All items from Bankruptcy and Restructuring Blog

A bankruptcy court in Pennsylvania recently held that trade creditors who supplied goods to a debtor prior to its bankruptcy filing were not entitled to administrative priority status under Bankruptcy Code section 503(b)(9) because the goods were “received by the debtor” at the time they were placed on the vessel at the port overseas more than 20 days before the debtor’s bankruptcy filing, although the debtor took possession of the goods within the 20 day period.  In re World Imports, Ltd. — B.R. —-, 2014 WL 2750258 (Bankr. E.D. Pa., June 18, 2014).
Normally, trade creditors who have not received payment for their goods before the company’s bankruptcy filing can assert only unsecured claims for the value of those goods.  This means that such trade creditors have a last-in-line position to recovery for their claims after creditors holding secured and priority claims.  However, section 503(b)(9), added by the 2005 amendment to the  Bankruptcy Code, enhances the position of trade creditors who supplied the debtor with goods during the 20-day period prior to the bankruptcy filing.  Pursuant to section 503(b)(9), such creditors can assert an administrative claim for “the value of any goods received by the debtor within 20 days before the date of commencement of a case under this title in which the goods have been sold to the debtor in the ordinary course of such debtor’s business.”



Posted 6 weeks 1 day ago

The U.S. Supreme Court (“Court”) issued a 5-4 decision today in a case with implications for Tribal-State relations and the resolution of disputes under the federal Indian Gaming Regulatory Act, 25 U.S.C. § 2701 et seq. (“IGRA”).  The Court in Michigan v. Bay Mills Indian Community[1] found that the sovereign immunity of the Bay Mills Indian Community (“Tribe”) barred a suit filed by the State of Michigan (“Michigan”) to enjoin Class III gaming on the Tribe’s Vanderbilt property, land the Tribe purchased in fee located 100 miles south of its reservation.  In making its decision today, a majority of the Court:



Posted 16 weeks 1 day ago

Successor liability is often a concern for the acquirer when purchasing substantially all of a seller’s assets.  While this risk is well known, the circumstances under which an acquirer will be found liable under the theory of successor liability are less clear.  The recent decision in Call Center Techs., Inc. v Grand Adventures Tour & Travel Pub. Corp., 2014 U.S. Dist. Lexis 29057, 2014 WL 85934 (D. Conn. 2014), sheds helpful light on this issue by defining the continuity of enterprise theory of successor liability.
Under the continuity of enterprise theory, the acquirer can be found liable for claims against the seller brought subsequent to closing for presale conduct of the seller, even when there was no fraud or continuity of ownership. The “continuity of enterprise” theory is Connecticut’s approach to the common law “mere continuation” theory of successor liability.
In Call Center, Interline, a corporation owned by two secured creditors and previous consultants to the debtor company, Grand Adventures Tour & Travel (GATT), acquired all of GATT’s assets in a foreclosure sale Interline conducted. After taking ownership of GATT’s assets, Interline operated the same inter-airline travel business, in the same location, with mostly the same employees and management. Call Center Technologies subsequently brought a breach of contract claim against GATT, and Interline as GATT’s successor, at which point the court was forced to decide this successor liability issue.



Posted 20 weeks 1 day ago

According to New York’s Department of Health Commissioner, “nearly half [of] New York’s 227 hospitals are financially distressed.”[1]
What then is the future for New York’s hospitals, especially in light of healthcare reform and declining reimbursement rates?
Historically in New York, hospitals and the delivery of patient care have been viewed as “charitable” endeavors. In an effort to ensure that there are no conflicts of interests that adversely affect patient care, New York law generally prohibits investor-owned corporations from owning and operating health care facilities.
Realizing that for-profit investments could help stimulate and restructure distressed hospitals, Governor Cuomo’s proposed 2014-2015 budget and associated legislation attempted to authorize a two-year private equity pilot program (the “Pilot Program”) whereby up to five for-profit corporations, subject to approval by the Public Health and Health Planning Council (and subject to a number of other regulatory requirements), would be permitted to invest in various health care facilities.



Posted 20 weeks 2 days ago

On January 17, 2014, California Governor Jerry Brown declared a “State of Emergency” in California due to the severity of drought conditions across the State.  Since then, the California drought continues to be severe and unprecedented in recent years, and is taking a pervasive toll on California residents, businesses, farm land, foliage and wildlife.  Despite recent rainfall, local water districts and the State have called for voluntary, and in some locales, mandatory reduction in consumption of water.  After considering the severe human toll, anyone doing business with an entity located in California (or other western states experiencing similar drought conditions) that requires water for any business purpose, particularly farmers in Northern and Central California where there are fewer alternative sources of water, must be concerned about inventory and the impact of the drought on its supply chain.  Can my California contract counterparty fulfill its obligations to produce sufficient quantities of produce, dairy products, steel, flowers, honey, etc., to meet my contract needs?  Waiting for a delivery that never arrives, is delayed or arrives in lower quantity or, worse yet, quality, is not a viable option.  The key is to be prepared to find an alternative supplier so that production goals can be timely met.  Successful navigation of these issues requires careful contract drafting and contemplation in advance of new agreements, and critical analysis of existing contracts.  This article highlights the pertinent legal mechanisms at work and options for your business.



Posted 21 weeks 17 hours ago

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 25 weeks 5 days 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 26 weeks 5 days 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 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 1 year 6 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 1 year 6 days ago