI trustee’s determination that certain claims relating to TBA contracts do not qualify as customer claims against LBI’s estate.
In June 2011, the United States Supreme Court issued its opinion in the case known as Stern v. Marshall. The U.S. Supreme Court held that filing a proof of claim in a bankruptcy case does not constitute consent to the bankruptcy court’s jurisdiction over all counterclaims or actions that the bankruptcy estate may later bring against the creditor.
In fact, filing the proof of claim constitutes consent only to those claims or actions that either (1) stem from the bankruptcy case itself; or (2) are necessary to the resolution of the creditor’s proof of claim.