In Aalfs v. Wirum (In re Straightline Investments, Inc.),1 the United States Court of Appeals for the Ninth Circuit considered whether a post-petition factoring of accounts receivable by the debtor was an avoidable transfer under section 549 of the Bankruptcy Code. The Court of Appeals affirmed the Bankruptcy Court, finding that the post-petition transfer had been properly avoided and that the lower court was justified in allowing the trustee both to recover the accounts receivable and their proceeds and to retain the consideration paid by the transferee.

In In re SNTL Corp.,1 the United States Bankruptcy Appellate Panel of the Ninth Circuit recently decided that if a creditor is required in another proceeding to disgorge as a preference a payment that had been guaranteed by the debtor, the debtor’s liability as guarantor may be revived, provided that the agreement releasing the debtor from its guarantee obligation to the creditor explicitly permits such revival.

Background

In In re Calpine Corporation, 2007 WL 685595 (Bankr. S.D.N.Y. 2007), the Bankruptcy Court for the Southern District of New York considered the issue of whether secured creditors whose debt was being paid prior to its original maturity date were entitled to a prepayment premium.

On the afternoon of July 18, 2013, the City of Detroit filed its highly anticipated petition for relief under Chapter 9 of the Bankruptcy Code in the Bankruptcy Court for the Eastern District of Michigan. This marks the largest municipal bankruptcy filing in United States history.¹As a result of the Chapter 9 filing, all actions by creditors to collect prepetition claims against the City are enjoined through the imposition of an automatic stay, except for the application of special revenues pledged to indebtedness.

On June 22, 2012, Judge Robert Drain of the United States Bankruptcy Court for the Southern District of New York granted the motion of the Bakery, Confectionary, Tobacco Workers and Grain Millers International Union to dismiss Hostess’s motion to reject certain expired collective bargaining agreements.  The court held that section 1113 of the Bankruptcy Code no longer applied to key portions of the CBAs because the agreements had expired – certain CBA obligations remained in force only by operation of the National Labor Relations Act.  In re Hostess Brands, Inc., 2012 WL 23

In two recent decisions in the General Growth Properties, Inc., et al. chapter 11 cases, the United States Bankruptcy Court for the Southern District of New York upheld certain loan provisions which provided for an automatic event of default and imposition of a default rate of interest upon the commencement of a bankruptcy case, and held that certain creditors were entitled to receive postpetition interest at the contractual default rate.  General Growth Properties, Inc. and its affiliated debtors own, develop, and operate regional shopping malls across the United States.

In Marathon Petroleum Co. v. Cohen (In re Delco Oil Co.),1 the Court of Appeals for the Eleventh Circuit recently held that a trustee could avoid a debtor's post-petition transfers of funds that were cash collateral, notwithstanding that the payments had been made in good faith and in the ordinary course of business.

Last month, in a significant ruling in the General Growth Properties, Inc. (“GGP”) bankruptcy case, the United States Bankruptcy Court for the Southern District of New York denied motions to dismiss, as bad faith filings, the bankruptcy cases of 20 purported bankruptcyremote special purpose entity (“SPE”) subsidiary debtors.1

As the Madoff Securities and Stanford Financial schemes have unraveled in recent months, financial industry participants have had to scrutinize closely their involvement with these entities. A key issue in each of these cases will be the extent to which the trustee (or similar representative) can “claw back” payments made as part of the Ponzi and related fraudulent schemes. The U.S. Bankruptcy Court for the Southern District of New York recently considered similar facts in Bayou Accredited Fund, LLC v. Redwood Growth Partners, L.P.

In Bethlehem Steel Corp. v. Moran Towing Corp. (In re Bethlehem Steel Corp.),1 the United States Bankruptcy Court for the Southern District of New York held that preferential transfer claims were not arbitrable. The Court reasoned that because the avoidance powers did not belong to the debtor, but rather were creditor claims that could only be brought by a trustee or debtor-in-possession, they were not subject to the arbitration clauses in contracts to which the creditors were not parties.

The Dispute and the Arbitration Clauses