With the economic crisis leading to the failure of many businesses, bankruptcy cases are on the rise. In many of the cases grabbing headlines, such as Lehman Brothers, Nellson Nutraceutical, New Century and SemCrude, courts have shown a willingness to appoint examiners to investigate, report on and make recommendations regarding possible issues of mismanagement, fraud or other improprieties relating to the affairs of the debtor or its former or current management.

Last week, the Supreme Court issued its decision in Travelers Indemnity Co. v. Bailey,2 establishing an important precedent concerning the ability of bankruptcy courts to release claims against third party non-debtors in chapter 11 plans of reorganization. In the June 2009 issue of Cadwalader’s Restructuring Review newsletter, we introduced this case and considered the potential implications of a ruling on this important but unsettled topic.

Oil and gas producers in Texas and a handful of other states have had the comfort of believing that they held purchase money security interests against the production in the hands of first purchasers and proceeds of that production. Now, the law supporting that belief has come under fire.

Under section 363(f) of the bankruptcy code, a trustee may sell assets of the bankruptcy estate free and clear of liens and other interests. Generally, absent consent of the lienholder, a trustee may only sell assets free and clear of liens under one of the following conditions:

The bankruptcy case of the City of Vallejo, Calif., the largest chapter 9 case filed since the Orange County case 15 years ago, continues to produce significant decisions on issues of first impression. First, following a lengthy trial, the Bankruptcy Court for the Eastern District of California, where the City's case is pending, found that the City met all of the qualifications necessary to be a municipal debtor under chapter 9. In re City of Vallejo, 2008 WL 4180008 (Bankr. E.D. Cal. Sept. 5, 2008).

On June 10, 2009, the sale of substantially all of Chrysler's assets closed, just 42 days after the country's third largest automaker filed for bankruptcy protection. The closing followed a contentious sale hearing before the Bankruptcy Court, an expedited appeal to the Second Circuit Court of Appeals and a brief stay imposed by the United States Supreme Court. The source of the contention: three Indiana state pension funds, arguing that the sale of Chrysler's assets constituted a sub rosa plan of reorganization that upended the priority scheme of the Bankruptcy Code.

On Friday, the new General Motors (GM) began operations with a new corporate structure, and is now primarily owned by the governments of the U.S., Canada and Ontario, along with the UAW Retiree Medical Benefits Trust. The result of an asset sale approved by the bankruptcy court on July 5, the new GM will narrow its focus to four core brands (Chevrolet, Cadillac, Buick and GMC). Also, the number of U.S.

The court overseeing the chapter 11 bankruptcy cases of Lehman Brothers Holdings Inc. and various subsidiaries (the “Debtors”), has entered an order establishing deadlines and procedures for filing claims against the Debtors. In terms of procedural requirements, the order places unusual burdens on parties whose claims are based on derivative contracts and guarantees.

A Virginia bankruptcy court has issued a decision that should be a major eye-opener for any entity that engages in tax-free exchanges under section 1031 of the Internal Revenue Code.

The U.S. Court of Appeals for the Fifth Circuit has issued a case useful for credit bidders that successfully bid on their own collateral at a bankruptcy sale, which goes forward without a specific agreement "carving out" expenses. Borrego Springs Bank N.A. v. Skuna River Lumber L.L.C., (In re Skuna River Lumber, LLC), 564 F.3d 353 (5th Cir. 2009).