The South Bay Law Firm Law Blog highlights developing trends in bankruptcy law and practice. Our aim is to provide general commentary on this evolving practice specialty.

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      Bankruptcy and Insolvency News and Analysis – Week Ending November 13, 2015
    Bankruptcy and Insolvency News and Analysis – Week Ending November 6, 2015
    Bankruptcy and Insolvency News and Analysis – Week Ending October 30, 2015
    Bankruptcy and Insolvency News and Analysis – Week Ending October 23, 2015

    Bankruptcy and Insolvency News and Analysis – Week Ending October 23, 2015

    Friday, October 23rd, 2015


    A Run on the Bank


    The LSTA Publishes Detailed Response to the ABI Commission’s Proposed Bankruptcy Reforms

    Secured Claims

    California Court Holds Implied Consent Is a Valid Alternative Basis to Surcharge Secured Creditors’ Collateral

    Executory Contracts

    Bankruptcy Court Makes ‘Executive’ Decision, Rules Master Service Agreement Ineligible for Rejection


    Das Moot – Debtors’ Argument that 363(m) Moots Creditors’ Appeal of Sale Order Gets Sunk by Third Circuit

    Avoidance and Recovery

    In re PSN USA, Inc: Eleventh Circuit Holds Indirect Benefits May Constitute Reasonably Equivalent Value Under Section 548


    Chapter 15 Provides Restructuring Avenue for Brazilian Companies

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    Bankruptcy and Insolvency News and Analysis – Week Ending September 25, 2015

    Friday, September 25th, 2015


    Great Recession - 1

    Case Commencement

    Guernsey Dairy Opinion – Allowing WARN Claims to Arise May Breach a Director’s Duty

    Venue and Compensation

    Stakeholders Have Mixed Views on Attorneys’ Fee Guidelines and Venue Selection for Large Chapter 11 Cases

    What Happens In The Bahamas – – Stays In The Bahamas

    Creditors’ Expenses Can Be Reimbursed in Ch. 7 Case

    Automatic Stay

    District Court Holds that Assignee is Not Entitled to Safe Harbor Protections

    Claims and Administrative Expenses

    Checkmate: Trumping a Supplier’s Administrative Claim



    Third Circuit Approves Use of Escrow Agreements Funded by Acquirers to Pay Junior Creditors Before Senior Creditors

    So Long as It’s Your Own Money — Third Circuit Allows Secured Creditors to Gift Value to Junior Creditors to Resolve Sale Objection Even When More Senior Creditors Receive Nothing

    Confirmation and Discharge

    Putative Class Actions in Bankruptcy for Violations of the Discharge Injunction and Bankruptcy Code Section 524(j)

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    Bankruptcy and Insolvency News and Analysis – Week Ending August 7, 2015

    Friday, August 7th, 2015

    Burning 20


    July Commercial Chapter 11 Filings Increase 77 Percent from 2014

    Claims And Litigation

    Just Follow the Rules!  FRCP amendments could be e-discovery game changer

    Officer/Director Breach of Duty: If Things Get Bad Enough, There May Be Recourse

    Avoidance and Recovery

    Ordinary Course of Business Defense Further Examined – Burtch v. Revchem Composites, Inc.

    In a Case of First Impression at the Circuit Level, Ninth Circuit Holds an Insider Who Waives his Right to Indemnification from the Debtor is not a “Creditor” for Purposes of Preferential Transfers Under Sec. 547 of the Bankruptcy Code


    The ABI Commission on Business Bankruptcy Reform: The Sale of All or Substantially All of the Debtor’s Assets and Proposed Creation of “Section 363(x)”



    Structured Dismissals Part IV – Bells & Whistles: Sweetening the Pot and Drawing Objections

    Post-Bankruptcy Investing & Chapter 22s: Iconic Branding Alone Is Not Enough


    OAS S.A. Part III – SDNY Takes a Narrow View of Chapter 15’s Public Policy Exception

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    Bankruptcy and Insolvency News and Analysis – Week Ending July 31, 2015

    Friday, July 31st, 2015



    Fitch: U.S. Consumer Bankruptcies Set to Fall to Eight-Year Low

    Bankruptcy Filings Down 12 Percent Since Last June


    Credit Bidding: Not An Absolute Right (And What Does That Mean?)

