Monthly Archives: April 2012

Jefferson County: “Fear not each sudden sound and shock; Tis of the wave and not the rock”

On April 20, 2012, the Supreme Court of Alabama held that Ala. Cod. § 11-81-3 (1975) does not require that an Alabama municipality have prepetition bond indebtedness as a condition of eligibility to file for bankruptcy under Chapter 9. The Supreme Court of Alabama issued its decision in response to a certified question from the District Court for the Southern District of Alabama regarding whether the City of Prichard, Alabama was authorized to file for Chapter 9 under Alabama law. See City of Prichard v. Scott A. Balzer, Case No. 1:10-0622-KD-M (Ala. Apr. 4, 2012). Continue reading

Court Holds Plan Does Not Trump Arbitration Clause In Parties’ Agreement

On March 9, 2012, Judge Allan L. Gropper of the U.S. Bankruptcy Court for the Southern District of New York held that a claim for damages resulting from a debtor’s breach of an executory contract must be arbitrated notwithstanding a provision in the debtor’s plan stating that the bankruptcy court retained exclusive jurisdiction to determine all such claims. CIT Group Inc. v. Tyco Int’l Ltd. (In re CIT Group Inc.), Case No. 09-16565 (Bankr. S.D.N.Y. Mar. 9, 2012). The court temporarily stayed arbitration pending the Second Circuit’s decision on whether to grant the claimant’s further stay motion. Continue reading

RadLax Review – Oral Argument Observations

On Monday April 23, 2012, the U.S. Supreme Court heard oral arguments in RadLAX Gateway Hotel, LLC v. Amalgamated Bank. In this case, the Debtors proposed a plan of reorganization that prohibited their secured lenders from credit bidding on collateral to be sold pursuant to the plan under the indubitable equivalent prong of the cram down provisions of the Bankruptcy Code. Contrary to prior opinions of the Third and Fifth Circuits, the Seventh Circuit held that the plan was improper. Click here to view our previous posts on this case. The Court allotted thirty minutes of argument to RadLAX; and Amalgamated and the U.S. Government shared another thirty minutes of argument time. Restructuring Review attended the argument and, although it is generally difficult to predict how the Court will rule based on the questions directed to counsel during the argument, we note the following observations: Continue reading

Mezzanine Borrower’s Chapter 11 Case Filed on Eve of Foreclosure Sale Dismissed as a Bad Faith Filing

On December 22, 2011, Judge Mary F. Walrath of the U.S. Bankruptcy Court for the District of Delaware dismissed with prejudice a mezzanine borrower’s chapter 11 case. See In re JER/ Jameson Mezz Borrower II LLC, 461 B.R. 293 (Bankr. D. Del. 2011). After examining the facts and circumstances surrounding the filing, the Bankruptcy Court determined, among other things, that the case was filed in bad faith, the debtor lacked a realistic chance of confirming a plan, and the filing was a litigation tactic designed to hinder the mezzanine lender’s foreclosure efforts. Continue reading

Radlax Review – Summary of Petitioners’ Reply Brief

As part of our continuing coverage of RadLAX Gateway Hotel, LLC v. Amalgamated Bank, this is one of a series of posts summarizing the briefs filed with the Supreme Court. This post summarizes the petitioners’ reply brief, filed with Court on March 31, 2012. In the brief, RadLAX argues that the reading of section 1129 of the Bankruptcy Code by Amalgamated (the Respondent) is flawed and that credit bidding does not always maximize the value of the estate. Additionally, RadLAX denies Amalgamated’s allegations that the proposed plan prohibited credit bidding to benefit insiders or a favored third-party bidder and accuses Amalgamated of working to prevent confirmation of a plan that would benefit all creditors. Continue reading

Delaware’s Not So Safe Harbors: Third Circuit Bankruptcy Court Declines to Rule that a Payment on a Letter of Credit is an Avoidance-Proof “Settlement Payment”

On March 26, 2012, Judge Mary F. Walrath of the United States Bankruptcy Court for the District of Delaware refused to rule that, as a matter of law, payments made to satisfy a debtor’s obligations under a letter of credit constitute “settlement payments” protected from avoidance under section 546(e) of the Bankruptcy Code. EPLG I, LLC v. Citibank, National Association et al. (In re Qimonda Richmond, LLC, et al.), No. 09-10589, 2012 Bankr. LEXIS 1264 (Bankr. Del. March 26, 2012). Although the decision helps to clarify the scope of one of the Bankruptcy Code’s most important safe harbor provisions, it has also left some important questions unanswered regarding the scope of section 546(e). Continue reading

A Practitioner’s Guide to Resolving Late Claims

Proofs of claim play a critical role in bankruptcy cases. Debtors use them to determine their liabilities; creditors use them to preserve their rights to distribution. Accordingly, the Bankruptcy Rules require that all unsecured creditors file a proof of claim in order for their claims to be allowed. Missing the bar date to file claims can have severe consequences, but don’t panic; there are options when clients approach you with late claims. Continue reading

Radlax Review: Summary of Amici Briefs

As part of our continuing coverage of RadLAX Gateway Hotel, LLC v. Amalgamated Bank, this is one of a series of posts summarizing the briefs filed with the Supreme Court. This post summarizes the arguments in the four amici briefs filed with the Court. The United States government, two groups of law professors and a coalition of financial industry trade groups filed amici briefs. The amici reprise many of the arguments raised in the respondent’s brief and all four argued in support of the position that secured creditors must be allowed to credit bid under a plan that provides for the sale of assets free and clear of liens and encumbrances. Continue reading

News From London: English Court of Appeal Interprets the ISDA Master Agreement

Last week the Court of Appeal of England and Wales handed down its decision in four appeals which raise a number of questions of construction in relation to derivatives in the form of interest rate swaps and forward freight agreements documented under the International Swaps and Derivatives Association Inc. Master Agreement (the “ISDA Master Agreement”). In particular, the decision focuses on the interpretation of section 2(a)(iii) of the ISDA Master Agreement. Continue reading

VeraSun: Claims Under “Change in Control” Agreements Subject to Cap Governing “Employment Contracts”

In a recent decision in the VeraSun bankruptcy cases, the U.S. Bankruptcy Court for the District of Delaware held that “change in control” agreements between former executives and the debtors are “employment contracts” under section 502(b)(7) of the Bankruptcy Code. Accordingly, the Court determined that the former executives’ claims asserted under the agreements were appropriately capped by the claims-allowance scheme set forth in section 502. In re VeraSun Energy Corp., et al., 2012 Bankr. LEXIS 1262 (Bankr. D. Del. Mar. 26, 2012). Continue reading