ASARCO Standard

Professionals retained in a bankruptcy case by a trustee, a chapter 11 debtor-in-possession ("DIP"), or an official committee may be awarded "reasonable compensation" for "actual, necessary services" performed on behalf of their clients under section 330 of the Bankruptcy Code.

In In re Argon Credit, LLC, 2019 WL 169315 (Bankr. N.D. Ill. Jan. 10, 2019), the U.S. Bankruptcy Court for the Northern District of Illinois ruled that, in accordance with section 510(a) of the Bankruptcy Code, a standby clause in a subordination agreement prevented a subordinated lender from conducting discovery concerning the senior lender’s claims.

Chapter 15 of the Bankruptcy Code offers an effective mechanism for U.S. courts to provide assistance to non-U.S. courts presiding over the insolvency proceedings of foreign debtors with assets located in the U.S. An important feature of chapter 15 is "comity," the deference that U.S. courts give to the decisions of foreign courts under appropriate circumstances. A ruling recently handed down by the U.S. Court of Appeals for the Second Circuit illustrates that, although comity is an integral part of chapter 15, this chapter is far from the only context in which it applies.

A “structured dismissal” of a chapter 11 case following a sale of substantially all of the debtor’s assets has become increasingly common as a way to minimize costs and maximize creditor recoveries. However, only a handful of rulings have been issued on the subject, perhaps because bankruptcy and appellate courts are unclear as to whether the Bankruptcy Code authorizes the remedy.

On August 20, 2018, the National Bankruptcy Conference (the "NBC") submitted a letter (the "Letter") to representatives of the House Subcommittee on Regulatory Reform and the House Committee on the Judiciary that proposed certain technical and substantive amendments to chapter 15 of the Bankruptcy Code. Chapter 15, which is patterned on the 1997 UNCITRAL Model Law on Cross-Border Insolvency (the "Model Law"), was enacted in 2005 and establishes procedures governing cross-border bankruptcy and insolvency proceedings. To date, the Model Law has been enacted by the U.S.

In a highly anticipated decision, the U.S. Supreme Court ruled on March 22, 2017, in Czyzewski v. Jevic Holding Corp., No. 15-649, 2017 BL 89680 (U.S. Mar. 22, 2017), that, without the consent of affected creditors, bankruptcy courts may not approve "structured dismissals" providing for distributions which "deviate from the basic priority rules that apply under the primary mechanisms the [Bankruptcy] Code establishes for final distributions of estate value in business bankruptcies."

"In Wellness Int’l Network, Ltd. v. Sharif, ___ U.S. ___, 135 S. Ct. 1932 (2015), a divided U.S. Supreme Court resolved the circuit split regarding whether a bankruptcy court may, with the consent of the litigants, adjudicate a claim that, though statutorily denominated as “core,” is not otherwise constitutionally determinable by a bankruptcy judge. The majority held that so long as consent—whether express or implied—is “knowing and voluntary,” Article III of the U.S. Constitution is not violated by a bankruptcy court’s adjudication of such a claim.

Introduction

In re Katy Indus., Inc., 590 B.R. 628 (Bankr. D. Del. 2018) presented an interesting question: If a stalking horse bidder’s successful bid to purchase a company in chapter 11 was partially predicated upon a credit bid, and a portion of that credit bid was challenged after the sale closed, what would be the result for the bidder’s overall successful bid if that portion of the credit bid was eliminated?

Background

Good news: structured dismissals have survived Supreme Court scrutiny. Bad news: dismissals may be harder to structure, given yesterday’s 6-2 decision overruling the Third Circuit in Jevic narrowing the context in which they can be approved. We now have guidance on whether or not structured dismissals must follow the Bankruptcy Code’s priority scheme. The short answer is that they must.