All items from Bankruptcy and Restructuring Blog

On February 11th, the three private plaintiff-appellants and eleven State plaintiff-appellants in State National Bank of Big Spring, et al. v. Jacob J. Lew, et al. filed briefs with the U.S. Court of Appeals for the District of Columbia Circuit in their appeal of the District Court’s decision that the plaintiffs lacked standing to challenge certain provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. No. 111-203, 124 Stat. 1376 (2010) (the “Dodd-Frank Act” or the “Act”).  The plaintiff-appellants challenged the “Orderly Liquidation Authority” granted to the FDIC under Title II of the Dodd-Frank Act on the basis that such authority supplants Chapters 7 and 11 of the Bankruptcy Codeand thereby strips the plaintiff-appellants of the statutory protections, amounting to property rights, afforded by the Bankruptcy Code to unsecured creditors.



Posted 4 weeks 2 hours ago

The Office of the Solicitor of the Department of the Interior has issued a legal opinion (the “Opinion“) to the Secretary of the Interior interpreting the statutory phrase “under federal jurisdiction” in the Indian Reorganization Act, 25 U.S.C. § 461 et seq. (1934), (the “IRA“).[1]  The Opinion is a result of the U.S. Supreme Court decision, Carcieri v. Salazar, 555 U.S. 379 (2009) (hereinafter, “Carcieri”), which limited Secretarial authority to take land into trust for tribes to those tribes “under federal jurisdiction” in 1934. The Opinion advises the Department of the Interior (“Interior“) that a tribe may be considered “under federal jurisdiction” in 1934 if it can show:



Posted 5 weeks 1 hour ago

The United States Bankruptcy Court for the Southern District of New York (the “Court”) in Weisfelner v. Fund 1 (In Re Lyondell Chemical Co.), 2014 WL 118036 (Bankr. S.D.N.Y. Jan. 14, 2014) recently held that the safe harbor provision of 11 U.S.C. § 546(e) did not bar unsecured creditors from seeking, under state fraudulent transfer law, to recover payouts made to former shareholders of a company acquired in a leveraged buyout.  This case highlights the limitations in section 546(e)’s so-called safe harbor provision, which protects settlement payments made to complete pre-bankruptcy securities contracts from later being attacked and avoided by the bankruptcy estate representative as fraudulent transfers.



Posted 9 weeks 3 days ago

By Kristy Young
BREAKING NEWS: In a contentious 4-3 decision and amid more than 300 community members on both sides of the issue, the City Council for the City of Richmond voted to continue pursuing its eminent domain plan in the early morning hours of Wednesday, September 11. The council also rejected two related measures, one that would withdraw the letters threatening eminent domain and another requiring Mortgage Resolution Partners, the firm providing financial backing for the City’s plan, to obtain insurance to insulate the city from legal liabilities.
Last month, the City of Richmond sent letters to mortgage companies seeking to purchase 624 loans secured by underwater properties (homes with mortgages greater than their current market value). The City’s letter threatened to use its power of eminent domain if investors resisted selling the loans.



Posted 31 weeks 1 day ago

By Kristy Young
BREAKING NEWS: In a contentious 4-3 decision and amid more than 300 community members on both sides of the issue, the City Council for the City of Richmond voted to continue pursuing its eminent domain plan in the early morning hours of Wednesday, September 11. The council also rejected two related measures, one that would withdraw the letters threatening eminent domain and another requiring Mortgage Resolution Partners, the firm providing financial backing for the City’s plan, to obtain insurance to insulate the city from legal liabilities.

Last month, the City of Richmond sent letters to mortgage companies seeking to purchase 624 loans secured by underwater properties (homes with mortgages greater than their current market value). The City’s letter threatened to use its power of eminent domain if investors resisted selling the loans.



Posted 31 weeks 1 day ago

By Eugene Kim
In re Majestic Star Casino, LLC, F.3d 736 (3rd Cir. 2013), the U.S. Court of Appeals for the Third Circuit broke from other courts by holding that S corporation status (or "qualified subchapter S subsidiary" or "QSub" status) is not property of the estate of the S corporation's bankruptcy estate. Other Circuits have routinely held that entity tax status is property of the estate.
In Majestic, Majestic Star Casino II, Inc. ("MSC II"), along with several of its affiliates (collectively, the "Debtors") was controlled by Barden Development, Inc. ("BDI"), whose sole shareholder was Don H. Barden ("Barden"). The Debtors, not including BDI or Barden, filed for bankruptcy under Chapter 11 in Delaware Bankruptcy Court on November 23, 2009.



