Here’s an aggregation of some of my Twitter posts from May 25-31, 2018, with links to important cases, articles, and news briefs that restructuring professionals will find of interest. Don’t hesitate to reach out and contact me to discuss any posts. Thanks for reading!

BK RELATED CASES:

  • Midstream O&G Contracts – 2nd Cir. affirms the bankruptcy court’s decision in Sabine Oil, which authorized the rejection of midstream oil and gas contracts, stating: “Regarding the horizontal privity requirement, there is no meaningful legal distinction between the contract in Clear Lake & the one at issue here. Neither contract conveyed a property interest in subject land (in this case, the mineral estate). Accordingly, both fail to establish horizontal privity of estate and therefore both fail to create a real covenant.” In re Sabine Oil And Gas Corporation
  • Golden Shares – 5th Cir (1) “golden share” op. finds nothing worth mining, stating: “We decline to answer the BK Ct’s 1st certified question regarding the enforceability of “blocking provisions” & “golden shares” generally. That question is appropriately reserved for a case in which it is not hypothetical.” The rest of the 5th’s “Golden Share” opinion, however, is worth mining by private equity investors regarding when a person becomes a “minority controlling shareholder” under Delaware law (with the Court concluding here that “if Boketo is a controlling shareholder of FSNA, then the tail is wagging the dog.” In re Franchise Services of North America Inc.
  • Golden Shares – 5th Cir (2): Here’s a good analysis of the 5th Circuit’s “golden shares” decision in Franchise Services of N. America: Fifth Circuit Allows Shareholder-Creditor To Block Bankruptcy Filing, by Sarah Borders, Deff Dutson, and Sarah Primrose of King & Spalding
  • Standing – 9th: Failure to attend noticed hearing on and to object to the Ch 7 trustee’s untimely motion to assume an executory contract were irrelevant to whether the assumption order directly & adversely affected pecuniary interests for standing purposes. Matter of Point Center Financial Inc
  • Buying Avoidance Actions – D-AZ: The 9th Cir permits a sale of the trustee’s avoiding powers, including to an affiliate of the defendant to the action, and the creditor who purchased those avoidance powers is not required to pursue those powers for the benefit of all creditors. SVP Financial Services Partners LLLP
  • Lease Assumption via §365(p) but Not Reaffirmed – SD-CA: In a case of 1st impression, Ct examines whether a lease assumption agreement per Code §365(p) is enforceable after discharge if the lease assumption has not been reaffirmed per §524(c) and holds that reaffirmation is not required if the lease is assumed per Code section 365(p)(2). Bobka v Toyota Motor Credit Corporation
  • DOL Claims & Dischargeability – ED-VA: US Dept of Labor claims for unpaid wages are not subject to §523(a)(7)’s discharge exception since liquidated damages award sought by the Secretary serves a compensatory purpose, not a penal purpose. Acosta v JM Osaka Inc
  • IP Rights Post-Rejection – BK-CT takes a bold step in support of a nondebtor’s IP rights post-rejection & “respectfully declines to follow the 1st Cir holding [in Tempnology] and similarly aligns with the plain language reading of Section 365(g) advanced by Judge Easterbrook in the 7th Circuit.” In re Sima International Inc
  • Summary Judgment Denial as Non-Final Orders – BK-DE compiles cases in ruling that denial of summary judgment motion is not a final order implicating the bankruptcy court’s authority as a non-Article III court to enter final judgments. In re Anderson News LLC
  • Claims Objections and Choice of Forum Clauses – BK-DE: Objection to proof of claim is properly heard in the BK Ct despite “multiple challenges to Plaintiff’s choice of forum” and defendant’s request to dismiss, enforce a forum selection clause, abstain, or otherwise transfer the case to a NY court. In re Penson Worldwide
  • Mortgage Foreclosure and Offsetting Claims – BK-SD-FL: FL 5-yr statute of limitations for mortgage foreclosures doesn’t reduce a lender’s secured claim by subtracting amounts that were contractually due, absent acceleration, more than five years prior to commencement of the bankruptcy case. In re BCML Holding LLC
  • Maritime LIens and BK Jurisdiction – BK-HI cleans up on remand post-9th Cir reversal & holds that the stay does not apply to Plaintiff’s maritime claims & that the BK Ct lacked jurisdiction to rule on plaintiff’s maritime lien or to authorize the trustee’s sale of the vessel free and clear of the lien. In re Sea Hawaii Rafting LLC
  • Insurer’s Duty of Disclosure in Settlement – BK-ND-IL won’t dismiss case alleging CNA fraudulently concealed documents relating to disputed insurance policies from the Debtor. Further because of the special relationship between CNA and the Debtor, CNA violated its duty to disclose the documents, which prompted the parties to enter into a settlement agreement, which is approved herein. In re Oakfabco Inc
  • Waiver of 5th Am. Privilege – BK-ND-IL: In another well-cited opinion by Judge Thorne holds that because the 5th Amendment privilege was never raised in response to the discovery request, any such objection was waived. In re Wolf
  • FERC Proceedings and the Automatic Stay – BK-ND-OH enjoins FERC proceeding, saying it does not involve police powers, would interfere with the Court’s jurisdiction over executory contracts, and creates potential admin claims. In re FirstEnergy Solutions Corp
  • GM Ignition Switch MDL and related BK Appeals – SD-NY reviews 8 preceding opinions from the bankruptcy court and 2d Cir in issuing 11 rulings on appeals from bankruptcy court rulings as well as bellweather products liability trials in the GM MDL Litigation. In re Motors Liquidation Company
    • Court reverses BK Ct’s 2015 ruling on fraudulent concealment claims against New GM, holding that plaintiffs can proceed on breach of duty claims for not disclosing ignition defects & thus depriving plaintiffs of the ability to file timely proofs of claim, stating: “That is, the mere fact that they allege a form of injury relating to the bankruptcy proceedings does not mean that they allege a duty arising from those proceedings.”
    • Court further reverse BK Ct ruling that the claims of purchasers of used GM vehicles without the Ignition Switch Defect were barred by the Sale Order to the same extent as the claims of their predecessors in interest, stating: “Plaintiffs purchased GM vehicles & suffered accidents after the Closing Date, they fall squarely within the scope of the 2d Circuit’s holding that the Sale Order cannot be applied to those who ‘had no relation with Old GM prior to bankruptcy.’ “

