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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      Insolvency News and Analysis - Week Ending November 21, 2014
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    Posts Tagged ‘Bankruptcy’

    Insolvency News and Analysis – Week Ending November 14, 2014

    Saturday, November 15th, 2014
    English: The John Minor Wisdom U.S. Courthouse...

    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)

    Trends

    Year-Over-Year Bankruptcy Filings Continue to Decline

    Claims

    Recharacterization: When Your “Loan” Becomes a “Capital Contribution”

    Avoidance and Recovery

    The Problem with Preferences

    Executory Contracts and Leases

    When termination is not termination: Bankruptcy Courts views on leases

    Reorganization

    Bankruptcy Court Bars Future Claimant from Seeking to Avoid Effect of Discharge

    Cross-Border

    In re Fairfield Sentry Ltd: Second Circuit Holds Sale of SIPA Claim by Chapter 15 Debtor Subject to Section 363 Review

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    Insolvency News and Analysis – Week Ending October 17, 2014

    Friday, October 17th, 2014

    English: Woolworth's, Banbridge (3of3) See 110...

    Involuntary Petitions

    LLP: When Is A Partnership Not a Partnership (And Who Cares)?

    Sales

    Fiduciary Considerations for Pre-Bankruptcy Transactions

    In re NE Opco, Inc: Section 363(f) Bars Pre-closing Claims Arising from Purchaser’s Alleged Wrongdoing Occurring After Entry of Sale Order

    Claims

    Environmental Claims: The Gift That Keeps On Giving

    Dismissal

    #Hashtag: Thinking of Starting Your Own Marijuana Business?

    Cross-Border

    Second Circuit Fails to See the Comity in Chapter 15

     

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    What’s In A Name?

    Thursday, October 2nd, 2014

    William Shakespeare

    “What’s in a name?” Shakespeare once asked, rhetorically.  According to Shakespeare’s character Juliet – and according to the US Bankruptcy Court for the District of Columbia – not a great deal.

    In a decision issued in early August, US Bankruptcy Judge Martin Teel, Jr. held that the so-called “general partner” of a District of Columbia limited liability partnership (LLP) could not, despite her title, initiate an involuntary bankruptcy proceeding against the debtor LLP.

    Bankruptcy Code section 303(b)(3) provides that one or more of a partnership’s general partners are eligible to commence an involuntary petition against the entity.  Acting under this section, the designated “general partner” of Washington DC’s Beltway Law Group, LLP commenced an involuntary Chapter 7 case against her own firm.  Judge Teel subsequently found in reviewing the petition that – notwithstanding her title of “general partner” – the principal of a District of Columbia LLP could not commence an involuntary petition against the entity.

    Judge Teel observed that the term “general partner,” for purposes of section 303(b)(3), refers to a partner who has at least some personal liability for the partnership’s debts.  Under District of Columbia partnership law, however, partners in an LLP are not liable for the LLP’s debts as a result of their partnership status.  Instead, such partners are at risk only to the extent of the capital subscribed.  An LLP is therefore more akin to a “corporation” as that term is used in section 101(9)(A).

    Judge Teel allowed that if an LLP had previously been a partnership within the contemplation of section 303(b) such that its partners were liable for the former partnership’s debts, the LLP’s status as a partnership for purposes of those debts would remain in place.  But this was not Beltway Law Group’s case.  Consequently, the petitioner – despite her title – was not a “general partner” for purposes of commencing an involuntary petition against the LLP.

    The limited liability partnership is a common entity form in many jurisdictions.  It is also an entity form which did not exist at the time the Code was drafted.  Understanding how the form is treated for purposes of involuntary filings provides useful guidance in the event of financial distress and/or a dispute amongst the holders of interests in an LLP.

    Though based in local law (here, the District of Columbia), Beltway Law Group’s discussion provides a helpful, straightforward analytical framework for determining whether an LLP may ever be classified as a “partnership” for purposes of an involuntary bankruptcy filing.  Of particular help is Judge Teel’s clarification of the difference between a “corporation” and a “partnership” as those terms are employed by the Code.

    Beltway Law Group provides localized – but nevertheless useful – guidance for practitioners who may be evaluating the possibility of an involuntary “partnership” bankruptcy filing.

     

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    Insolvency News and Analysis – Week Ending September 26, 2014

    Friday, September 26th, 2014

     

    Legislation

    False Premises of Bankruptcy Reform Agenda

    Current Developments

    The Weil Bankruptcy Blog: 2014 Mid-Year Review

    Case Commencement

    Why Pot Companies Can’t File For Bankruptcy

    Finance

    Litigation: the newest corporate finance tool

    Secured Claims

    Equitable Subrogation: “Complete and Perfect Justice” Requires Party To Be Without Fault

    Administrative Claims

    Double Dipping? Section 503(b)(9) and the New Value Defense to Preference Liability

    Avoidance and Recovery

    Bankruptcy. Extraterritoriality. District court holds that section 550(a) of the Bankruptcy Code does not apply extraterritorially to allow for recovery of subsequent transfers received abroad by a foreign transferee from a foreign transferor.

