A court-approved pre-plan settlement that would have resolved a dispute between a Chapter 11 creditors’ committee and the debtor’s secured lenders over the lenders’ liens was vacated by the U.S. Court of Appeals for the Second Circuit on March 5. Motorola, Inc. v. Official Committee of Unsecured Creditors and J.P. Morgan Chase Bank, N.A. (In re Iridium Operating LLC). The settlement also would have funded massive litigation against the debtor’s former parent, Motorola Inc.

Motorola’s Successful Argument

“[T]he Bankruptcy Code does not permit [an undersecured] creditor . . . to advance an unsecured claim for post-[bankruptcy] attorneys’ fees,” held the U.S. District Court for the Eastern District of North Carolina on Nov. 27, 2017. Summitbridge Nat’l Invs. Iii v. Faison, 2017 U.S. Dist. LEXIS 195267, *8 (E.D. N. C. Nov. 27, 2017). Affirming the bankruptcy court, the district court agreed that “the Code is most properly interpreted to allow only oversecured creditors to add post-[bankruptcy] attorneys’ fees.” Id., at *10.

A Chapter 11 reorganization plan may extinguish a secured creditor’s lien if: (1) the plan “does not preserve the lien”; (2) the court confirms the plan; (3) the plan “dealt with” the lender’s collateral; and (4) the lender “participated in the bankruptcy” case, held the U.S. Court of Appeals for the Second Circuit on Aug. 4, 2015. In re Northern New England Tel. Operations, LLC, 2015 WL 4619576 (2d Cir. Aug. 4, 2015).

Cramdown Plan Stays Suits Against Corporate Parent

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.

On Jan. 25, 2010, the U.S. Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”) held that a trust deed provision reversing a priority of payment waterfall upon the bankruptcy of a credit support provider under a swap agreement is unenforceable under the U.S. Bankruptcy Code (the “Bankruptcy Code”).

Creditors often consider filing an involuntary bankruptcy petition against their financially distressed debtors. Before using this extraordinary remedy, a creditor should evaluate whether it will achieve a valid business objective. Additionally, each creditor should evaluate whether there is a valid basis to support the filing. When the debtor's bankruptcy is appropriate, it can be a valuable step in maximizing a creditor's recovery. But the stakes are high.

“[B]ankruptcy does not constitute a per se breach of contract and does not excuse performance by the other party in the absence of some further indication that the [debtor] either cannot, or does not, intend to perform,” held the Supreme Court of Connecticut in a lengthy opinion on Nov. 21, 2017. CCT Communications, Inc. v. Zone Telecom, Inc., 2017 WL 5477540, *13 (Ct. Nov. 21, 2017) (en banc), superseding 324 Conn. 654, 153 A.3d 1249 (2017). Reversing the trial court, granting the plaintiff’s motion for en banc reconsideration of its earlier Feb.

A bankruptcy court must dismiss a creditor’s involuntary bankruptcy petition when the debtor has raised a “legitimate basis” for disputing the petitioning creditor’s underlying claim, held the U.S. Court of Appeals for the Second Circuit on July 14, 2015. In re TPG Troy, LLC, 2015 WL 4220619, at *5 (2d Cir. July 14, 2015). The Second Circuit also affirmed the bankruptcy court’s award of $513,427 in attorney’s fees and costs to the vindicated debtor under Bankruptcy Code (“Code”) Section 303(i)(1). Id. at *6.

On August 4, 2016, the Delaware Bankruptcy Court considered cross-motions for summary judgment in a preference action case styled as Pirinate Consulting Group, LLC v. Maryland Department of the Environment (In re NewPage Corp.), Adv. Pro. No. 13-52206 (KG). This gem of an opinion is noteworthy in that it analyzes various defenses raised by a state agency to a preference complaint.