Monthly Archives: January 2012

International Forum Shopping Trip Cut Short by SDNY

Judge Robert W. Sweet of the U.S. District Court for the Southern District of New York recently weighed in on the standing of a chapter 15 debtor’s foreign representative to allege a violation of the automatic stay following commencement of … Continue reading

Seventh Circuit Holds Companies Liable for Insolvent Affiliate’s Pension Obligations

The Seventh Circuit Court of Appeals recently affirmed a district court decision holding that two limited liability companies were jointly and severally liable for the pension obligations of a third, insolvent affiliate that had ceased making contributions to a multiemployer pension fund. Central States, Southeast and Southwest Areas Pension Fund v. SCOFBP, No. 10-3633 (7th Cir. Dec. 27, 2011). Continue reading

“New Value” Provided by Subsidiary Is No Defense to Preference Attack Launched Against Parent

On December 30, 2011, Judge Stuart M. Bernstein of the Bankruptcy Court for the Southern District of New York denied the motion of defendant Best Buy Co., Inc. for partial summary judgment on the issue of whether any recovery of a prepetition transfer made to Best Buy by a debtor must be reduced by subsequent new value provided to the debtor by one of Best Buy’s affiliates. The Responsible Person of Musicland Holding Corp., v. Best Buy Co., Inc. (In re Musicland Holding Corp.), Case No. 08-01023, 2011 WL 6880675 (Bankr. S.D.N.Y. Dec. 30, 2011). Continue reading

Jefferson County: The Bankruptcy Court Always Wins

On January 6, 2012, Judge Thomas B. Bennett of the Bankruptcy Court for the Northern District of Alabama held that (i) the Alabama state receivership court lost possession and control over Jefferson County’s property interests in its sewer system immediately upon the filing of the County’s chapter 9 bankruptcy case and (ii) special revenue warrants are exempt from the automatic stay and must continue to be serviced during the course of a chapter 9 case. This decision highlights the loss of control that municipal bondholders face when a municipality files for bankruptcy relief under chapter 9 of the Bankruptcy Code and the special treatment afforded to special revenue bonds in chapter 9. Continue reading

If Your Signature is On It, You’d Better Have Personally Reviewed It

That was the admonition Judge Sean H. Lane of the United States Bankruptcy Court for the Southern District of New York recently delivered to a partner and his law firm. The Court held that the partner’s failure to personally review a proof of claim that an attorney at his firm submitted to the Court under the partner’s signature, but which the partner had not personally reviewed, violated Bankruptcy Rule 9011.[i] Continue reading

Time to Roll the Dice on Online Gaming?

On December 23, 2011, the U.S. Department of Justice Office of Legal Counsel (“OLC”) issued a memorandum opinion dated September 20, 2011, eliminating one of the federal barriers to legalizing internet gambling and opening the door for the possibility of a regulatory regime shift.[1] In the OLC Opinion, the Department of Justice addressed an apparent conflict between the Wire Act and UIGEA and concluded that “interstate transmissions of wire communications that do not relate to a sporting event or contest” fall outside the reach of the Wire Act. Finding that the Federal Wire Act does not prohibit the use of out-of-state transaction processors to sell in-state lottery tickets over the internet or the transmission of lottery data across state lines, the OLC Opinion reverses the long-held position that the Wire Act applied to all interstate gambling, whether sports-related or not. Although it may take some time to determine the ultimate effect of the OLC Opinion, now that the Justice Department has clarified its view that the Wire Act does not broadly prohibit online wagering (unless it relates to sporting events or contests), the advance of internet gaming appears inevitable. Continue reading

Ortiz v. Aurora Health Care, Inc. (In re Ortiz), No. 10-3465 (7th Cir. Dec. 30, 2011)

The Seventh Circuit Court of Appeals dismissed the debtors’ appeal of the bankruptcy court’s dismissal of the debtors’ state law counterclaims because the bankruptcy court lacked authority to enter a final judgment on the debtors’ counterclaims, and without a final judgment, there was no basis for appellate jurisdiction. Continue reading

Harrisburg: A Case Study in State Law Barriers to Chapter 9

On November 23, 2011, the Bankruptcy Court for the Middle District of Pennsylvania dismissed Harrisburg, Pennsylvania’s chapter 9 bankruptcy petition because Harrisburg was not specifically authorized to file for Chapter 9 as required by the Bankruptcy Code. Harrisburg’s failed attempt to remain in Chapter 9 highlights the political factors and state law constraints that municipalities must consider prior to seeking bankruptcy relief.[1] This article will discuss the origins of Harrisburg’s debt crisis, the Harrisburg City Council’s attempt to file for Chapter 9 without the Mayor’s approval, the legal obstacles placed in the path of the City Council’s bankruptcy filing, and the lessons that other distressed municipalities and creditors can learn from Harrisburg’s experience. Continue reading

Coudert Brothers Trust v. Baker & McKenzie, et al., No. 11-2785, 2011 U.S. Dist. LEXIS 110425 (S.D.N.Y. Sept. 23, 2011)

In Coudert Brothers, the Southern District of New York considered whether the parties impliedly consented to the bankruptcy court’s entry of a final order determining non-core claims it otherwise lacked constitutional authority to adjudicate under Stern v. Marshall.[i] Because the parties did not consent, the district court treated the bankruptcy court’s opinion as proposed findings of fact and conclusions of law, which the district court would review de novo. Continue reading