Monthly Archives: September 2011

In re Canopy Financial, Inc., Case No. 11-A-581, 2011 WL 3911082 (N.D. Ill. Sept. 1, 2011)

Fraudulent transfer claims were under review again in Paloian v. American Express Co., (In re Canopy Financial, Inc.), where the Northern District of Illinois held that the bankruptcy court is authorized to hear fraudulent conveyance claims and propose findings of fact and conclusions of law to the district court.

Continue reading

Living Wills: FDIC Modifies, Finalizes Rules

The final rule modifies the prior proposed rule in a number of ways and generally reduces the burden on financial institutions – though the burden remains significant. Continue reading

Special Features – Stern v. Marshall

On June 23, 2011, the Supreme Court issued an opinion in Stern v. Marshall, the well-known case involving the estate of former model Vickie Lynn Marshall (more famously known as Anna Nicole Smith) and the estate of her late husband, wealthy oil magnate J. Howard Marshall. The decision, which was written by Chief Justice Roberts, held that a bankruptcy court, as a non-Article III court, lacked constitutional authority to issue a final judgment on state law counterclaims by a debtor against a claimant notwithstanding that the Bankruptcy Code specified that all counterclaims of a debtor were within the “core” jurisdiction of the bankruptcy court. For an in depth analysis of the decision, please refer to Cadwalader, Wickersham & Taft LLP’s Client & Friends Memo “Stern v. Marshall: How Big Is It?” published July 14, 2011.

Although the decision may have wide-ranging implications on bankruptcy jurisdiction, the nature and extent of its impact are not yet clear. Chief Justice Roberts’ opinion notes that the question it addresses is “a ‘narrow’ one,” and it will be interesting to see how lower courts apply the ruling to the facts of various cases as they arise. As a service to our readers, Cadwalader’s Restructuring Review Blog will examine how courts interpret and apply Stern v. Marshall and the resulting impact on the jurisdiction of bankruptcy courts across the country.

Continue reading

Stern v. Marshall: How Big Is It?

On June 23, 2011, the Supreme Court ruled 5-4, in an opinion by Chief Justice Roberts, that a Bankruptcy Judge lacked constitutional authority to issue a final ruling on state law counterclaims by a debtor against a claimant. Continue reading

Bankruptcy Bullets – CML V, LLC v. Bax, 2011 WL 3863132 (Del. Sept. 6, 2011)

On September 6, 2011, the Delaware Supreme Court affirmed the Delaware Chancery Court’s dismissal of derivative claims filed by a creditor on behalf of an LLC, holding that Section 18-1002 of the Delaware LLC Act grants standing to file derivative claims on behalf of an LLC only to the members of the LLC and their assignees, and not to an LLC’s creditors (even where the LLC is insolvent). Continue reading

Bankruptcy Bullets – Green Tree Servicing, LLC v. DBSI Landmark Towers, LLC., 2011 U.S. App. LEXIS 18078 (8th Cir. Aug. 30, 2011)

On August 30, 2011, the U.S. Court of Appeals for the Eighth Circuit affirmed a decision of the U.S. District Court for the District of Minnesota: granting a sublessee’s motion to treat its lease as terminated pursuant to section 365(h) of the Bankruptcy Code after the debtor-sublessor rejected the sublease; and denying the lessor’s claim for attornment (a real estate term meaning a tenant must acknowledge the assignment to the new landlord upon alienation of real property). The Court held that though the attornment provision between the lessor and the sublessee – both non-debtors – could survive termination, none of the triggering events that would require attornment had occurred. Continue reading

FDIC to Consider Final Rule on Living Wills

As detailed here, on Tuesday September 13, the FDIC is slated to give final consideration on “Resolution Plans” — better known as “living wills” — for instutations with $50 BN or more in assets.  The proposed rule would require all … Continue reading

In re Whittle Development: Just When You Thought Foreclosure Sales Were Sacrosanct …

On July 27, 2011, the U.S. Bankruptcy Court for the Northern District of Texas in Whittle Development, Inc. v. Branch Banking & Trust Co. (In re Whittle Development Inc.) issued an opinion finding that a debtor may avoid as a preferential transfer under Bankruptcy Code section 547 a prepetition real property foreclosure sale, even if the foreclosure sale complied with state requirements for a valid foreclosure. Whittle is significant not only because it throws into question the long-accepted notion that foreclosure sales are sacrosanct and their results final, but also because it represents a departure from Supreme Court precedent in the related area of fraudulent transfers under Bankruptcy Code section 548. Continue reading