Monthly Archives: February 2012

No Equitable Tolling of 11 U.S.C. § 548’s Two-Year “Look-Back”

On January 24, 2012, Judge Brendan L. Shannon of the U.S. Bankruptcy Court for the District of Delaware ruled that section 548’s two-year look-back period is not subject to the doctrine of equitable tolling. Meaning, even if a recipient of a transfer of a debtor’s property took some action to prevent a debtor from becoming aware that a fraudulent transfer claim under section 548 existed against such recipient, so long as the transfer of property took place outside of the two-year look-back period, the debtor could not pursue a claim under section 548. See Industrial Enterprises of America, Inc. v. Burtis et al (In re Pitt Penn Holding Co., Inc., et al.), Adv. No. 11-51868, 2011 Bankr. LEXIS 5260 (Bank. D. Del 2012). Continue reading

In re Thorpe Insulation Company: The Non-Settling Insurers Strike Back

On January 24, 2012, Judge Ronald M. Gould of the U.S. Court of Appeals for the Ninth Circuit held that an appeal filed by certain insurance companies with respect to a plan confirmation order was not moot and that such insurance companies had standing to object to the plan, notwithstanding the Debtors’ contention that the plan was “insurance neutral” because it did not affect insurer’s legal rights. The Ninth Circuit remanded the plan confirmation to the Bankruptcy Court for further consideration. This decision highlights the fact that a plan of reorganization can be reopened after confirmation, to deal with certain issues, including concerns raised by insurers. In re Thorpe Insulation Company, Case No. 10-56543 (9th Cir. 2012). Continue reading

Class Dismissed: Fourth Circuit Affirms Denial of Class Proofs of Claim; Leaves Open Possibility for Similar Claims in the Future

On February 2, 2010, the United States Court of Appeals for the Fourth Circuit held that certain class action claimants in the Circuit City bankruptcy cases were authorized to file class proofs of claim. However, the Fourth Circuit further held that in this case, the class action process could not proceed because the bankruptcy claims process provided certain procedural advantages over the class process. Gentry v. Siegel, — F.3d —-, 2012 WL 310870 (4th Cir. 2012). Although the decision theoretically permits class actions in bankruptcy cases within the Fourth Circuit, the decision suggests that Fourth Circuit bankruptcy courts will seldom allow class actions to proceed concurrent with the bankruptcy process. Continue reading

Ninth Circuit Finds that Orders Denying Removal of a Trustee Are Not Subject to Appeal

On February 9, 2012, the Ninth Circuit held that an order denying a motion to remove a trustee was not a final appealable order under 28 U.S.C. § 158(d)(1) because it did not substantively affect the parties’ rights and permanently determine the trustee’s status, rather it merely maintained the status quo. SS Farms, LLC v. Sharp (In re SK Foods, L.P.), — F.3d —-, 2012 WL 400421 (9th Cir. Feb. 9, 2012). This contrasts with a prior Ninth Circuit holding that an order denying a motion to remove a trustee was a final order. See Dye v. Brown (In re AFI Holding), 530 F.3d 832 (9th Cir. 2008). Continue reading

Seventh Circuit in Holly Marine Affirms Exception to Gifting Prohibition

Since the Second Circuit’s decision in DISH Network Corp. v. DBSD North America, Inc., the continued viability of gift plans – plans that provide for distribution of some portion of senior creditors’ recoveries to junior stakeholders – has been called into question. The United States Court of Appeals for the Seventh Circuit in In re Holly Marine Towing, Inc., recently approved a settlement agreement that included a payment from the debtor’s principals to junior creditors. The Seventh Circuit permitted the gift because it came under chapter 7, as opposed to chapter 11, and involved the principals’ settlement proceeds, rather than estate assets. Thus, the Seventh Circuit held that the gift did not implicate the priority rules of the Bankruptcy Code. Continue reading

Structured Dismissals (Part I of II): Another Possible Chapter 11 Exit Strategy to Consider After a Sale of Substantially All Assets

