Zone of Insolvency

Zone of Insolvency

Category Archives: U.S.

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Eleventh Circuit rules doctrine of equitable mootness applies in chapter 9

Posted in U.S.
On August 16, 2018, the United States Court of Appeals for the Eleventh Circuit issued an opinion in the chapter 9 case of Jefferson County, Alabama, reversing the decision of the District Court and ruling that the doctrine of equitable mootness applies in municipal bankruptcies. In Jefferson County’s chapter 9 case, the bankruptcy court confirmed… Continue Reading

In a 5-4 decision, SCOTUS levels the retail playing field

Posted in U.S.
Brick and mortar retail businesses have been experiencing financial distress, with retail defaults at an all time high. In 2018 alone, there have been over a dozen retailers filing for bankruptcy protection, several of which, including Toys “R” Us and The Bon-Ton Stores, have been forced to liquidate. However, while many traditional “mall tenants” and… Continue Reading

SCOTUS Determines That 546(e) Safe Harbor Does Not Protect Transfers Where Financial Institution Is A Mere Conduit

Posted in U.S.
In a decision significantly impacting the ability of a plaintiff to prosecute avoidance actions, the United States Supreme Court, in Merit Management Group, LP v. FTI Consulting, Inc., 583 U.S. ___ (2018), unanimously held that a transfer of funds, where a financial institution served as a mere conduit, does not entitle the recipient of the… Continue Reading

First Circuit Weighs in on Scope of Intellectual Property Protected by Bankruptcy Code Section 365(n)

Posted in U.S.
In a decision last month, the First Circuit maintained the relatively narrow scope of protection provided to intellectual property licensees upon rejection of a license in bankruptcy. Focusing on the statute’s language, the court of appeals held that Bankruptcy Code section 365(n) fails to protect either a trademark license or exclusive distribution rights of a… Continue Reading

So. Cal. Luxury Real Estate Developer Woodbridge Group Files Chapter 11 Case

Posted in U.S.
Woodbridge Group of Companies, a luxury real-estate developer, filed for chapter 11 reorganization on December 4, 2017.  Woodbridge and its 200-plus affiliates operated a sprawling, complex real estate enterprise that focused on the acquisition and development of high-end properties. Although the company estimates the value of its properties to be nearly $1 billion, it asserts it… Continue Reading

Second Circuit Adopts “Efficient Market” Approach to Calculate Cramdown Interest

Posted in U.S.
Last week, the Second Circuit established an “efficient market”-based approach for calculating cramdown interest rates. Adopting a test established by the Sixth Circuit, the Second Circuit held that courts must apply a market interest rate where an efficient market exists. See Momentive Performance Materials Inc. v. BOKF, NA (In the Matter of: MPM Silicones, L.L.C.),… Continue Reading

Good News/Bad News in Keeping Affiliates out of Bankruptcy

Posted in U.S.
A bankruptcy filing by one company does not necessarily mean that its affiliates will also file for bankruptcy. It is common for a financially distressed company to file for bankruptcy while its financially sound affiliates continue business operations in the ordinary course. The bad news, however, is that a court may disregard a company’s decision not… Continue Reading

Lenders Beware: Diligence Needed to Protect that Guarantee Claim From Substantive Consolidation in Bankruptcy

Posted in U.S.
Last month, the Bankruptcy Court for the Southern District Of New York overruled an objection to proposed substantive consolidation provisions included in the plan of reorganization for Republic Airways Holdings Inc. See In re Republic Airways Holdings Inc., 565 B.R. 710 (Bankr S.D.N.Y. 2017). The bankruptcy court’s ruling provides a good refresher on the requirements… Continue Reading

SCOTUS Ends Structured Dismissals that Circumvent Priority Rules

Posted in U.S.
Earlier today, in Czyzewski v. Jevic Holding Corp., the Supreme Court put an end to “structured dismissals” that allow a debtor to leave bankruptcy while circumventing the Bankruptcy Code’s creditor payment priority scheme. A Chapter 11 debtor generally has three options for exiting bankruptcy: (1) a confirmed plan of reorganization (or liquidation); (2) conversion to… Continue Reading

