The United States District Court for the Southern District of Ohio, applying Ohio law, has held that an insurer could rescind an insurance policy based on an individual's fraudulent statements that the insured company was not facing bankruptcy. Unencumbered Assets Trust v. Great Am. Ins. Co., 2007 WL 2029063 (S.D. Ohio July 10, 2007).

The U.S. Court of Appeals for the Eleventh Circuit held on July 26, 2007, that a bankruptcy court properly calculated an investment bank's advisory fee under a reasonableness standard. In re Citation Corp., ___ F.3d ___ 2007 WL 2128165 (July 26, 2007).

The U.S. Court of Appeals for the Third Circuit has issued a recent decision that is instructive as to what creditors should not do when a customer is having a hard time paying its bills.

A recent decision from the Bankruptcy Court of the Southern District of New York has rendered the enforcement of reclamation claims that arose 20 days prior to the bankruptcy filing almost impossible in cases in which there is a prepetition lien on inventory.

In In re Dana Corp., 2007 WL 1199221 (Bankr. S.D.N.Y. Apr. 19, 2007) there was $300 million in reclamation claims asserted, but the debtor estimated that valid reclamation claims totaled only approximately $3 million.

The U.S. Court of Appeals for the First Circuit has held that a debtor’s interest in its liquor license constitutes property of the estate pursuant to section 541 of the Bankruptcy Code.

The First Circuit further held that the debtor’s rejection of its lease ended the debtor’s contractual right to continued use of its liquor license, and left the landlord with ordinary remedies for breach of contract—such as specific performance to obtain recovery of the license. See In re Ground Round, Inc. (Abboud v. Ground Round), 482 F.3d 15 (1st Cir. 2007).

Lenders take note—a state court has held that in some circumstances a refinancing transaction can extinguish an original guarantee.

One week after Aegis Mortgage Corp. filed for chapter 11 in Delaware, a group of former employees filed their complaint seeking class certification over allegations that Aegis Mortgage Corporation, Aegis Wholesale Corporation and Cerberus Capital Management, L.P.—all allegedly acting as their employer—violated the Worker Adjustment and Retraining Notification (WARN) Act when they failed to give over 400 employees 60 days' notice prior to a mass termination by Aegis Mortgage on August 7, 2007.

In Diamond Z Trailer, Inc. v. JZ, LLC (In re JZ, LLC), No. 07-1011 (9th Cir. B.A.P., June 18, 2007), the Ninth Circuit Bankruptcy Appellate Panel affirmed a Bankruptcy Court decision holding that an unscheduled executory contract rides through the bankruptcy if not assumed or rejected during the bankruptcy. Further, a debtor has standing to sue for a breach of that executory contract when the breach occurred after the closure of the bankruptcy case.

Another court ruling on a missed bar date highlights the importance of ensuring your rights are protected. Failure to comply with a deadline to file a claim can have catastrophic consequences.

Summary: As of July 1, 2007, Tennessee has a "new" statute on mechanics' and materialmen's liens. The new statute is the culmination of several years of effort on the part of a special committee of the Tennessee Bar Association (TBA). While the new statute replaces the old statute in its entirety, the new statute incorporates many of the provisions of the old statute. As a result, the new statute did not result in the drastic change in the law that the TBA committee originally envisioned.1