As courts and commentators alike have observed in recent years, sales of substantially all assets pursuant to section 363 of the Bankruptcy Code prior to confirmation of a chapter 11 plan have become common practice in large-scale corporate bankruptcy cases. Chapter 11 debtors who effectuate such sales traditionally must pursue one of three possible options for concluding the chapter 11 case: (i) confirmation of a plan of reorganization or liquidation, (ii) conversion of the case to a case under chapter 7 of the Bankruptcy Code, or (iii) entry of an order dismissing the case and returning all parties to their respective state law rights and remedies. However, when these courses of actions are not feasible or otherwise are simply not appropriate or practical under the circumstances, debtors are increasingly turning to structured dismissals as an alternative chapter 11 exit strategy. This blog post provides an overview of structured dismissals, and discusses how and when they are used. Part II of this series will discuss several examples of structured dismissals from recent chapter 11 cases. Continue reading

Fourth Circuit Clarifies Position on Non-Debtor Releases

On December 9, 2011, the U.S. Court of Appeals for the Fourth Circuit held that although non-debtor releases are permissible in certain contexts, the District Court for the Eastern District of Virginia erred in affirming a bankruptcy court’s order approving the National Heritage Foundation’s (“NHF”) chapter 11 plan containing non-debtor releases. Behrmann v. Nat’l Heritage Found., Inc., 663 F.3d 704, 712-13 (4th Cir. 2011). The Fourth Circuit found that the bankruptcy court had not stated facts sufficient to justify its decision approving the debtor’s plan. The Fourth Circuit refrained from adopting a particular test that must be satisfied before non-debtor releases may be approved, as other U.S. Circuit Courts of Appeal have done, instead emphasizing that Fourth Circuit bankruptcy courts should make such determinations on a case-by-case basis and explain such determinations with detailed facts. Id. Although Behrmann does not provide a test for determining whether particular non-debtor releases are permissible in the Fourth Circuit, the opinion provides some guidance as to the specificity necessary in bankruptcy court orders approving such provisions, and should be kept in mind by bankruptcy professionals preparing proposed findings of fact in support of chapter 11 plans. Continue reading

Real Estate Lenders Rejoice: Ninth Circuit Holds that the Property Held by One Debtor in a Bankruptcy Case Involving a Consolidated Group of Real Estate Companies Qualified as a Single Asset Real Estate

On January 27, 2012, the Ninth Circuit Court of Appeals held that a property level debtor was subject to the single asset real estate provisions of the Bankruptcy Code even though the debtor was one of fifty-three debtor subsidiaries in a bankruptcy case involving a consolidated group of real estate companies that had centralized management and a centralized cash management account. Meruelo Maddux Properties-760 S. Hill Street, LLC v. Bank of America, N.A. (In re Meruelo Maddux Properties, Inc.), No. 10-56128 (9th Cir. Jan. 27, 2011). Continue reading

Amended Standing Order of Reference, 12 Misc. 00032 (S.D.N.Y. Jan. 31, 2012).

On January 31, 2012, Southern District of New York Chief Judge Loretta A. Preska issued an Amended Standing Order of Reference, providing that (i) bankruptcy judges may submit proposed findings of fact and conclusions of law with respect to “core” matters over which bankruptcy courts do not have constitutional authority to enter final judgments and (ii) the district court may treat any order of the bankruptcy court as proposed findings of fact and conclusions of law in the event that the district court determines that entry of a final order by the bankruptcy court would be inconsistent with Article III of the United States Constitution. Continue reading

“It Ain’t Over Till It’s Over”: United States District Court for the Southern District of New York Denies Madoff Trustee’s Bid for an Interlocutory Appeal

Quoting the great sage Yogi Berra, on January 17, 2012, Judge Jed S. Rakoff of the United States District Court for the Southern District of New York denied the motion of Irving H. Picard, the SIPA trustee for Bernard L. … Continue reading