The below chart summarizes the modifications to certain protocol and procedures of major US Bankruptcy Courts in light of the recent COVID-19 outbreak. At the moment, the chart includes the US Bankruptcy Courts for the District of Delaware, the Southern District of New York, the Northern District of Illinois, the Eastern District of Virginia, and the Southern District of Texas. Mayer Brown will continue to monitor the situation in the days and weeks to come, and will update the chart accordingly.

BANKRUPTCY COURT

STATUS

ACCESS & ENTRY RESTRICTIONS

On May 4, 2012, the Delaware bankruptcy court inIn re KB Toys, Inc., et al. (KB Toys), handed down a thoughtful decision addressing the issue of whether impairments attach to a claim or remain with its seller. The KB Toys court held that “a claim in the hands of a transferee has the same rights and disabilities as the claim had in the hands of the original claimant. Disabilities attach to and travel with the claim.”

Overview

On November 26, 2019, the US Court of Appeals for the Fifth Circuit held in Ultra Petroleum Corp. v.

On April 19, 2012, the Lehman bankruptcy court handed down its decision on the long-pending motion to dismiss filed by JPMorgan Chase Bank, N.A., in response to Lehman Brothers Holdings Inc.’s $8.6 billion avoidance action against it. The action sought to recover the value of collateral taken by JP Morgan in its role as principal clearing bank to Lehman in the run-up to the Lehman insolvency.

In a decision that reaffirms its previous rulings on the jurisdictional limits of bankruptcy courts, the US Court of Appeals for the Third Circuit recently held in W.R. Grace & Co. v. Chakarian (In re W.R. Grace & Co.)1 that bankruptcy courts lack subject matter jurisdiction over third-party actions against non-debtors if such actions could affect a debtor’s bankruptcy estate only following the filing of another lawsuit.

Taggart v. Lorenzen, No. 18-489

Today, the Supreme Court held 9-0 that a creditor cannot be held in contempt of court for violating a bankruptcy discharge order if there is a “fair ground of doubt” as to whether the order barred the creditor’s conduct.

In the course of the next few weeks, Omega Navigation Enterprises, Inc. and its affiliates (collectively, “Omega”), an international shipping enterprise, will find out if motions by certain of their lenders to, among other things, dismiss Omega’s chapter 11 bankruptcy proceedings have been granted by the U.S. Bankruptcy Court for the Southern District of Texas.¹ If not, then Omega may be permitted to continue its attempt to reorganize its business under chapter 11 of the Bankruptcy Code.

A recent decision by the US District Court for the Southern District of New York regarding the terms of an engagement letter demonstrates the need to clearly articulate the intended purpose and scope of an engagement. As the case described below demonstrates, if there is any ambiguity with regard to whether or not a fee must be paid and/or when an engagement is terminated, the resolution of such ambiguity may depend upon the description of the engagement’s purpose.

Both the First Energy Solutions and PG&E bankruptcies have seen proceedings regarding power purchase and similar agreements (PPAs) that raise this question.

Background

Contracts often contain provisions that enable a party to terminate or modify the contract based on the other party's bankruptcy filing, insolvency or deteriorating financial condition. In general, the Bankruptcy Code renders these types of provisions (sometimes referred to as "ipso facto" clauses) ineffective. Specifically, under section 365(e)(1) of the Bankruptcy Code (emphasis added):