All items from Business Finance & Restructuring News - Weil

NORTH OF THE BORDER UPDATE
This article has been contributed to the blog by Caitlin Fell and Justine Erickson. Caitlin Fell is an associate in the insolvency and restructuring group of Osler, Hoskin & Harcourt LLP and Justine Erickson is a summer student at Osler, Hoskin & Harcourt LLP.
Ontario courts have recently reviewed the reasonableness of fees of court-appointed officers in the insolvency context. In two recent cases, Bank of Nova Scotia v Diemer, 2014 ONSC 365, and Re TNG Acquisition Inc. 2014 ONSC 2754, the court considered what is fair and reasonable and, in both cases, lowered the fees requested by the relevant officers.
Legal Principles
In Diemer, the court discussed the law as it relates to fee approvals for court-appointed officers. The court referred to Re Bakemates International Inc., [2002] OJ No 3659, where the Ontario Court of Appeal held that there is an onus on a receiver to prove that the fees for which it requires approval are fair and reasonable, and that a court can adjust these fees. There are several methods to determine what is reasonable in each circumstance.



Posted 12 weeks 11 hours ago

This morning, the Supreme Court issued its hotly anticipated decision in Executive Benefits Insurance Agency v. Arkison. Since Stern v. Marshall, issues of bankruptcy courts’ constitutional authority have been debated up and down court systems throughout the country, and have, in one court’s colorful words, generated a “nationwide constipation of case-processing delays.” Although the Supreme Court’s decision today in Arkison ends the discussion on one of these issues, many questions remain.



Posted 12 weeks 1 day ago

Professional compensation is often a contentious issue in bankruptcy, as we have previously discussed. Compensation for chapter 7 trustees has been subject to a split among district and bankruptcy courts – some hold that fee awards for chapter 7 trustees should be based solely on the commission rates provided in section 326(a) of the Bankruptcy Code, while others hold that section 326(a) sets a maximum limit, rather than a standard for, awarding compensation.
In In re Rowe, the Fourth Circuit weighed in on the question of whether a bankruptcy court is required, in the absence of extraordinary circumstances, to compensate chapter 7 trustees on a commission basis.
In this case, the trustee requested a fee of $17,254.61. The bankruptcy court found that the trustee had failed to complete his duties properly or timely and reduced the fee to $8,020, which was the equivalent of a fee based on the trustee’s hourly rate. The trustee appealed the fee reduction, and the district court affirmed the bankruptcy court’s decision. The trustee then appealed to the Fourth Circuit.
The Bankruptcy Code:



Posted 12 weeks 4 days ago

Where a document filed under seal in a bankruptcy case has nothing to do with the bankruptcy itself, is the public entitled to access the document?  The United States District Court for the Eastern District of Virginia considered this unique question in Robbins v. Tripp, relying on both the statutory language of section 107 of the Bankruptcy Code and the policy underlying common law in holding that the report at issue should remain under seal.
Background
The appellee in Robbins, attorney John W. Tripp, had experienced some problems representing the debtors in a particular bankruptcy.  The United States Bankruptcy Court for the Eastern District of Virginia requested that Tripp’s attorney file a report detailing general problems with Tripp’s practice of law and recommending solutions.  Tripp’s attorney sought to file the report under seal. Over repeated objections of the U.S. Trustee, the bankruptcy court granted several motions by Tripp to file the report under seal temporarily. After the bankruptcy court entered an order permanently sealing the report, the U.S. Trustee filed its appeal.



Posted 12 weeks 5 days ago

Real estate lenders should be aware of a recent decision, In re RAMZ Real Estate Co., LLC, in which the United States Bankruptcy Court for the Southern District of New York held that a class of claims consisting solely of a secured tax claim was impaired for purposes of voting on a debtor’s chapter 11 plan where the plan provided for the full payment of the tax claim but allowed for the payment of postpetition interest at less than the statutorily provided interest rate, and that such impairment was not artificial for purposes of satisfying the requirements of section 1129(b) of the Bankruptcy Code.
Background
In RAMZ Real Estate, the debtor owned two pieces of commercial real property in upstate New York. One of the properties, a mixed-use building located in Kingston, New York, was encumbered by a first mortgage in favor of Community Preservation Corporation in the amount of $744,000. The debtor commenced its chapter 11 case after Community Preservation brought a foreclosure action in state court. Approximately eight months after the commencement of the chapter 11 case, the court entered an order valuing the Kingston property at $485,000, significantly less than the outstanding mortgage debt.



Posted 12 weeks 6 days ago

Purchasers beware: sometimes less is not more. As the successful bidder in Berlin & Denmar Distributors, Inc. found out the hard way, the failure to negotiate and document the terms of a purchase, including such basics as conditions precedent and liquidated damages, may leave a successful bidder on the hook for much more than it thought it bargained for.



Posted 13 weeks 1 day ago

Secured creditors naturally want to be repaid. Sometimes secured creditors go as far as asking a debtor to waive its right to seek bankruptcy protection. Although such clauses are frequently held to be unenforceable, we previously have discussed exceptions for LLCs. A recent case from the United States Bankruptcy Court for the District of Oregon, In re Bay Club Partners-472, LLC, joins the debate, albeit holding just the opposite — an “astute creditor’s” “cleverly insidious” bankruptcy waiver in an LLC operating agreement is not enforceable.
BACKGROUND
Bay Club Partners-472, LLC is a limited liability company that was formed to renovate and operate an apartment complex in Arizona. Prepetition, Legg Mason Real Estate CDO I, Ltd.’s predecessor loaned $23.6 million to Bay Club for the purchase of the apartment complex, and several years later, Bay Club defaulted.



Posted 13 weeks 4 days ago

As we’ve noted on several occasions, parties in interest in a bankruptcy case generally hope for “big money – no whammies” (“Think of Thanksgiving. Everyone wants the biggest turkey possible (except, perhaps, the chef) but all bets are off when it’s time to wrestle over who gets a leg.”). Putting aside those with short positions and those who would like to exercise control at the fulcrum position, certain other parties want to show that they have but a small turkey – plaintiffs asserting actions to recover constructively fraudulent transfers. In such a situation, the plaintiff must prove, among other things, that the transfers (i) were made while the debtor was insolvent or rendered the debtor insolvent; (ii) left the debtor with unreasonably small capital; or (iii) were made with the belief that the debtor would incur debts beyond its ability to satisfy those debts as they matured.



Posted 13 weeks 6 days ago