Appeals Court Strengthens Protections for Bankruptcy Committee Members

Posted in Bankruptcy Courts, U.S.
Serving on a court-appointed bankruptcy committee can come with many benefits, and the list just got a little longer. In Blixseth v. Brown, the Ninth Circuit held that committee members enjoy some of the same protections as trustees when it comes to potential attacks for actions taken during a bankruptcy case. Applying the Barton doctrine,… Continue Reading

Delaware Bankruptcy Court Limits Access to Emails in Cross-Border Bankruptcy Case

Posted in U.S.
A recent decision by Judge Sontchi in the Bankruptcy Court for the District of Delaware casts some light on the methods that representatives of non-U.S. debtors can—and can’t—use to track down those who owe such debtors money. The Representatives of the Irish liquidation proceeding for Irish Bank Resolution Corporation Limited (“IBRC”) obtained recognition of the… Continue Reading

Bankruptcy Court Authorizes Hellas II Liquidators to Proceed with Claims against Apax, TPG and Others

Posted in U.S.
Chadbourne & Parke LLP currently represents the English liquidators of Hellas Telecommunications (Luxembourg) II SCA, a company that formerly owned one of the largest mobile phone operators in Greece. On behalf of the English liquidators, in 2012 Chadbourne obtained an order from the US Bankruptcy Court from the Southern District of New York granting Chapter… Continue Reading

Narrow Means Narrow

Posted in U.S.
On May 26, 2015, the Supreme Court of the United States (SCOTUS) decided Wellness International Network, Ltd. v. Sharif—another case addressing issues raised in the wake of the Court’s “narrow” Stern v. Marshall decision. While the case clarified some of the jurisdictional issues raised by litigants post-Stern, many issues remain and each Justice seems more… Continue Reading

Difficulties in Pursuing Non-Bankruptcy Litigation in Bankruptcy Court

Posted in U.S.
When a defendant in a lawsuit files for bankruptcy, the bankruptcy court will not necessarily have jurisdiction over the pending litigation. The court must determine that the case is either “core” or “related” to the bankruptcy. In Ammini v. Labgold (In re Labgold), Case No. 14-01043, decided on June 16, 2015, the Bankruptcy Court for… Continue Reading

In re Nobel Group, Inc.: Just Kidding–The Bankruptcy Court Doesn’t Really Have Jurisdiction After All

Posted in U.S.
In Nobel Group, Inc. v. Cathay Bank (In re Nobel Group, Inc.), the Bankruptcy Court for the Northern District of California reviewed the scope of its jurisdiction post-confirmation and held that, notwithstanding plan provisions stating the contrary, the court did not have jurisdiction over the reorganized debtor’s claims asserted against its previously secured creditor.… Continue Reading

Non-Consensual Third-Party Releases: Eleventh Circuit Joins “Pro-Release” Majority

Posted in U.S.
Circuit courts are divided as to whether provisions of a bankruptcy plan of reorganization may release a non-debtor from creditors’ claims over the objection of a non-consenting creditor (i.e. non-consensual third-party releases). A majority of courts will permit non-consensual third-party releases under certain limited circumstances. This issue has been in the news recently with speculation that… Continue Reading

Think You Have a “Good Faith, for Value” Defense? Value to Creditors is the Key!

Posted in U.S.
Fraudulent transfer statutes were enacted to protect creditors from improper depletion of a debtor’s assets.  They generally accomplish this goal by allowing creditors (or a bankruptcy estate representative) to avoid transactions that are either actually or constructively fraudulent as to creditors, and to recover some or all of the proceeds of the transaction.  For example,… Continue Reading

“Deepening Insolvency” Staggers On

Posted in U.S.
The Third Circuit Court of Appeals recently passed on a chance to join numerous other federal and state jurisdictions in rejecting “deepening insolvency” as an independent tort, leaving the doctrine weakened, but still technically viable in the significant bankruptcy arena. However, in In re Lemington Home for the Aged, the Court did strongly indicate that… Continue Reading

Don’t Forget to Object!

Posted in U.S.
On January 23, 2015, the Eleventh Circuit recognized the res judicata effect of provisions contained in a bankruptcy plan of reorganization that released all claims against a third-party guarantor. In deciding In re FFS Data, Inc., the court examined (i) the plain language of the plan provisions to determine whether a particular claim was included… Continue Reading