INTERESTING CASES FROM ILLINOIS AND OTHER COURTS:

  • Standing and Remand Rights – 7th Cir: Upon finding that patrons in action removed to federal court lacked Article III standing, the district court was required to remand the case back to state court rather than dismiss it. Collier v SP Plus Corporation
  • Takings Claims Arising from the Harvey Flooding in Houston – Fed. Cl.: For those of you who like interesting takings cases, here’s one relating to the construction of dams that worked perfectly, but also flooded the land upstream in last year’s Houston floods. “The government’s argument based on preexistence fails. Palazzolo explicitly rejects the ‘sweeping[ ] rule’ that ‘[a] purchaser or a successive title holder … is deemed to have notice of an earlier-enacted restriction and is barred from claiming that it effects a taking. [Palazollo] explained that ‘[t]he State may not put so potent a Hobbesian stick into the Lockean bundle,’ thereby “put[ting] an expiration date on the Takings Clause,’ ‘strip[ping landowners] of the ability to transfer the interest which [they] possessed before the prior to the regulation,’ and ‘secur[ing] a windfall [to the State].’ [Palazzolo, 533 U.S.] at 627.” In re Upstream Addicks and Barker (Texas) Flood-Control Reservoirs
  • Insurance Duty to Defend Mixed Claims – IL AP 1: Legal malpractice claims alleging willful conduct throughout the complaint are excluded from insurance coverage and so there is no duty to defend. Illinois State Bar Association Mutual Insurance Company v Leighton Legal Group LLC

