All items from Business Finance & Restructuring News - Weil

“Possession is nine tenths of the law.” The United States Bankruptcy Appellate Panel of the Ninth Circuit amended that old adage in its recent decision in In re Newman, No. NV-12-1439-JuKiD (B.A.P. 9th Cir. Feb. 4, 2013), in which the Panel held that a federal income tax refund was subject to turnover, despite the fact that the debtor had spent the refund before turnover was sought.
Background:

Uncertainty lurks at the crossroads of arbitration and bankruptcy law.  It is well settled that bankruptcy courts will permit arbitration of non-bankruptcy issues, but when it comes to “core” issues arising under bankruptcy law, the line becomes blurred.  The overall arbitrability of bankruptcy issues is unpredictable, and recent caselaw highlights the tension between the policies underlying federal bankruptcy law and arbitration:  bankruptcy courts attempt to apply the strong public policy in favor of arbitration, but recognize that such public policy must have its limits when bankruptcy principles are the predominant issue before the court. 
Primer

This past Friday, the Bankruptcy Blog was down in Philadelphia covering the Wharton Restructuring and Distressed Investing Conference.  This year’s theme, Health of Nations: Distress, Recovery, or Revival, hit on a variety of timely topics and captured a general sentiment of skepticism balanced by opportunity.  Marcia Goldstein, Gary Holtzer, and Garrett Fail represented Weil on the Legal Restructuring and Operational Restructuring panels.  Here are some of the key takeaways.
Keynote 1 – Edward Altman, Professor, NYU Stern (State of the Markets)

Much ink has been spilled over the enforceability of third party releases in chapter 11 plans, including at the BFR Blog here and here.  A recent decision in the United States Bankruptcy Court for the District of Delaware shifts the burden back to impaired creditors to affirmatively opt out of “consensual” releases unless they want to be bound by such releases.  In In re Indianapolis Downs, LLC, Judge Shannon approved third party releases contained in a chapter 11 plan that bound impaired creditors who abstained from voting and otherwise did not affirmatively opt out of the third party releases.  By way of comparison, recent rulings by another bankruptcy judge in the District of Delaware, Judge Walrath, have held that third party releases are not permissible absent affirmative consent.