    Avoidance and Recovery

    The Fifth Circuit Declares A Mulligan In The Golf Channel “Innocent Transferee” Case


    Tenth Circuit Declares “No Recharacterization Without Justification”


    SDNY Sides with Fifth Circuit and the UNCITRAL Model Law when Granting Recognition to OAS S.A. et al.

    OAS S.A. Part II – SDNY Holds That Austrian Financing Subsidiary Has Its Center of Main Interests in Brazil

    OAS Chapter 15 decision sheds new light on cross-border insolvency practice, but may add complexity to financial institutions’ global credit risk management


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    Bankruptcy and Insolvency News and Analysis – Week Ending July 10, 2015

    Friday, July 10th, 2015



    Bankruptcy Filings Fall 12 Percent for the First Half of 2015, Commercial Filings Drop 19 Percent

    Automatic Stay

    District Court Holds Swap Claim Assignee Not A Swap Participant Entitled To Safe Harbor Rights


    Onward, Christian Soldiers: Some Guidance on 363 Sales, Fair Auctions, and Proposed Sales to Insiders

    Avoidance and Recovery

    Fifth Circuit Seeks Mulligan on Texas Law Question in Golf Channel case

    Related Articles

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    Insolvency News and Analysis – Week Ending November 21, 2014

    Friday, November 21st, 2014
    English: The Supreme Court of the United State...

    The Supreme Court of the United States. Washington, D.C. (Photo credit: Wikipedia)


    Ch. 11s Fall 24 Percent in Week Ended Nov. 14 from Year Ago Pace

    Third Quarter Review

    Legislation and Rules

    A Dozen Reforms the ABI’s Bankruptcy Reform Commission Report Should Endorse

    Amendments Adopted by the Supreme Court to be Effective December 1, 2014


    Thoughts on a New Age of Consent: What Does Consent Mean with Respect to Stern Claims?

    Secured Claims

    ‘Stripping Off’ Mortgage Cases Going To High Court

    Avoidance and Recovery

    NOLs – A Recoverable Transfer?

    Positive Health Of The Fraudulent Transferee’s Good Faith Defense


    Buyer Beware: Payment On Assumed Debt In An Asset Sale Could Be An Avoidable Preference


    Cramdown Hurdles Round 2: Confirmation Can Be An Elusive Prize


    Chapter 15 Bankruptcy: Game-Changer or False Dawn?

    Forty-Four Percent of Chapter 15s Filed in S.D.N.Y. in 2014

    Suntech Chapter 15: Moving COMI and Establishing Jurisdiction Held Legitimate and Not Improper Manipulation

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    Insolvency News and Analysis – Week of November 7, 2014

    Friday, November 7th, 2014
    English: The John Minor Wisdom U.S. Courthouse...

    English: The John Minor Wisdom U.S. Courthouse, home of the United States Court of Appeals for the Fifth Circuit, New Orleans, Louisiana. (Photo credit: Wikipedia)


    Year-Over-Year Bankruptcy Filings Continue to Decline

    Current Developments

    Recent Developments in Bankruptcy Law

    Secured Claims

    Recent “Family Farmer” Case Shows How Secured Creditors Can Avoid Being Plowed Down By Unfair Cramdown Provisions

    The Bankruptcy Clause, the Fifth Amendment, and the Limited Rights of Secured Creditors in Bankruptcy

    Lenders take note of recent Fifth Circuit bankruptcy decision

    In re Motors Liquidation: No Intent Required for UCC-3 Termination Statement to be Effective

    Avoiding Collateral Damage: In re Motors Liquidation and the Effectiveness of UCC Termination Statements

    Administrative Claims

    In re World Imports: Court Denies Section 503(b)(9) Claims of Sellers Who Did Not Ship Goods Directly to the Debtor

