Shareholders Beware! -- In Light of Circuit Split, Venue May be Critical in Determining Whether Shareholders Who Sell Their Shares of a Company in a Leveraged Buyout are Protected from Subsequent Avoidance Actions in a Bankruptcy Case
October 9, 2008
Gwendolyn J. Godfrey
Wendy L. Hagenau
Section 546 of the Bankruptcy Code expressly provides certain limitations on the avoiding powers of a trustee in a bankruptcy case. In particular, section 546(e) prohibits a trustee from avoiding a transfer that is a settlement payment made to a financial institution, except for transfers that are made with actual intent to defraud the debtor. Essentially, 546(e) is a “safe harbor” provision for transactions that would otherwise be regulated by securities laws—which generally strive to limit transactions that disrupt the market of buying and selling securities.
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Post-Confirmation Litigation – Be Careful to Describe Your Litigation or it Will be Lost - 09/08
Bankruptcy & Financial Restructuring
September 3, 2008
Keith Miles Aurzada
On August 12, 2008, the Fifth Circuit Court of Appeals decided the case of United Operating, LLC. The case sets forth the standard for preserving post-confirmation litigation under a plan of reorganization. In this case, the Fifth Circuit held that post-confirmation litigation must be adequately described in the disclosure statement or the standing to sue is waived.
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Loose Lips Sink Ships and Other Fraudulent Conveyance Lessons - 02/28/08
Bankruptcy & Financial Restructuring
February 28, 2008
Wendy L. Hagenau
Two recent cases involving fraudulent conveyance actions brought under section 548 of the Bankruptcy Code demonstrate the importance of words spoken and written by the parties contemporaneously with the transaction.
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Amendments to the Bankruptcy Rules Became Effective Dec. 1, 2007
Bankruptcy & Financial Restructuring
December 10, 2007
As of December 1, 2007, amendments to the Federal Rules of Bankruptcy Procedure became effective. The amendments discussed below concern commercial bankruptcy cases and serve to facilitate the efficient administration of such cases.
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Beware of Changing Credit Terms on the Eve of Your Customer's Bankruptcy - 09/25/07
Bankruptcy & Financial Restructuring
September 25, 2007
Gwendolyn J. Godfrey
Wendy L. Hagenau
Two recently issued decisions may make it more difficult for a preference defendant to establish the ordinary course of business defense when the defendant revises credit terms with a customer having financial difficulty on the eve of the customer's bankruptcy.
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Increasing Your Dividend: Including Attorney's Fees As Part of Your Prepetition Claim - 09/13/07
Bankruptcy & Financial Restructuring
September 13, 2007
Gwendolyn J. Godfrey
E. Penn Nicholson
The Supreme Court has held that a creditor may not be precluded from
including contractual attorney's fees as part of its prepetition claim. In
Travelers Casualty & Surety Co. of America v. Pacific Gas & Electric Co., 127 S.Ct. 1199 (2007), the Court resolved a conflict between the Fourth and Ninth Circuits and held that contractual rights to attorney's fees, if allowed under state law, may be included as part of a creditor's prepetition claim, unless the claim falls under one of the exceptions found in Section 506(b) of the Bankruptcy Code.
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Single Asset Real Estate Cases - Enforcing the Stay May Be Difficult Under the New Bankruptcy Code - 05/10/07
Bankruptcy & Financial Restructuring
May 10, 2007
Keith Miles Aurzada
When Congress recently amended the Federal Bankruptcy Laws, one important change made it more difficult for debtors in single asset real estate cases to maintain the automatic stay without filing a plan of reorganization or making interest payments to secured creditors.
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Healthcare Businesses and the Appointment of a Patient Care Ombudsman in Bankruptcy - 03/14/07
Bankruptcy & Financial Restructuring
March 14, 2007
Wendy L. Hagenau
Under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 ("BAPCPA"), a number of special provisions were enacted for "healthcare businesses". One provision in particular requires the appointment of a patient care ombudsman in a case under chapter 7 (liquidation) or chapter 11 (reorganization) if the debtor is a healthcare business.
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Loan Repayment to Bank Recovered In Bankruptcy As "Outside The Ordinary Course of Business" - 09/29/06
Bankruptcy & Financial Restructuring
September 29, 2006
When Congress recently amended the federal bankruptcy laws, one important change made it easier for creditors to assert the "ordinary course of business" defense to bankruptcy "preference" claims. At least that was the view of many commentators. However, a North Carolina bankruptcy court recently issued an opinion that seemingly makes the defense more difficult to prove.
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Sixth Circuit Denies Bankruptcy Trustee's Attempt
Bankruptcy & Financial Restructuring Group
August 14, 2006
What happens when a real estate mortgage is assigned to a purchaser but the assignment is not recorded until after the borrower files bankruptcy? A bankruptcy trustee in Kentucky claimed the mortgage assignee's security interest was subject to cancellation in bankruptcy. In fact, the bankruptcy trustee further claimed the recording of the mortgage assignment violated the Bankruptcy Code's automatic stay. Fortunately for the assignee, the Sixth Circuit Court of Appeals had a different opinion and rejected the bankruptcy trustee's arguments.