    Confirmation

    Make Whole Premiums and Unmatured Interest

    Momentive Noteholders’ Request to Change Vote Denied – You can’t have your cake and eat it too.

    Dismissals

    Structured Dismissals – How They Work Part I: Court Authority for an Alternative Ending

    Cross-Border

    German Insolvency Law — Overview of Insolvency Challenge Rights

     

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    Insolvency News and Analysis – Week Ending September 19, 2014

    Friday, September 19th, 2014

    Seal of the United States Court of Appeals for...

     

    Claims

    Court Denies Administrative Priority Status to Seller Whose Goods Were Not Received by the Debtor

    Auction Design for Claims Trading

    Sales

    Purchasers at Bankruptcy Sales — They can’t be bad and expect to be protected as “good”

    Secured Claims and Credit

    Perfection and the New Jurisdiction-Hopping Corporations

    Mysteries Of The Uniform Commercial Code: Leases Of Goods That Become Installed In, Affixed To, Or Mixed With Other Goods

    Credit Bid: Loan-to-Own Strikes Out

    Credit Bid (Round 2): What Does It Take to Show “Cause”?

    A Refresher on Lender Liability

    Sales

    Weathering the Storm: Eleventh Circuit Vacates Four-Year-Old 363 Sale Order Based on Bad Faith Filing of an Involuntary Bankruptcy Case

    Confirmation

    The Role of Profit in Valuing Chapter 11 Cramdown Paper

    Momentous Decision in Momentive Performance Materials Part IV: Make-Wholes and Third Party Releases

    Intellectual Property

    The Messy Problem of IP Licensing During Bankruptcy

    Cross-Border

    PUSHING THE BORDERS OF CHAPTER 15: WHEN A FOREIGN REPRESENTATIVE “FLOUTS” THE PURPOSES OF CROSS-BORDER INSOLVENCY

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    Insolvency News and Analysis – Week Ending September 5, 2014

    Friday, September 5th, 2014
    Delaware license plate from personal collection

    Delaware license plate from personal collection (Photo credit: Wikipedia)

     

     

     

     

     

     

     

    Trends

    [Bankruptcy Filings and] High Yield Debt

    Bankruptcies down in Delaware, US

    Corporate Governance

    LLC Managers Beware: Get Involved With Member Distributions By an Insolvent LLC and You May Be Personally Liable

    Financial Markets

    Rolling Back the Repo Safe Harbors

    Sales

    Eleventh Circuit Directs Bankruptcy Court to Vacate Sale Order Based on New Evidence that Involuntary Bankruptcy Case Was  Filed In Bad Faith

    Secured Claims

    The (Il)Legitimacy of Bankruptcies for the Benefit of Secured Creditors

    Avoidance and Recovery

    Caveat Debtor: Liens Preserved Pursuant to Section 551 Subject to Defects Under State Law

    The Uniform Voidable Transactions Act – New Section 11 and Series LLCs

    Fraudulent Transfer: A Case Where Strong Arm Powers Were “An Inch Too Short”

    Fifth Circuit Provides Valuable Guidance on Jurisdiction and Authority Post-Stern

    Confirmation

    S.D.N.Y. Bankruptcy Court Denies Claim for Make-Whole Premium and Allows Cram Down of Debtors’ Chapter 11 Plan Paying Secured Creditors Below-Market Interest Rates on Replacement Notes

     

    Bankruptcy Court Holds That Secured Creditors Can Be “Crammed Down” With Below-Market Rate Replacement Notes

    The Fourth Circuit Weighs in on Third-Party Releases in Plans of Reorganization

    Analysis Regarding Third-Party Releases in Bankruptcy

    Third Circuit Rules that Failure to Disclose Third-Party Release Proves Fatal

    Cross-Border

    Significant Changes To [Vietnamese] Bankruptcy Procedures

     

     

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    Insolvency News and Analysis – Week Ending August 29, 2014

    Friday, August 29th, 2014

     

    Seal of the United States Court of Appeals for...

    Seal of the United States Court of Appeals for the Second Circuit. (Photo credit: Wikipedia)

     

     

     

     

     

     

     

     

     

     

     

     

     

    Procedure

    What’s the Difference Between a Contested Matter and an Adversary Proceeding Anyway?

    Avoidance and Recovery

    Section 548(e) Authorizes Avoidance and Recovery of Transfer of Living Trust Assets

    Void and Voidable – A Distinction Without a Difference?

    SIPC v. Madoff Investment Securities LLC: Fraudulent Transfers between Foreign Parties Not Recoverable under Section 550(a)(2)

    Sales

    To (Credit) Bid Or Not To (Credit) Bid, That Is The Question

    Claims

    Failure to Provide a Translation Does not Translate to Victory

    Post-Petition Interest: Not Very Predictable

    Tax

    Be Careful What You Plan For in California: Bankruptcy Reorg Is Normal Course of Business

    Second Circuit’s Significant Decision Could Impact Liquidating Trustees

    Practice Pointers from the Second Circuit: A Prohibited Power Grab Can Be “Taxing”

     

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    Bankruptcy and Insolvency News and Analysis – Week Ending August 22, 2014

    Friday, August 22nd, 2014
    English: Charles Simms, March 17, 1796, Fire I...