    Proofs of Claim

    Think Twice: Signing Proofs of Claim for Clients

    Avoidance and Recovery

    Is this Harbor Safe? Second Circuit Set to Explore Limits of Bankruptcy Code Section 546(e)

    New Value Does Not Need to Remain Unpaid

    Give and Take: Delaware Bankruptcy Court Dismisses Trustee’s Turnover and Avoidance Claims Relating to Debtor’s Net Operating Losses

    Ordinary Course of Business Preference Defense Clarified in a Recent SDNY Bankruptcy Court Decision


    Opportunistic Acquisitions: Buying Assets Through Bankruptcy


    Stop in the Name of Equity: Second Circuit Affirms Dismissal of Appeals in Chapter 11 Liquidation Proceedings as Equitably Moot


    Momentive Postscript – Bankruptcy Rule 3018: Vote Changing on Chapter 11 Plans: You Can’t Have Your Cake and Eat It, Too


    Corporate Bankruptcy Tourists Land in U.S.

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    Insolvency News and Analysis – Week Ending October 10, 2014

    Friday, October 10th, 2014

    Current Events

    Commercial Restructuring and Bankruptcy News (ReedSmith, LLP)


    The Short Case for Venue Reform


    Proposed Bankruptcy Rule and Official Form Changes

    Secured Claims

    Just When You Thought You Were Out, They Pull You Back In

    Credit bidding challenges in bankruptcy

    Administrative Claims

    When Are Goods “Received” by the Debtor? Establishing International Suppliers’ Entitlement to 503(b)(9) Administrative Expense Claim

    Executory Contracts, IP, and Licensing

    Questioning the Executoriness of Trademark Licenses in Integrated Agreements

    Avoidance and Recovery Actions

    Dilution Of Corporate Stock As A Fraudulent Transfer In Antonello

    R-E-C-O-V-E-R: Find Out What It Means to the Third Circuit

    Strong Arm Powers: What Can Be Done With An Avoided Lien?

    Uniform Voidable Transactions Act Approved by Uniform Law Commission to Replace UFTA

    Subordination and Recharacterization

    Focusing on Intent in Recharacterization Analysis, Delaware Bankruptcy Court Ruling Indicates that Creditors Seeking Derivative Standing Face High Hurdle

    Bankruptcy Sales

    Opportunistic Acquisitions: Buying Assets Through Bankruptcy

    Sales Free and Clear: What About Restrictive Covenants?

    Conversion and Dismissal

    Taking a Stand Where Few Have Trodden: Structured Dismissal Held Clearly Authorized by the Bankruptcy Code


    Brazilian Reorganization Plan: Fundamentally Fair or Wholesale Trampling of Creditors’ Rights?

    U.S. Causes of Action and Attorney Retainer Fund Sufficient Assets for Chapter 15 Recognition

    A “Second Bite” from the Second Circuit: Revisiting Section 363 Review of Transfers in Chapter 15 Bankruptcy Cases

    Second Circuit Holds That a Sale by a Chapter 15 Debtor in a Foreign Main Proceeding of a Claim Against an Obligor Located in the U.S. Must Be Reviewed by the U.S. Bankruptcy Court Under Section 363 of the Bankruptcy Code

    Related articles

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    Insolvency News and Analysis – June 20, 2014

    Friday, June 20th, 2014
    Alphabetical by Author

    Alphabetical by Author (Photo credit: woohoo_megoo)












    Bankruptcy and Insolvency News and Analysis – Week of June 16 – 20, 2014:


    Prevalence and Utility of Roadmap Decisions in Mega-Cases

    No Confirmation Without Representation: New Test Is Proposed for Approval of a Debtor’s Proposed Slate of Post-Confirmation Officers and Directors

    Bankruptcy Sales:

    Bankruptcy Sale: No Stay Pending Appeal, Then No Appeal?

