October 08, 2015
In our First Quarter Review, we focused exclusively on two hot topics we covered early in the year – our series on the ABI Commission’s report on bankruptcy law reform and our “Drilling Down” series, which explores the issues that can arise in the restructuring of companies in the oil and gas industry. For our Mid-Year Review, we are focusing on the other topics that caught our attention in the first half of 2015.
We continue to see cases address issues that affect debt securities, both in and out of bankruptcy. Our Mid-Year Review discusses the consequences of Chesapeake Energy’s unsuccessful attempt to declare a mulligan on its bond redemption, the LSTA’s advisory on “disqualified institutions,” the Delaware bankruptcy court’s EFIH make whole decision, the appeals from Judge Drain’s Momentive rulings, and a ruling by the Fifth Circuit subordinating claims against a debtor under guarantees of securities issued by an affiliate of the debtor.
We follow that with some entries that discuss issues specific to secured claims, including what is required for an attorney’s charging lien. That entry pairs nicely with the one that addresses the situation in which a creditor’s overly broad description rendered its security interest invalid. On more bankruptcy-focused issues, we have a case in which the bankruptcy court refused to allow the debtor to use a lender’s cash collateral to pay the debtor’s professionals, a Fifth Circuit decision addressing the interplay between sections 363(k) and 1111(b) of the Bankruptcy Code, and a chapter 7 case in which the Seventh Circuit enforced a bar date against a secured creditor. Not to be forgotten, of course, is the SCOTUS decision in Caulkett, another chapter 7 case, dealing with lien-stripping.
Claims – and specifically releases of claims – always generate decisions, and we include here entries that discuss a decision by the Second Circuit rejecting attempts by a class representative to object to a debtor’s plan and opt out of releases in the plan, an Eleventh Circuit decision upholding nonconsensual third party releases, and a decision in the S.D. Tex. where the bankruptcy court had to consider whether it had the authority to order a non-debtor to dismiss a state court lawsuit against a third party.
Of course, we are always on the lookout for confirmation issues, and the first half of the year did not disappoint us, even if various debtors ended up disappointed. We saw a debtor’s attempt to use cramdown fail, SCOTUS rejecting a debtor’s attempt to appeal from an order denying confirmation because it was not a final order, and the Third Circuit refusing to permit a debtor to “clarify” (instead of “modify” under section 1127) a plan post-confirmation.
West Electronics reared its ugly head in a decision involving trademark licensing rights, and we also had a number of decisions that focused on leases. How to apply section 502(b)(6) to cap a landlord’s rejection claims, for example, is always a thorny issue. Moreover, whether a rejection is a breach or a termination may sound like an academic issue, but in the Overseas Shipholding case, the resolution of that issue made a difference.
We have two entries that focus on the automatic stay and where claims should be litigated, including the continuing debate on the effectiveness of a prepetition lien waiver. (And we challenge you to find another blawg that quotes V for Vendetta and Holes, particularly in the same section.)
We also saw two significant decisions on professional fees in bankruptcy, including one from SCOTUS in which the Supreme Court held that professionals could not (at least absent contractual rights) receive compensation for defending their fee applications. On other litigation fronts, we have an entry that discusses a case that demonstrates some of the concerns that arise when a former bankruptcy judge is appointed as a mediator and another that addresses the enforceability of a mediation term sheet when one party to a purported settlement changes its mind. We also deconstruct a Sixth Circuit’s analysis of venue transfer and statute of limitations rules as applied to a case involving a lawsuit filed in North Carolina by a Virginia resident, which was subsequently transferred to Michigan. Got it? We can’t forget Stern, though, with an entry discussing what “de novo review” means in the Sixth Circuit and, of course, SCOTUS’s decision in Wellness, which may be the last time we hear about Stern issues in the Supreme Court for awhile.
It’s always good to add to our knowledge of risks and defenses in the avoidance action arena. An interesting issue we saw was whether a bankruptcy court could invalidate a prepetition lease termination as a fraudulent transfer or preference and whether securitized loan payments are protected by the 546(e) safe harbor. Surprisingly, the ghost of Deprizio made an appearance in the Ninth Circuit, which had to determine whether waiving a right to indemnification on a guaranty shielded an insider guarantor from preference liability. The Seventh Circuit (the actual home of Deprizio) had an avoidance issue of its own, when it considered whether a lender’s forbearance could be considered reasonably equivalent value.
As always, we conclude with our “Best of the Rest.” This time, we have entries on what excuses do (and do not work). Hint: You need to come up with something better than faulty subway directions or an effort to avoid overtime work. While we are on things that you cannot do, add to the list paying off petitioning creditors as a means of dismissing an involuntary petition. We discuss whether social media accounts are property of the estate, include entries from our “Breaking the Code” series on section 109(a) and filing a case for a foreign business, discuss the limits on objecting to a claim on the basis of incomplete documentation, and have another entry in our “Bitcoin Bankruptcy” series (also addressing section 109, but in the context of whether a U.S.-based Bitcoin exchange could be eligible for relief as a debtor under the Bankruptcy Code).
We hope you continue to turn to the Weil Bankruptcy Blog as your primary resource for the most cutting-edge issues in restructuring and bankruptcy.
Enjoy catching up!