HIGHLIGHTS:

Overview

In Asarco, LLC v. Noranda Mining, Inc., the Tenth Circuit Court of Appeals held that representations made to the bankruptcy court that the Debtor’s settlement of environmental claims reflected only the Debtor’s share of the cleanup costs did not judicially estop the Debtor from brining a contribution claim against another potentially responsible party for those same costs.

Can a bankruptcy court order the “structured dismissal” of a Chapter 11 case if such dismissal would alter the ordinary priority rules for creditor distributions under the Bankruptcy Code? In Czyzewski v. Jevic Holding Corp., 580 U.S. (March 22, 2017) (Jevic), the Supreme Court recently determined that such an order cannot issue without consent from all affected creditors even in “rare cases in which courts could find sufficient reasons to disregard priority.”

The U.S. Court of Appeals for the Ninth Circuit recently reversed the dismissal of a Fair Debt Collection Practices Act claim arising out of a non-judicial foreclosure. The Ninth Circuit ruled that section 1692f(6) of the FDCPA applies to non-judicial foreclosure activity.

A copy of the opinion in Dale Dowers v. Nationstar Mortgage, LLC is available at: Link to Opinion.

Traditional DIP Order Carve Outs Do Not Cap the Administrative Claims of Committee Professionals

The United States Supreme Court (the “Court”) recently issued a long-awaited decision in Czyzewski v. Jevic Holding Corp. (“Jevic”), which limits the use of “structured dismissals” in Chapter 11 bankruptcy cases, requiring structured dismissals pursuant to which final distributions are made to comply with the Bankruptcy Code’s priority scheme, or the consent of all affected parties to be obtained.1

What is a Structured Dismissal?

In Nortel Network’s (“Nortel”) chapter 11 case, In re: Nortel Networks Inc., et al., United States Bankruptcy Court for the District of Delaware, Case No. 09-10138(KG), Bankruptcy Judge Kevin Gross recently reduced the Indenture Trustee’s counsel fees by $913,936.00 in response to heavily litigated objections to the fees by noteholders, Solus Alternative Asset Management LP (“Solus”) and PointState Capital LP (“PointState”) (collectively the “Objecting Noteholders”).

Background: Professionals’ Fees in Chapter 11 cases

When faced with a recalcitrant debtor, clients sometimes move too quickly to put the debtor into an involuntary bankruptcy, especially when fraudulent transfers and other creditor avoidance attempts become apparent. But creditors considering filing or joining in the filing of an involuntary bankruptcy petition, and the attorneys that represent them, have much to deliberate before becoming involved in an involuntary bankruptcy filing.

In Pacifica L 51 LLC v. New Investments, Inc. (In re New Investments, Inc.), 840 F.3d 1137 (9th Cir. 2016), the Ninth Circuit Court of Appeals held that Section 1123(d) of the Bankruptcy Code provides that a cure amount may include a post-default rate of interest if the underlying loan documents and applicable non-bankruptcy law provide for the payment of post-default rate interest upon a default.