    Secured Lending and Claims:

    An L of a Mess: Perfecting Against LLP’s

    Equity Begets Flexibility: Valuing a Secured Creditor’s Claim in Bankruptcy and Allocating Post-Petition Interest

    Avoidance Actions:

    Seventh Circuit Reads Bankruptcy Safe Harbor Broadly

    Defending Preference and Claw-Back Actions in the Wake of the Supreme Court’s Bellingham Decision

    Executory Contracts and Intellectual Property:

    Contract Remedies in the Face of Imminent Default – What Happens to State Law Adequate Assurance and Anticipatory Breach in Bankruptcy?

    Eighth Circuit reconsiders trademark licenses in bankruptcy


    Comity and drama: current trends in cross-border insolvencies

    Jurisdiction and Bellingham Analysis:

    Supreme Court’s decision in Bellingham leaves key Stern v Marshall questions unanswered

    And Still More:

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    When a Good Deal . . . Isn’t.

    Monday, July 1st, 2013

    A very recent decision out of California’s Central District Bankruptcy Court highlights the boundaries of “commercial reason” and “diligence” where distressed asset sales are concerned.

    In re 1617 Westcliff, LLC (Case No. 8:12-bk-19326-MW) involved the court-approved sale of the debtor’s real property under a purchase agreement in which the debtor and the purchaser agreed to use their “commercially reasonable and diligent efforts” to obtain the approval of the debtor’s mortgage lender for the assumption of the mortgage debt by the buyer.  If the approval was not obtainable, the buyer had the right to terminate the transaction.  The buyer also had the right to terminate the deal if the assumption required payment of more than a 1% assumption fee.

    As is sometimes the case where due diligence remains while a deal is approved, things didn’t quite work out as planned.  Unfortunately, the bank proved less cooperative than the parties had anticipated.  More importantly, however, the buyer notified the debtor-seller 4 days prior to closing that it would not proceed with the transaction as structured, but might be willing to proceed if the transaction was framed as a tax deferred exchange.

    The debtor was, understandably, somewhat less than receptive to restructuring the deal at the 11th hour.  It insisted that the buyer proceed with the transaction as originally agreed and as approved by the court.  In response, the buyer effectively walked away.  The parties then made competing demands on the escrow company regarding the buyer’s $200,000 deposit, and filed cross-motions with Bankruptcy Judge Mark Wallace to enforce them.

    In a brief, 11-page decision, Judge Wallace found that the buyer’s renunciation of the deal 4 days before closing was a material breach of the buyer’s obligation to use “commercially reasonable and diligent efforts” to obtain assumption consent:

    The Purchase Agreement required [the buyer] to keep working in good faith for an assumption until the close of business on May 10, 2013, not to throw up its hands and to propose – at the eleventh hour – a wholesale restructuring of the purchase transaction in a manner completely foreign to the Purchase Agreement.  On [the date of the proposal] there were still four days left to reach agreement with the Bank, but [the buyer] chose (five months into the deal) to abandon the assumption.  It was not commercially reasonable nor was it diligent for [the buyer] to cease negotiations with the Bank relating to the assumption of the loan under these circumstances.
    Judge Wallace found that due to this breach the debtor was entitled to retain the $200,000 deposit.  He found further that the buyer, by offering to purchase the property in a restructured transaction, had failed to effectively terminate the deal.  Instead, the buyer had indicated that it was “eager to keep the Purchase Agreement in force (on terms other than those agreed to).”  Since the deal had not terminated, the buyer remained under a duty to continue to use reasonable efforts to obtain the bank’s consent.  Its failure to do so caused the loss of its deposit.

    Bill of sale sedan 1927

    Bill of sale sedan 1927 (Photo credit: dlofink)

    The 1617 Westcliff decision (the unpublished slip copy is available here) serves as a reminder to buyer’s counsel of the unique nature of distressed asset purchases.  The Bankruptcy Court which originally approved the purchase remains available and prepared to resolve any issues which may arise prior to closing, often at a fraction of what it would cost to get a Superior Court involved in connection with an unraveled private sale.  And conditions and contingencies to the sale must be carefully drafted and observed.  This applies even to common asset-purchase “boilerplate” such as “commercial reasonableness” and “diligence.”

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