    English: Charles Simms, March 17, 1796, Fire Insurance Policy (Photo credit: Wikipedia)

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Practice and Procedure

    PROPOSED [BANKRUPTCY RULE] AMENDMENTS PUBLISHED FOR PUBLIC COMMENT

    DEALING WITH DIFFICULT DEBTORS

    Corporate Governance

    How Remote is Bankruptcy Remote? Is an Operating Agreement Restriction Against a Bankruptcy Filing Without the Unanimous Consent of All Members Enforceable?

    Let’s Call the Whole Thing Off: What Happens if the Bankruptcy Code Says Yes, But the Debtor’s Governance Documents Say No?

    Sales

    In re Ormet Corp: Delaware Bankruptcy Court Holds Section 363(f) Bars ERISA Successor Liability Claims

    Avoidance Actions and Other Recoveries

    Mind Your Ds and Os: Policy Language Proves Determinative in Director and Officer Insurance Coverage

    Klein v. King & King & Jones: Tenth Circuit Clarifies UFTA’s Good Faith and Subsequent Transferee Defenses

    Plan Confirmation Issues

    Fourth Circuit Issues Reminder to Plan Proponents: Evidentiary Support is Required for Non-Debtor Releases

     

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    Insolvency News and Analysis – Week Ending August 15, 2014

    Friday, August 15th, 2014
    (en) World Map (pt) Mapa Mundo (de) Weltkarte ...

    (en) World Map (pt) Mapa Mundo (de) Weltkarte (sv) Världskarta (Photo credit: Wikipedia)

     

     

     

     

     

     

     

     

     

     

     

    Statutory Construction

    Our “Must-Cite” Bankruptcy Cases

    Jurisdiction

    Still Trying To Close The Stern V. Marshall Can Of Worms

    The Ninth Circuit Waits for No One

    Cross-Border

    A Bird’s-Eye View of Chapter 15

    Chapter 15 Comes of Age

    Managing parallel proceedings – USA & Cayman Islands

    Sales

    Bankruptcy Sales and Leases: “Free And Clear” May Not Be So “Free And Clear”

    Sale of Assets Free and Clear Insulates Employee Claims Against Purchaser . . . Almost

    Section 363(f) Retires ERISA-Based Successor Liability Claims

    Avoidance and Recovery

    Trust Beneficiary Checkmated By Bankruptcy Code 548(e) In Castellano

    Property of the Estate

    Peering Through the Muck Again: Another Court Analyzes Whether LLC Operating Agreements are Property Interests or Executory Contracts

     

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    Paid in Full

    Sunday, August 10th, 2014
    American National Bank AD

    American National Bank AD (Photo credit: Wikipedia)

    One of the fundamental functions of any bankruptcy proceeding is the establishment of an amount and priority for each creditor’s claim against the debtor. A short, 5-page decision issued late last month by the Nebraska Bankruptcy Court in two related Chapter 11 cases (Biovance and Julien) serves as a reminder that although creditors are not permitted a “double recovery” on their claims, they are nevertheless permitted to assert the full value of their claims until those claims are paid in full.

     
    In the US, it is common for creditors to mitigate credit risk through two primary means: Taking a security interest in the debtor’s collateral, and/or securing a guaranty of payment from a [non-debtor] third party. Further, and in the event of a payment default, courts frequently recognize a creditor’s right to pursue simultaneous collection activity for the entirety of the debt against the debtor, the collateral, and the guarantor. In a recent decision involving two related Chapter 11 debtors, a Nebraska Bankruptcy Court was asked by the debtors to limit the amounts claimed by a creditor as the creditor had already received a portion of the payments owed to it.

     
    In this case, a business debtor (Biovance) had leased equipment from American National Bank (ANB), collateralizing one of the leases with a certificate of deposit held by that debtor.  The other lease was protected by a guarantee issued by the individual debtor (Julien) to ANB.  ANB had obtained permission to collect its collateral with respect to the first lease, and to liquidate its claims in Nebraska state court with respect to the second (which claims were subsequently settled).  The debtors argued, among other things, that as the confirmed bankruptcy plan provided for payment in full of all claims, the creditor was therefore obligated to immediately credit the amounts it had received.  ANB argued that a proof of claim filed under 11 U.S.C. § 502 need not be reduced by amounts recovered from a third party unless it stood the chance of a double recovery.

     
    The Bankruptcy Court of Nebraska agreed with ANB, noting that the confirmed plan is neither a recovery nor payment in full. It is only a promise to pay. The Court went on to hold that until such time as ANB had actually received its payment in full, it was entitled to assert the balance due against all concerned parties – including the debtors.

     
    Establishing the amount and priority for each creditor’s claim against the debtor fixes the limit of recoveries available to a creditor from the debtor’s estate. Such claims are, in the aggregate, an important factor in the creditors’ assessment of the feasibility of a debtor’s proposed reorganization – and in determining whether liquidation offers them a preferable recovery.

     
    The Biovance decision, though not surprising, nevertheless reminds creditors and their counsel to preserve all of the value of their claims, even if paid partially, until the claims are paid in full.

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