All items from Business Finance & Restructuring News - Weil

Walk a mile in my shoes
Walk a mile in my shoes
Yeah, before you abuse, criticize and accuse
Walk a mile in my shoes
(Elvis Presley, “Walk a Mile in My Shoes”)
Walk a mile in these Louboutins
But they don’t wear these *%!# where I’m from
I’m not hating, I’m just telling you
I’m tryna let you know what the %#!* that I’ve been through
(Iggy Azalea, “Work”)

Posted 11 weeks 35 min ago

When an oversecured creditor forecloses on a debtor’s property after the automatic stay has been lifted, does the Bankruptcy Code (as opposed to state law) govern recovery of attorney’s fees and other amounts from the sale proceeds? Does the bankruptcy court have jurisdiction over the distribution of such proceeds? In Goldsby v. 804 Congress LLC (In re 804 Congress), the United States Court of Appeals for the Fifth Circuit answered both questions in the affirmative, citing, among other things, the legislative intent of the Bankruptcy Code and the bankruptcy court’s role in resolving lienholder disputes.      
Foreclosure and Dispute over Proceeds

Posted 11 weeks 1 day ago

This is the third post in our Bitcoin Bankruptcy series on the Weil Bankruptcy Blog.  In the spring of this year, the shutdown of Japanese bitcoin exchange Mt. Gox made us think about what might have happened if Mt. Gox were a U.S.-based bitcoin exchange.  We began the series by taking a general look at what bitcoins are and how they work, and then we started to consider whether a hypothetical U.S.-based bitcoin exchange would be eligible to file for chapter 11 relief.

Our last Bitcoin Bankruptcy post concluded that a U.S.-based bitcoin exchange likely would be eligible for chapter 11 relief unless it were a stockbroker, commodity broker, or a bank that is not a multilateral clearing organization.  Today, we examine whether a bitcoin exchange might constitute a “stockbroker” under the Bankruptcy Code.
The Text of the Bankruptcy Code

Posted 11 weeks 2 days ago

In a unanimous decision, the New York Court of Appeals stuck a dagger through the heart of bankruptcy estates of failed law firms as it declared that profits earned on matters that former partners of the failed firm take with them to their new employers are not property of the former firm.  Those profits belong to the new firm that provides the legal services.

Posted 11 weeks 5 days ago

When a bank holding company files a chapter 11 case, a key factor to the success of the case will be whether the debtor previously made any commitment to a federal depository institution regulatory agency, such as the FDIC, to maintain the capital of the debtor’s bank subsidiary.  This is because section 365(o) of the Bankruptcy Code provides that the debtor is deemed to have assumed such obligations, and any claim for subsequent breach of these obligations is entitled to priority under section 507(a)(9) of the Bankruptcy Code.  The FDIC often demands that the debtor honor these commitments, and the viability of the chapter 11 case may depend on the debtor’s ability to either meet its obligations or pay the priority claim.  Otherwise, the debtor needs to successfully challenge the FDIC’s claim for breach.  In evaluating these challenges, courts often focus on whether the debtor is found to have made a “commitment” at all, but a recent decision by the United States Bankruptcy Court for the District of New Mexico highlights yet another potential challenge: whether the commitment was breached.  Although the case, In re First State Bancorporation, is a chapter 7 case, the chapter 7 trustee’s ability to raise this challenge could easily be applied in the chapter 11 cases of other bank holding companies.


Posted 11 weeks 6 days ago

Recently, the Bankruptcy Court for the Eastern District of Louisiana stayed its own judgment pending an appeal to resolve doubt over the bankruptcy court’s authority to enter judgment on counterclaims related to a management agreement among Highsteppin’ Productions, L.L.C. (HSP) and debtors George Porter, Jr., Brian Stoltz, David Russell Batiste.  The bankruptcy court issued the stay despite HSP’s consent to the bankruptcy court’s entry of judgment and HSP’s failure to object to the bankruptcy court’s authority until losing at trial because the law “is in a serious state of flux and is subject to varying interpretation.”  The bankruptcy court’s decision highlights the reluctance of certain bankruptcy courts to enforce their own judgments given the uncertainty of whether Article III of the Constitution permits the exercise of judicial power by bankruptcy courts on the basis of party consent.  The Supreme Court’s grant of certiorari in Wellness Int’l Network v. Sharif on this issue, which we discussed on July 2, could not come soon enough.
Making Music and Litigation

Posted 12 weeks 1 hour ago

This article has been contributed to the blog by David Rosenblat and Justine Erickson. David Rosenblat 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.
Three recent decisions of the Ontario Superior Court of Justice have considered the use of fairness opinions in the context of plans of arrangement. In Champion Iron Mines Ltd. (Re), 2014 ONSC 1988 (“Champion Iron”), Brown J called into question the court’s ability to consider fairness opinions in the context of a proposed plan of arrangement when the opinion contains limited disclosure of the underlying analysis. However, two subsequently released decisions, Bear Lake Gold Ltd. (Re), 2014 ONSC 3428 (“Bear Lake”) and Re Patents Royal Host Inc., 2014 ONSC 3323 (“Royal Host”), considered Brown J’s decision and affirmed the previous disclosure practices associated with fairness opinions.
Fairness Opinions and Plans of Arrangement

Posted 12 weeks 2 days ago

The Supreme Court Gets Its Grammar on: Interpreting the
Right to Postpetition Interest Under Section 506(b)

 In this Throwback Thursday, piece we revisit the decision of the United States Supreme Court in U.S. v. Ron Pair Enters. In a 5-4 decision, the Supreme Court held that section 506(b) of the Bankruptcy Code permits a creditor to receive postpetition interest on an oversecured claim even if the creditor does not have the benefit of an agreement providing for interest on the claim.
As an initial matter, the Supreme Court distinguished between two types of secured
claims — involuntary and voluntary. Involuntary secured claims are created by operation of law and do not require the consent of a debtor. Conversely, voluntary secured claims are created by an agreement between a creditor and a debtor. Prior to Ron Pair, the distinction between these two types of secured claims was relevant for determining postpetition interest. The claim at issue in Ron Pair was a governmental claim for unpaid taxes that was perfected by a tax lien on certain property owned by the debtor. As such, the claim was involuntary in nature.

Posted 12 weeks 6 days ago

We at the Stern Files recently expressed our disappointment with the lack of more meaningful guidance in Executive Benefits Insurance Agency v. Arkison regarding the nature and extent of bankruptcy judges’ authority, and it seems our prayers have been answered.

Posted 13 weeks 3 hours ago

On June 19, 2014, the Bankruptcy Court for the Southern District of New York once again granted Australia-based Octaviar Administration Pty Ltd. chapter 15 recognition as a foreign main proceeding, six months after the Second Circuit overturned an earlier order granting the same relief. The bankruptcy court overruled objections to the petition for recognition from Drawbridge Special Opportunities Fund LP, a defendant in litigation that the Octaviar court-appointed liquidators are pursuing in the U.S., finding that Octaviar has property in the U.S. to satisfy the eligibility requirements of section 109(a) of the Bankruptcy Code, as required by the Second Circuit for granting chapter 15 relief. The decision may indicate that the gateway requirements imposed by the Second Circuit are not such an impediment to foreign debtors seeking chapter 15 relief.
Octaviar’s directors placed Octaviar into voluntary administration in Australia in October 2008; the Supreme Court of Queensland, Australia, appointed Katherine Elizabeth Barnet and William John Fletcher as liquidators of Octaviar in July 2009. Octaviar first filed its chapter 15 petition seeking recognition of the Australian proceeding in August 2012.

Posted 13 weeks 1 day ago