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Author Archives: Patrick Evans
SDNY Finds Direct Payments to Shareholders in a LBO Are Safe Harbored Under Section 546(e) of the Bankruptcy Code
On November 7, 2012, Judge Lewis A. Kaplan for the United States District Court of the Southern District of New York held that payments made in connection with a leveraged buyout to holders of privately held securities were safe harbored under section 546(e) of the Bankruptcy Code notwithstanding the fact that the payments passed directly from the purchaser to the seller without the use of any financial intermediary. AP Services LLP v. Silva, et al., Case No. 11-03005 (S.D.N.Y. Nov. 7, 2012). The decision comports with the trend among the United States Courts of Appeal, including the Second Circuit, to interpret section 546(e) broadly, and provides clarity regarding the section’s application to payments made in connection with a LBO that are wired directly to a shareholder’s bank account. Continue reading
Posted in Safe Harbors
Akanthos: Eleventh Circuit Denies Noteholders’ Fraudulent Transfer Claims due to No-Action Clause in Indenture
On April 25, 2012, the U.S. Court of Appeals for the Eleventh Circuit overturned a decision by the U.S. District Court for the Northern District of Georgia permitting noteholders to proceed with a fraudulent transfer suit against the issuer of their notes, despite a clause in the indenture prohibiting such suits. The Eleventh Circuit held that the prohibition in the indenture, otherwise known as a “no-action clause”, should be strictly enforced, and that the noteholders were thus barred from bringing fraudulent transfer claims against the issuer and its officers and directors. Akanthos Capital Mgmt, LLC, et al. v. CompuCredit Holdings Corp., et al., Case No. 11-13227 (11th Cir. Apr. 25, 2012). The Eleventh Circuit’s decision comports with the majority of courts that have interpreted no-action clauses in this context and provides greater certainty in the marketplace regarding the litigation risks associated with bond issuance. Continue reading
Posted in Avoidance Actions/Fraudulent Transfers
Benefit of the Bargain: SDNY Bankruptcy Court Affirms Presumption of Contractual Default Rate for Oversecured Creditors’ Postpetition Interest
On April 9, 2012, Judge Stuart M. Bernstein of the U.S. Bankruptcy Court for the Southern District of New York held that an oversecured creditor in a single asset real estate case was entitled to receive prepetition and postpetition interest at the contractual default rate, but declined to allow late payment premiums provided under the loan documents. 785 Partners LLC, Case No. 11-13702 (Bankr. S.D.N.Y. Apr. 9, 2012). The case reaffirms SDNY bankruptcy courts’ deference to the contractual default rate for calculating postpetition interest due to an oversecured creditor when the debtor is solvent and equitable considerations favor imposition of the default rate, a topic which we first discussed in the context of General Growth Properties’ chapter 11 cases. 785 Partners also provides greater clarity in the Southern District of New York regarding the allowance of prepetition interest and late payment charges. Continue reading
Posted in Claims
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
Second Circuit Resolves Choice of Law Rules for Bankruptcy Claims
On February 28, 2012, in a case of first impression, the U.S. Court of Appeals for the Second Circuit considered which choice of law rules should apply when a bankruptcy court sitting in one state is resolving a bankruptcy claim arising from a state-law action previously filed in another state. The Second Circuit held that where (1) a claim before the bankruptcy court is wholly derived from another legal claim pending in a parallel non-bankruptcy proceeding in another state, and (2) the pending original claim was filed in a court prior to the commencement of the bankruptcy case, the bankruptcy court must apply the choice of law rules of the state where the underlying prepetition claim was filed. Statek v. Development Specialists, Inc. (In re Coudert Brothers LLP), 2012 U.S. App. LEXIS 4019 (2d Cir. 2012). Continue reading
Posted in Claims
SDNY Bankruptcy Court Tackles Jurisdiction of Federal Maritime Commission
On February 10, 2012, Judge Sean Lane of the United States Bankruptcy Court for the Southern District of New York denied the motion of 22 defendants in adversary proceedings filed by the Debtor, The Containership Company, seeking to lift the automatic stay to file complaints before the Federal Maritime Commission (“FMC”). In re The Containership Company, Case No. 11-12622 (Bankr. S.D.N.Y. Feb. 10, 2012). Continue reading
Posted in Chapter 15, Stern v. Marshall Updates
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
Posted in Analysis
Tagged 362, SARE, Single Asset
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
Posted in News
Tagged Pension, Seventh Circuit