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Roman Catholic Archdioceses In Bankruptcy Cases - Continued Confusion Over Asset Ownership - 07/12/06
Financial Institutions
July 12, 2006
Gerald L. Blanchard
Creditors and Roman Catholic Archdioceses continue to wrestle with the issue of who owns church property and whether individual parishes, schools and cemeteries should be counted as assets of the archdiocese for determining how much to distribute to creditors in Chapter 11 bankruptcy cases. These issues are being litigated in the bankruptcy court which several Catholic Archdioceses have been forced to file due to their inability to pay the claims asserted against them arising from suits brought by individuals who are claiming that they were sexually abused by priests.
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Third Circuit Strikes Down Increase In Pension Plan Benefits As A Fraudulent Transfer Under the Bankruptcy Code - 05/26/06
Bankruptcy & Financial Restructuring
May 26, 2006
The Third Circuit Court of Appeals recently affirmed the avoidance of certain pension plan amendments by an employer as a fraudulent transfer under the Bankruptcy Code. Coming on the eve of the employer's bankruptcy filing, the amendments increased pension benefits as part of a larger employee retention program. However, the court determined the employer did not receive reasonably equivalent value in return for the benefit increases. The decision is important not only for employers that administer pension plans but for any employer that seeks to implement an employee retention program at a time of financial distress.
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Supreme Court Decision Makes State Agencies - 01/26/06
Bankruptcy & Corporate Reorganization
January 26, 2006
A recent 5-4 decision by the Supreme Court of the United States holds that debtors and trustees in bankruptcy may sue state agencies to recover preferential transfers without violating the state's Eleventh Amendment sovereign immunity. This decision suggests that states and state agencies are not immune from being sued in bankruptcy court over core bankruptcy matters.
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Things That Creditors of Delta Airlines And Northwest Airlines Should Consider In Regard To Their Bankruptcy Filings - 09/16/05
Bankruptcy & Corporate Reorganization
September 16, 2005
Gerald L. Blanchard
Wendy L. Hagenau
Robert M.D. Mercer
E. Penn Nicholson
Much of the attention surrounding the news of the recent Chapter 11 bankruptcy filings by Delta Airlines, Inc. and Northwest Airlines Corporation (collectively, the "Airlines") has focused on the potential impact upon the traveling public and the Airlines' own operations. However, there are numerous creditors who will be impacted significantly by the filing, including vendors and suppliers of goods and services to the Airlines, and parties who have contracts with the Airlines. Depending upon a creditor's particular situation and relationship with the Airlines, there are certain important bankruptcy issues that merit consideration by creditors.
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Discharge for Certain Corporate Frauds and False Claims Act Claims - 07/11/05
Health Care & Bankruptcy
July 11, 2005
Wendy L. Hagenau
The bankruptcy amendments now provide that a chapter 11 (reorganization) corporate debtor cannot receive a discharge for debts which arose as a result of false pretenses, a false representation or actual fraud or the use of a written statement that is materially false respecting the debtor's or an insider's financial condition which the debtor caused to be made or published with intent to deceive and on which the creditor to whom the debtor is liable reasonably relied.
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Sale of Non-Profit Hospitals in Bankruptcy - 06/30/05
Health Care
June 30, 2005
Wendy L. Hagenau
It is not uncommon in a bankruptcy case for the debtor to sell its assets, either as part of a plan of reorganization or liquidation or pursuant to section 363 of the Bankruptcy Code. The Bankruptcy Code provides that such a sale occurs after notice to all creditors and an opportunity for a hearing.
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New Bankruptcy Amendments Affect Medicare - 06/17/05
Health Care
June 17, 2005
Wendy L. Hagenau
For most healthcare businesses, Medicare reimbursement is a lifeline. Any termination or interruption in Medicare payments causes severe financial difficulty for the healthcare business.
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Ensuring Notices are Properly Sent by a Debtor - 06/06/05
Bankruptcy Law
June 6, 2005
Wendy L. Hagenau
Part 2 of this six-part series on the new amendments to the Bankruptcy Code.
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Supreme Court of Georgia Ruling Allows Companies in Bankruptcy to Pierce their own Corporate Veils to Impose Liability for Company Debts on their Controlling Shareholders - 05/13/05
Securities, Corporate & Fiduciary Litigation
May 13, 2005
Thomas S. Richey
A new Supreme Court of Georgia decision has expanded the potential liability of shareholders of bankrupt Georgia corporations by allowing corporations to "pierce their own corporate veil" and seek to impose liability for their debt on controlling shareholders. Moreover, such claims belong exclusively to the debtor-corporation when it is in bankruptcy and cannot be pursued independently by creditors. The court also ruled that a shareholder who abuses the corporate form can be held liable to the corporation for all its debts.
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Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 Enacted -04/21/05
Bankruptcy & Corporate Reorganization
April 21, 2005
Gerald L. Blanchard
Wendy L. Hagenau
Robert M.D. Mercer
E. Penn Nicholson
On April 20, 2005, President Bush signed into law the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. While the amendments on the "consumer" side have received the most popular press, numerous amendments to the Bankruptcy Code will impact creditors and operators of businesses in various ways.
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President Bush Signs Bankruptcy Amendments For Individuals Seeking Bankruptcy Relief - 04/20/05
Bankruptcy & Corporate Reorganization
April 20, 2005
Gerald L. Blanchard
On April 20, 2005, President Bush signed into law the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. The new law makes substantial amendments to the availability of bankruptcy relief for consumers.
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Several Courts Find That Letters Of Credit Which Were Used To Secure Lease Obligations Under Real Property Leases Are Subject To The Damages Cap Under 11 U.S.C. § 502(B)(6) - 09/13/04
Bankruptcy & Real Estate
Wendy L. Hagenau
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