In a recent case1 out of the bankruptcy court for the Southern District of Florida (the “Court”), a secured creditor moved to dismiss a debtor’s bankruptcy case “for cause” based on the debtor’s bad faith filing.2 The debtor owned certain commercial real estate in south Florida (the “Commercial Property”) and leased space to various tenants, one of which had recently applied for both state and federal licenses to sell medical marijuana.3 The secured creditor had a first-position mortgage on the Commercial Property.4 After a decade-long lending relationship soured, the debtor initiated a len

In order to file for bankruptcy in the United States, a company needs to secure the appropriate corporate authorizations as required by its governing documents. What happens when a debtor does not obtain appropriate authorization to file its bankruptcy case? Recently, the Bankruptcy Court for the Northern District of West Virginia held in In re Tara Retail Group, LLC that an improper bankruptcy filing can be ratified when those who are required to authorize the filing remain silent.

Background

Permissive Abstention:

It is very common for bankruptcy court orders to provide that the court retains jurisdiction to enforce such orders. Similarly, chapter 11 confirmation orders routinely provide that the bankruptcy court retains jurisdiction over all orders previously entered in the case. The enforceability of these “retention of jurisdiction” provisions, however, will not rest on the plain language in the order but on the bankruptcy court’s statutory jurisdiction.

The Bankruptcy Court for the District of Delaware recently issued a decision that will undoubtedly influence strategies in bankruptcy cases involving plugging and abandonment liabilities. The court’s ruling in Venoco, LLC v. City of Beverly Hills illuminates the Bankruptcy Code’s rehabilitative purposes by explaining that financial harm, without more, is not sufficient to enjoin a debtor’s actions.

What Happened

Because the number of unsatisfied clients who find themselves in bankruptcy are filing malpractice lawsuits against their pre-bankruptcy counsel is on the rise so, too, is the number of attorneys who find themselves on the defending end of such claims. Debtors and Trustees pursuing such claims, as well as attorneys defending against a bankruptcy debtor’s malpractice lawsuit, should consider the pros and cons of adjudicating these claims through an adversary proceeding in the bankruptcy court or via a state court action outside the bankruptcy realm.

In an important decision for secured creditors, the Ninth Circuit recently held that the proper “cramdown” valuation of a secured creditor’s collateral is its replacement value, regardless of whether the foreclosure value would generate a higher valuation of the collateral. The appellate court’s decision has the potential to significantly impact lenders that include certain types of restrictions on the use of the collateral (such as low income housing requirements) in their financing documents.

Part 1 of this blog series examined a bankruptcy court’s subject matter jurisdiction over a debtor’s legal malpractice claims. See, Part 1. Recognizing that bankruptcy courts typically retain related to jurisdiction over legal malpractice claims against a debtor’s pre-petition counsel, this blog now turns to abstention considerations for a legal malpractice strategy.

What happens in a Chapter 13 bankruptcy case when a creditor files a proof of claim involving a debt for which the statute of limitations to collect the debt has run? More specifically, does the filing of such a claim violate the Fair Debt Collection Practices Act (the “Act”)? That’s the issue considered by the U.S. Supreme Court in its recent decision in the case of Midland Funding, LLC v. Johnson. 1

In a May 16, 2017 ruling, the United States District Court for the District of Delaware affirmed the order of the bankruptcy court denying a party’s motion to compel arbitration. In doing so, the District Court adhered to traditional rules of contract interpretation in holding that the relevant arbitration provision was not written broadly enough to include the type of dispute pending before the bankruptcy court, and thus, the bankruptcy court retained jurisdiction.