The Supreme Court of the United States held today that the filing of a proof of claim that is obviously time barred is not a false, deceptive, misleading, unfair, or unconscionable debt collection practice within the meaning of the Fair Debt Collection Practices Act (the "FDCPA").

In a May 8, 2017 ruling, the Delaware Bankruptcy Court denied the official committee of unsecured creditors from accessing certain documents withheld from production based on the attorney-client privilege. Despite the purpose underlying the committee’s creation, the court distinguished the role of the committee from that of a bankruptcy trustee and barred the production of privileged documents in the absence of a finding of insolvency. This ruling hampers the ability of a creditor’s committee to root out fraud and potentially recover money for the benefit of the bankruptcy estate.

In a significant ruling impacting commercial real estate lenders in Michigan, the Sixth Circuit Court of Appeals has ruled that an absolute assignment of rents that had been fully perfected (by demanding payment from tenants to the lender and related recording) precludes a debtor from asserting that such rents can be used as cash collateral in bankruptcy. The reasoning is that these rents do not constitute property of the bankruptcy estate. As such, the debtor could not proceed with its Chapter 11 case.

Background

This article was published in a slightly different form in the November 2016 issue of Futures & Derivatives Law by The Journal on the Law of Investment & Risk Management Products.

Introduction

In an opinion by Judge Roth issued on March 30, 2017, the Court of Appeals for the Third Circuit held that two suppliers who had sold electrical materials to a bankrupt contractor had violated the automatic stay by asserting a construction lien against the owner of the development where the contractor had installed the materials supplied.

As noted in a recent Distressing Matters post, the United States Supreme Court in In re Jevic Holding Corp. held that debtors cannot use structured dismissals to make payments to creditors in violation of ordinary bankruptcy distribution priority rules.

In a May 2, 2017 decision, the Sixth Circuit Court of Appeals decided the fate of a stream of rental payments from the bankrupt owner of a residential complex. (In re: Town Center Flats, LLC, No. 16-1812, May 2, 2017, Sixth Circuit Court of Appeals) The case resembled a similar one, far more controversial and with a different result, from 1993. (Octagon Gas Systems, Inc. v. Rimmer, 995 F.2nd 948, 10th Circuit Court of Appeals, 1993) The Octagon Gas case roiled the factoring and receivables purchasing industry.

The Essential Resource for Today's Busy Insolvency Professional

The International Scene

George W. Shuster, Jr. WilmerHale Boston and New York

Benjamin W. Loveland WilmerHale Boston

George Shuster is a partner with WilmerHale in its Boston and New York offices. Benjamin Loveland is counsel in the firm's Boston office.

By George W. Shuster, Jr. and Benjamin W. Loveland

Upside Down in Chapter 15

Can U.S. Entities Qualify as "Foreign" Debtors in the U.S.?

Marsh Supermarkets Holding, LLC, and 15 of its affiliates, has filed for chapter 11 bankruptcy protection in the United States Bankruptcy Court for the District of Delaware (Lead Case No. 17-11066-BLS). The petition lists between $0 and $50,000 in assets and between $50 and $100 million in liabilities.

Practitioners Beware: When a client located in the state in which you practice law is served with a subpoena from a federal court located in another state, only the relevant federal court in your state (whether district or bankruptcy court) can adjudicate a motion to quash or otherwise modify the subpoena. A recent decision from a Colorado bankruptcy court, In re SBN Fog Cap II, LLC, 562 B.R. 771 (Bankr. D. Colo.