Today, the Supreme Court of the United States issued its much awaited decision in RadLAX Gateway Hotel, LLC v. Amalgamated Bank, 566 U.S. ______ (2012). The noteworthy decision resolves any uncertainty surrounding a secured creditor’s right to credit bid in a sale under a chapter 11 plan which arose after cases like Philadelphia Newspapers 599 F.3d 298 (3d Cir. 2010) curtailed the right.

In a unanimous decision, the U.S. Supreme Court held that debtors may not obtain confirmation of a Chapter 11 cramdown plan that provides for the sale of collateral free and clear of a creditor’s lien but does not permit the creditor to credit-bid at the sale. InRadlax Gateway Hotel, LLC et al. v.

A purchaser of assets from a debtor in bankruptcy may not be able to rely entirely on bankruptcy court approval of the sale to bar a claim arising long after the sale and based on a claimed defect in a product sold by the debtor years prior to its bankruptcy.

Although bankruptcy court sale orders routinely shield asset purchasers from successor liability claims, that protection is not unlimited, particularly where a claimant did not and could not have received notice of the sale.

On May 15, 2012, the United States Court of Appeals for the Eleventh Circuit issued an opinion in the TOUSA, Inc.

On May 15, 2012, the Eleventh Circuit Court of Appeals upheld a ruling by the U.S. Bankruptcy Court for the Southern District of Florida, which required certain lenders to return $403 million in prepetition payments they had received from TOUSA, Inc.

The United States Court of Appeals for the Eleventh Circuit, on May 15, 2012, reversed a district court's February 2011 decision that lenders were not liable on a fraudulent transfer claim. In re TOUSA, Inc., ___ F.3d ___, 2012 U.S. App. LEXIS 9796 (11th Cir. 5/15/12).^[1] It rejected the district court's finding that corporate subsidiaries had received "reasonably equivalent value" when they encumbered their assets to secure a loan made to them and their corporate parent.

Sleep better at night knowing that the loan you made to your borrower is supported by collateral from the borrower’s subsidiaries? You may want to keep one eye open. On May 15, 2012, the U.S. Court of Appeals for the Eleventh Circuit upheld a bankruptcy court opinion that reinforces lender liability for fraudulent transfers in subsidiary-supported loans. The Eleventh Circuit upheld the opinion of the U.S. Bankruptcy Court for the Southern District of Florida in In re TOUSA, Inc., and overruled a contrary opinion by the U.S. District Court.

On May 15, 2012, the Court of Appeals for the Eleventh Circuit affirmed two key rulings made by a Florida Bankruptcy Court in the long-running bankruptcy case of TOUSA, Inc., once one of the largest homebuilders in the country. The Bankruptcy Court had avoided—as fraudulent transfers—the liens granted by TOUSA’s subsidiaries (the Subsidiaries) to new lenders (the New Lenders) that provided $500 million in financing for TOUSA to payoff debt that was owed by TOUSA, but not the Subsidiaries, to then existing lenders (the Old Lenders).

Clients often raise questions concerning the enforceability of arbitration clauses in bankruptcy proceedings. While this topic has been hotly debated for many years, a recent Ninth Circuit opinion, In re Thorpe Insulation Co., 671 F.3d 1011 (9th Cir. 2012), reminds us that arbitration clauses are not sacrosanct and can be struck down by the court.

In In re Crane, the Bankruptcy Court for the Central District of Illinois recently held that a mortgage can be avoided in bankruptcy if it fails to include the maturity date and the interest rate of the underlying debt within the mortgage document. The court found that failing to include these loan terms on the face of the mortgage as recorded, violated the requirements of Illinois conveyancing statutes, and therefore did not provide the constructive notice to the trustee necessary for preventing the avoidance.