BK RELATED NEWS & ARTICLES:

  • Banking & Bankruptcy: Prof. Steve Lubben concludes: “After nearly a decade of waffling between ‘special’ & ‘normal’ bankruptcies for banks, we are ready to build upon what we learned & take the necessary further step: stop feigning that bank insolvency can or should happen in BK Ct.” A Functional Analysis of Sifi Insolvency, via SSRN
  • Dairy Woes in VT: Excellent raw video interviews with dairy farmers from Vermont. “Hinsdale said he tried for a year to sell the farm & found no buyers, even though it was priced less than the $2.5M the barn alone cost to build. Up to 800 people attended the auction, but only 300 bid. Farmers wanted to see what dairy assets are worth.” Says the farmer on the video, “If I gave them the farm, it wouldn’t cash flow; . . . the mantra is ‘get big or get our.’ ” Vermont dairy is in crisis: 4 years of bad prices take a toll even on industry leaders. Vermont dairy is in crisis: 4 years of bad prices take a toll even on industry leaders, via Burlington Free Press
  • Defeating Bankruptcy Law by Contract: There’s a lot to digest in Professor Westbrook’s trailer for his 2018 remake of “The End of Bankruptcy,” the Baird & Rasmussen 2002 classic. The End of Bankruptcy, by Jay Lawrence Westbrook via Credit Slips Blog
  • Farm Bankruptcy: This is a sad story. I wonder if the Chapter 7 trustee will pursue an avoidance action for the transfer of the farm to the joint debtors’ son 2 years before the filing. Maine organic farming icons file for bankruptcy, via BDN Business
  • Fiscal Expansion and BK: Don’t expect bankruptcies for a while. “Larry Summers has described the US [programme of fiscal expansion and reform] (accurately) as ”the most rapid increase in the debt-to-GDP ratio during peak business cycle times that has ever been seen in peacetime’.” Consequences of the Great Fiscal Divergence: Policy is raising US bond yields but effects on the dollar are ambiguous, via FT
  • Franchisee Bankruptcy: This dispute is worth following between Applebees & its 2nd largest franchisee, now in BK, involves the intersection of bankruptcy and franchise law. Copy of complaint here. Applebee’s Sues Franchisee In Ch. 11 Over Deal Breaches
  • Necco: “The company’s treats include Mary Jane candies, Clark Bars, Squirrel Nut Zippers and Sweethearts, the heart-shaped Valentine’s Day candy bearing romantic messages such as ‘Kiss Me’ and ‘Be Mine.’ Necco wafers have been around since before the Civil War.” Maker of Necco Wafers Gets Sweet Reprieve at Bankruptcy Auction, via WSJ
  • Pension Withdrawal Liability Settlement: “That obligation, valued at $95M, will be paid by the warehouse’s former owner, C&S Wholesale Grocers, which supplies Tops with about two-thirds of its merchandise. Tops already paid $29M of it. C&S will pay the remaining $65M due.” Pension Deal Removes Potential $180 Million Hurdle in Tops Bankruptcy, via The Buffalo News.
  • Retail: “Perhaps retail’s death is more a misunderstanding of a sector adapting to demand not just from the internet, but also a lopsided societal structure; where affluent urbanites shop in LCD lit stores, while the masses get by on Dunkin & Dollar General.” Retail is not dead, via FT
  • Valuation: Profs Morrison & Ayotte examine BK Ct opinions on valuation disputes with the goals of (1) understanding how parties and expert witnesses justify opposing views and (2) guiding judges in resolving valuation disputes, especially the pervasive errors in expert discounted cash flow (DCF) testimony. Valuation Disputes in Corporate Bankruptcy, via SSRN

LAW RELATED NEWS & ARTICLES:

LIFE AND THE WORLD GENERALLY: