Source: http://blogs.harvard.edu/bankruptcyroundtable/tag/richard-levin/
Timestamp: 2019-04-22 21:24:22+00:00

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The bankruptcy courts and their appellate courts continue to explore issues of interest to practitioners and academics. This quarterly summary of recent developments in bankruptcy law covers cases reported during the first quarter of 2018.
Most notable were two Supreme Court decisions. Merit Mgmt. Group, LP. v. FTI Consulting, Inc. substantially reduced the scope of the financial contracts avoiding power safe harbor by directing courts to focus on the ultimate recipient of the transfer, rather than on the intermediate financial institutions who participated in the transfer. Village at Lakeridge ducked the substantive bankruptcy law issue of the standard for determining who is a non-statutory insider (although the dissent tackled it) and instead ruled only on the appellate standard of review of such determinations.
Moving in the opposite direction from the Supreme Court’s reduction of safe harbor protections, the New York district court, on an appeal from the bankruptcy court’s decision, gave a broad reading to the ability of swap counter-parties under section 560 to close out and distribute collateral upon a default. (Lehman Bros.).
The Ninth Circuit took a strong position on the open question in the application of section 1129(a)(10), requiring an impaired consenting class for confirmation, adopting the “per-plan” approach. (Transwest) And the Fourth Circuit gave another boost to reorganizing real estate debtors by permitting a bankruptcy court to value collateral in a partial “dirt-for-debt” plan. (Bates Land).
In a case largely of first impression, the Texas bankruptcy court proposed rules to apply the “single satisfaction” rule of section 550(d) when the trustee settles with some but not all defendants. (Provident Royalties).
During the first quarter, the bankruptcy courts also expanded the reach of chapter 15 and its effectiveness. (Manley Toys, B.C.I. Finances Pty Ltd., Energy Coal S.P.A., Avanti, and Platinum Partners).
The bankruptcy courts and their appellate courts continue to explore issues of interest to practitioners and academics. This quarterly summary of recent developments in bankruptcy law covers cases reported during the fourth quarter of 2017.
The Eleventh Circuit was particularly noteworthy, holding that an individual debtor may recover attorneys’ fees for litigating a damages claim for a stay violation, including fees on appeal (Mantiply v. Horne) and, perhaps more ominously, that a chapter 13 confirmation order is not binding on a creditor who does not object to confirmation but has filed a stay relief motion and that state forfeiture laws may remove property from the estate while the case is pending (Title Max v. Northington). A rehearing motion has been filed in the latter case.
The bankruptcy courts and their appellate courts continue to explore issues of interest to practitioners and academics. This quarterly summary of recent developments in bankruptcy law covers cases reported during the first quarter of 2017.
Cases of note include the Supreme Court’s decision in Czyzewski v. Jevic Holding Corp., prohibiting a structured dismissal that includes priority-skipping distributions over the objection of holders of claims in the skipped class.
Two bankruptcy courts used various powers to impose harsh sanctions on two different banks for even harsher misbehavior. In re Sundquist imposed actual damages of $1 million and punitive damages of $45 million against Bank of America for a sustained campaign of stay violations, harassment, misinformation, and recalcitrance against homeowners who suffered serious medical and emotional damages as a result. In characterizing the bank’s action, the court began its opinion, “Franz Kafka lives.” Following a new concept in imposing punitive damages, the court directed $40 million of the award to various nonprofit institutions rather than to the homeowners. In In re Kraz, LLC, the court imposed actual and consequential contract damages for a bank’s repeated tendering of a false estoppel certificate (payoff demand) but denied punitive damages for lack of a tort to which to attach them.
The bankruptcy courts and their appellate courts continue to explore issues of interest to practitioners and academics. This quarterly summary of recent developments in bankruptcy law covers cases reported during the second quarter of 2016.
Cases of note include the Supreme Court’s invalidation of Puerto Rico’s homegrown restructuring statute and its surprising conclusion that an individual debtor’s debt to his corporation’s creditor might be nondischargeable for “obtain[ing] money or property” by “actual fraud” where the corporation transferred away property in an actual fraudulent transfer.
The Second Circuit upset GM’s 2009 bankruptcy sale by granting some ignition switch plaintiffs an exemption from the free and clear ruling because they didn’t have a chance to participate in sale process negotiations. The debate over whether the Code’s financial contracts safe harbor preempts creditors’ claims under state fraudulent transfer laws continues with a Delaware decision ruling against preemption.
A Delaware bankruptcy court (following a recent Illinois decision) invalidated an LLC agreement provision that allowed a creditor to veto a bankruptcy filing. In a boost for litigation funding, a Florida bankruptcy court found that communications with the funder might be subject to the common interest privilege.
And in a decision that should send shudders down the spine of every consumer bankruptcy lawyer, the Ninth Circuit BAP held that a chapter 7 trustee may reject a debtor’s prepaid retainer agreement with his lawyer to defend dischargeability litigation and recover “unused” fees.
We at the Bankruptcy Roundtable will take a break from posting for the next few weeks in August and hope that you too will be able to get away from your desk at work. We’ll be back after Labor Day.
While chapter 11 facilitates prepackaged plans that substantially reduce the cost, expense, and disruption of an ordinary chapter 11 case, it can still be an expensive and cumbersome process compared to an out-of-court workout. Recent court decisions under the Trust Indenture Act (Marblegate Asset Mgmt. v. Education Mgmt. Corp., — F. Supp. 3d —, No. 14 Civ. 8584, 2014 U.S. Dist. LEXIS 178707 (S.D.N.Y. Dec. 30, 2014), and Meehancombs Global Opportunities Funds, L.P. v. Caesars Entertainment Corp., — F. Supp. 3d —, No. 14 Civ. 7091 (SAS), 2015 U.S. Dist. LEXIS 5111 (S.D.N.Y. Jan. 15, 2015), can be viewed as making out-of-court restructurings involving bonds covered by the TIA by a less than unanimous bondholder vote more difficult than previously thought by requiring affected lenders’ unanimous consent to an out-of-court workout.
The NBC has prepared proposed legislation that would facilitate court supervision of bond restructurings under a new chapter 16 of the Bankruptcy Code. The proposal is a result of the NBC’s Committee to Rethink Chapter 11, a project that the NBC initiated in 2009 to examine how chapter 11 could be modernized to accommodate substantial changes in finance, economics, and law since it was first adopted in 1978. Chapter 16 proposes a middle ground, preserving both the flexibility of chapter 11’s collective action and super-majority voting rules for a workout involving only borrowed money and court supervision of the process to protect the minority while reducing the expense and complexity of using chapter 11’s prepackaged plan process.
For the full proposal, see here.

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