The Bottom Line:

Bankruptcy Judge Michael Lynn of the Northern District of Texas recently issued a noteworthy opinion in In re Village at Camp Bowie I, L.P. that addresses two important Chapter 11 confirmation issues. Judge Lynn determined that a plan that artificially impaired a class of claims in order to meet the requirements of section 1129(a)(10) had not been proposed in bad faith and did not violate the requirements of section 1129(a). In his ruling, Judge Lynn also applied the Supreme Court’s cram-down “interest”1 rate teachings in Till v.

The Supreme Court’s 5-to-4 decision in Stern v. Marshall, 131 S. Ct. 2594, 2011 WL 2472792 (June 23, 2011), drew upon a tortured factual background filled with sensational accusations and revelations, to deliver an opinion that definitively upsets a quarter- century’s jurisdiction by bankruptcy courts over a large set of actions.

CURRENTLY, NEGOTIATION and documentation of claims trades remain largely unregulated, with only limited oversight from bankruptcy courts and the Securities and Exchange Commission. Generally, the bankruptcy court’s, or the claims agent’s, involvement in claims trading is ministerial, i.e., maintaining the claims register and recording transfers if the form complies with the rule. Only if there is an objection to a claims transfer does the bankruptcy court become involved in the substance of a transfer.

On Monday, August 8, 2011, United States Bankruptcy Court Judge Mary Walrath ruled that Harry & David Holdings Inc. the Oregon-based gourmet food and gift company, can terminate its pension plan as part of a pre-arranged bankruptcy plan and emerge from bankruptcy free of its accumulated pension liability. The company convinced the court that it had to terminate the plan in order to successfully emerge from bankruptcy.

The United States Bankruptcy Court for the Southern District of New York, overseeing the bankruptcy cases of Lehman Brothers Holdings Inc. (“LBHI”) and its affiliated debtors (collectively, the “Debtors”), entered an order on Aug.

Summary

Summary

An Illinois appellate court, applying Indiana and federal law, has held that neither a bankruptcy exclusion nor an insured versus insured exclusion applied to bar coverage for claims brought by a bankruptcy trustee.  Yessenow v. Exec. Risk Indem., Inc., 2011 WL 2623307 (Ill. App. Ct. June 30, 2011).

The ability to sell an asset in bankruptcy free and clear of liens and any other competing “interest” is a well-recognized tool available to a trustee or chapter 11 debtor in possession (“DIP”). Whether the category of “interests” encompassed by that power extends to potential successor liability claims, however, has been the subject of considerable debate in the courts. A New York bankruptcy court recently addressed this controversial issue in Olson v. Frederico (In re Grumman Olson Indus., Inc.), 445 B.R. 243(Bankr. S.D.N.Y. 2011).