Although it has been described as an “extraordinary remedy,” the ability of a bankruptcy court to order the substantive consolidation of related debtor-entities in bankruptcy (if circumstances so dictate) is relatively uncontroversial, as an appropriate exercise of a bankruptcy court’s broad (albeit nonstatutory) equitable powers. By contrast, considerable controversy surrounds the far less common practice of ordering consolidation of a debtor in bankruptcy with a nondebtor.

Last month, the United States Court of Appeals in two separate circuits held that liability insurers have standing as parties in interest to appear and be heard in an insured's Chapter 11 case where the insurer might be liable to indemnify the claims of the insured's creditors.

In two recent decisions, the United States Bankruptcy Court for the Southern District of New York has interpreted narrowly certain of the Bankruptcy Code’s safe harbor provisions.  

ReGen Capital I, Inc. v. UAL Corporation, et al., (In the Matter of UAL Corporation, et al.), 635 F.3d 312 (7th Cir. 2011).

CASE SNAPSHOT

Mata, et al., v. Eclipse Aerospace, Inc. (In re AE Liquidation, Inc., et al.) Case No. 08-51891, 2011 BL 51047 (Bankr. D. Del. Feb. 28, 2011)

CASE SNAPSHOT

Introduction

Most employers know that it is unlawful to terminate the employment of or to discriminate against an individual who has previously filed bankruptcy because of his or her status as a debtor in a bankruptcy proceeding. A recent Federal Court of Appeals decision, however, highlights the distinction between denying employment to an individual based on prior bankruptcy filing and terminating the individual’s employment because of it.

Last month, the Chapter 7 trustee (the "Trustee") in the Viashow bankruptcy filed avoidance actions against several creditors of the bankruptcy estate.  One avoidance action in particular seeks to recover damages allegedly sustained by Viashow due to breaches of fiduciary duties by its officers and directors (the "D&O Action").  In addition to Viashow's officers and directors, the D&O Action seeks damages against defendants who allegedly "aided and abetted" the officers and directors in their breach.  

The United States Bankruptcy Court for the District of Delaware recently dismissed equitable subordination and fraudulent transfer claims filed by the Official Committee of Unsecured Creditors of Champion Enterprises, Inc.

Summary

In a 14 page opinion published June 7, 2011, Judge Carey ruled that publication of notice in only two newspapers was insufficient information to grant a motion to dismiss based on adequacy of notice. Judge Carey’s opinion is available here (the “Opinion”).

Background