Category Archives: Standing/Jurisdiction

SDNY Bankruptcy Court Holds that Venue of Houghton Mifflin Case is Improper, But Delays Transfer

On June 22, 2012, Judge Robert E. Gerber of the United States Bankruptcy Court for the Southern District of New York granted the U.S. Trustee’s motion to transfer the chapter 11 cases of Houghton Mifflin Harcourt Publishing Company and its affiliates to a different venue, notwithstanding the fact that the debtor’s prepackaged plan had been confirmed with unanimous support from its creditors, the cases were projected to conclude within 30 days of filing, and the debtors’ primary creditor constituencies supported venue in New York. While the Court found itself bound by the applicable venue statutes, the Court nevertheless held that because the statutes did not dictate when the Court must transfer the case, it would order the transfer at a time that would minimize the prejudicial effect to creditors – the first to occur of the effective date of the prepackaged plan or three weeks from the date of entry of the confirmation order. In re Houghton Mifflin Harcourt Publ’g Co., 2012 Bankr. LEXIS 2868 (Bankr. S.D.N.Y. June 22, 2012). Continue reading

Dante’s Third Ring: Lehman Investors Bring Adversary Proceeding In SDNY Bankruptcy Court

The battle over the enforceability of priority flip clauses in CDO indentures has entered a new phase. On February 8, 2012, a group of investors led by Belmont Park Investments Pty Ltd. filed an adversary proceeding against Lehman Brothers Special Financing Inc. and BNY Mellon Corporate Trustee Services Ltd. in the U.S. Bankruptcy Court for the Southern District of New York. The Investors seek recognition of a judgment entered by the High Court of Justice in England and Wales in Belmont Park Inv. Pty Ltd. & Others v. BNY Corp. Trustee Servs. Ltd., and a declaration that, as a matter of English law, the Investors have priority over LBSF, as swap provider, with respect to shared collateral securing notes issued under Lehman Brothers’ “Dante Programme.” The Investors filed a concurrent motion to withdraw the reference, seeking to remove the adversary proceeding from the U.S. Bankruptcy Court to the U.S. District Court. 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

In re Salander O’Reilly Galleries 453 B.R. 106, (S.D.N.Y. Jul. 18, 2011)

The debtor in Salander was a Manhattan art gallery that had obtained financing from a bank, allegedly secured by a blanket lien on all of the debtor’s assets. Approximately a year and a half before the commencement of the bankruptcy case, Kraken Investment, Ltd. and the debtor entered into a consignment agreement which provided for Kraken’s consignment of a Sandro Botticelli painting titled “Madonna and Child” to the debtor. Kraken had commenced a prepetition lawsuit in New York Supreme Court to recover the painting which was stayed by the bankruptcy filing. During the case, Kraken asserted a claim for the Botticelli pursuant to a court-approved art claims protocol, a liquidation trust was then formed pursuant to a confirmed plan of liquidation, and the bank assigned its interest in the Botticelli to the trust. Continue reading

Sanders v. Muhs (In re Muhs), No. 10-01008, 2011 WL 3421546 (Bankr. S.D. Tex, Aug. 2, 2011)

In Sanders v. Muhs (In re Muhs),[ii] the United States Bankruptcy Court for the Southern District of Texas held that a debtor’s right to discharge its debt and the amount of debt that is excepted from discharge are necessarily public rights that may be adjudicated by bankruptcy courts. In light of Stern v. Marshall, the Muhs court considered, sua sponte, its authority to hear an adversary proceeding which alleged that the debtors’ debt was non-dischargeable because the debtor intentionally made false representations that the creditor relied upon in providing a loan. Continue reading

In re BearingPoint, Inc., No. 09-10691, 2001 Bankr. LEXIS 2585 (Bankr. S.D.N.Y. July 11, 2011)

Visiting the holding of Stern v. Marshall, Judge Robert E. Gerber of the Bankruptcy Court for the Southern District of New York declined to adjudicate claims over which the bankruptcy court had reserved exclusive jurisdiction under the order confirming the debtor’s chapter 11 plan of reorganization. Continue reading