Posted 35 weeks 4 days ago

By Eugene Kim
In re Majestic Star Casino, LLC, F.3d 736 (3rd Cir. 2013), the U.S. Court of Appeals for the Third Circuit broke from other courts by holding that S corporation status (or "qualified subchapter S subsidiary" or "QSub" status) is not property of the estate of the S corporation’s bankruptcy estate. Other Circuits have routinely held that entity tax status is property of the estate.

In Majestic, Majestic Star Casino II, Inc. ("MSC II"), along with several of its affiliates (collectively, the "Debtors") was controlled by Barden Development, Inc. ("BDI"), whose sole shareholder was Don H. Barden ("Barden"). The Debtors, not including BDI or Barden, filed for bankruptcy under Chapter 11 in Delaware Bankruptcy Court on November 23, 2009.



Posted 35 weeks 4 days ago

By Blanka Wolfe
One of the quintessential principles of the Bankruptcy Code is that when a debtor assumes an executory contract, it must assume the contract as a whole – a debtor cannot cherry pick the contract provisions it wants to assume while rejecting others. Two recent bankruptcy court decisions – In re Hawker Beechcraft, Inc. and In re Contract Research Solutions, Inc. – demonstrate a growing trend among debtors to test the parameters of this general rule. But they also provide guidance to parties on how they can structure their agreements to limit or expand a counterparty’s ability to selectively assume contract provisions in bankruptcy.
Section 365 of the Bankruptcy Code and the Rule Against Piecemeal Assumption
As a general rule, a debtor cannot retain the benefits of a contract without accepting its burdens, but must assume or reject a contract in its entirety. However, a single contract may be comprised of multiple agreements and a debtor can assume certain parts of a contract while rejecting others so long as the contract is divisible or severable under applicable state law. While the applicable state law will differ, the determination of whether a contract is divisible often turns on the intent of the parties as expressed by the terms of the contract.
Recent Decisions Testing Limits of the General Rule Against Piecemeal Assumption



Posted 36 weeks 3 days ago

By Blanka Wolfe
One of the quintessential principles of the Bankruptcy Code is that when a debtor assumes an executory contract, it must assume the contract as a whole – a debtor cannot cherry pick the contract provisions it wants to assume while rejecting others. Two recent bankruptcy court decisions – In re Hawker Beechcraft, Inc. and In re Contract Research Solutions, Inc. – demonstrate a growing trend among debtors to test the parameters of this general rule. But they also provide guidance to parties on how they can structure their agreements to limit or expand a counterparty’s ability to selectively assume contract provisions in bankruptcy.

Section 365 of the Bankruptcy Code and the Rule Against Piecemeal Assumption
As a general rule, a debtor cannot retain the benefits of a contract without accepting its burdens, but must assume or reject a contract in its entirety. However, a single contract may be comprised of multiple agreements and a debtor can assume certain parts of a contract while rejecting others so long as the contract is divisible or severable under applicable state law. While the applicable state law will differ, the determination of whether a contract is divisible often turns on the intent of the parties as expressed by the terms of the contract.
Recent Decisions Testing Limits of the General Rule Against Piecemeal Assumption



Posted 36 weeks 3 days ago

By Shawn K. Watts 
The United States Bankruptcy Court for the District of Delaware (the “Court”) recently upheld a $23.7 million make-whole payment (the “Make-Whole Payment”) in In re School Specialty (Case No. 13-10125), denying the assertion by the Official Committee of Unsecured Creditors (the “Committee”) that the fee is unenforceable under the United States Bankruptcy Code and applicable state law.
In May of 2012, School Specialty Inc. (“School Specialty”) borrowed $70 million from Bayside Finance LLC (“Bayside”) pursuant to a credit agreement containing a make-whole provision designed to ensure that Bayside would receive its bargained-for yield in the event that School Specialty prepaid the loan.
Less than a year later, School Specialty breached the credit agreement’s minimum liquidity covenant, which triggered the borrower’s obligation to make the Make-Whole Payment. The parties thereupon entered into a forbearance agreement, which recognized the borrower’s obligation for the Make-Whole Payment.



Posted 42 weeks 1 day ago