Here’s an aggregation of some of my Twitter posts from May 1-6, 2018, with links to important cases, articles, and news briefs that restructuring professionals will find of interest. Don’t hesitate to reach out and contact me to discuss any posts.

May 1 – 6, 2018


  • 3d Cir:  “The BK Ct didn’t consider the faster payment rate in isolation. Rather, it considered the 19 day difference in the context of the parties’ relationship, similarity of transactions, the manner in which payment was tendered, [the creditor’s new and unusual collection efforts during the Preference Period, and [the creditor’s] actions after learning of [Debtor’s] hardship. We agree w/the BK Ct analysis that, taken as a whole, [the creditor’s] conduct in the Preference Pd. deviated from the parties’ ordinary course of business practices.” In re AE Liquidation Inc
  • 8th Cir The “weak presumption that property purchased with entirety funds takes on the character of entirety property” fails to meet the higher evidentiary threshold necessary to establish the existence of a partnership. Cutcliff v Reuter
  • 9th Cir:  In a move you don’t see often, the 9th Cir. concisely summarizes Caremark and duty of care claims under Delaware Law. In re KSL Media Inc
  • BAP-6If the Debtors’ interest in certain real property was only a nontransferable equitable interest, as opposed to a transferrable legal interest, the trustee could not use, sell, or lease that interest and it would have no consequential value to the trustee. While the trust holds legal title to the property, the trust provisions allow the Debtors (and then others) to occupy it for the duration of their lives. Nothing in the document conveys legal title to the Debtors. Therefore, the Debtors’ interest is equitable in nature (and the parties agreed that if the Panel were to affirm the bankruptcy court’s determination that the Debtors’ interest was an equitable life estate that it would not be subject to turnover). In re Blasingame
  • D-CT:  Interesting litigation over an attorney opinion letter that opined as to the company’s corporate authority and due authorization to enter into the transaction. Court holds that “[t]he Opinion Letter is not a contract” and “Plantiffs do not have a claim as 3d party beneficiary.” Hence the breach of contract claim fails. UC Funding I LP Trustee v Berkowitz Trager And Trager LLC
  • B-ND-IL:  Judge Goldgar in Caesars rejects an agreed protective order because “the proposed order would have had the court find there had been ‘good cause shown,’ and no such showing had been made.” In re Caesars Entertainment Operating Co Inc
  • ND-IL:  “In sum, no precedent saves UPB’s counterclaim for equitable estoppel from § 1821(j)’s sweeping ouster of the courts’ power to grant equitable remedies.” FDIC, as Receiver for Seaway Bank v. Urban
  • ND-IL Court denies assignee for benefit of creditor’s motion to dismiss Lubrizol’s action against it for breach of fiduciary duty action for misdirecting payments that should have gone to the debtor’s former parent (Delta) but was accidentally sent to the debtor/assignor. “If the Court accepts as true the allegation by Lubrizol that the Trustee knew that the Delta payments did not actually belong to [the debtor/assignor], that would certainly infer a lack of good faith in the management of matters relating to the trust and would not comport with the terms of the Trust Agreement.” Lubrizol Corporation v Olympic Oil Ltd
  • MD-NC:  Court examines the record in detail in determining whether the BK Ct was right to dismiss a second voluntary petition filed the day after the same judge dismissed the first one. In re Rain Tree Healthcare of Winston-Salem LLC
  • B-WD-OK:  “The Court finds it incredulous that [the atty w/30 years of experience] would pay himself $348,404 in fees related to the bankruptcy over a two year period and not deem it appropriate to make any disclosure of the same before being ordered to do so by the Court.” In re Stewart
  • B-WD-PA:  The Stipulated Order did not extend the time for the Debtor to remove property  (i.e., the Mirrors) from the business premises, nor did it restrict the previous authorization granted to Landlord to exercise self-help remedies after vacation date.  Debtor’s motion for turnover and unjust enrichment against landlord to recover mirrors seized after vacation date denied. In re Flabeg Solar US Corporation
  • ED-PA:  Applying collateral estoppel would foreclose the possibility that the involuntary bankruptcy petitions against NMI were properly motivated, but that the filing against Rosenberg was not. . . . That result would not be warranted given the differences between the two proceedings and the underlying facts. Thus, the Court concludes that there is not sufficient identity of issues to permit offensive collateral estoppel.” National Medical Imaging LLC v US Bank NA

Interesting Non-Bankruptcy Cases from Illinois Courts:

  • 7th Cir:  Illinois recognizes three exceptions to economic loss rule: for personal injuries or property damage resulting from sudden or dangerous occurrences, for fraud, and for negligent misrepresentations by professional business advisors. Community Bank of Trenton v Schnuck Markets Inc
  • ND-IL:  “Taking all reas. inferences in ATG’s favor, the Ct can’t find the Agreement’s non-competition is geographically unreasonable as a matter of law at this stage, esp. in light of ATG’s assertions about its biz & the relatively short duration of the clause.” American Transport Group v. Power








Thanks for reading!

©2018, Steve Jakubowski

Here’s an aggregation of some of my Twitter posts from April 23-30, 2018, with links to important cases, articles, and news briefs that restructuring professionals will find of interest. Don’t hesitate to reach out and contact me to discuss any posts.

 APRIL 23 – 30, 2018


  • US Supreme Court:  Citing Marathon and Stern – “This Ct has not ‘definitively explained’ the distinction between public and private rights, and its precedents applying the public-rights doctrine have ‘not been entirely consistent.’ This case doesn’t require adding to the ‘various formulations’ of the public-rights doctrine. …  Our precedents have recognized that the doctrine covers matters ‘which arise between the Govt & persons subject to its authority in connection with the performance of the constitutional functions of the executive or legislative departments.’ …   In other words, the public-rights doctrine applies to matters ‘arising between the government and others, which from their nature do not require judicial determination and yet are susceptible of it.’ ” Oil States Energy Services LLC v Greenes Energy Group LLC
  • 2d:  New York’s internal affairs doctrine does not apply to in pari delicto. “Since we conclude that New York law applies to DLA’s in pari delicto defense based on an interest analysis, we need not reach the question of whether, under NY law, the law governing an affirmative defense to a claim is the same as the law governing the claim itself.” In re ICP Strategic Income Fund Ltd
  • 6th:  The Bk Ct correctly concluded that the assignment of “all the right, title and interest of [BOA] in, to, and under the Loan Docs,” did not include any “non-contract claims (including for breach of fiduciary duty) predating the Assignment. In re Modern Plastics Corporation
  • 8th The authority of BK Ct to issue “necessary or appropriate” orders did not allow it to order substantive consolidation of archdiocese estate with non-debtor parishes/parish schools even though these parishes and schools held the majority of archdiocese’s property and were supervised by the Archdiocese.  Also, there was no contention that parishes and schools were archdiocese’s alter egos, and isolated incidents of lack of corporate formality or commingling of assets did not overcome these barriers to substantive consolidation. In re Archdiocese of Saint Paul and Minneapolis
  • WD-WABK Ct properly followed the majority of courts in applying the accrual approach to the landlord’s administrative rent claim. In re Door to Door Storage Inc
  • B-ED-AR:  Good analysis by the Court in rejecting the creditor’s ordinary course defense to a preference action after a trial on the merits. In re Turner Grain Merchandising
  • B-MD-FLCourt takes a hatchet to an oversecured lender’s attorney’s fees. In re Unnerstall
  • B-SD-FL:  It isn’t accurate to say the 11th Cir in Edwards rejected the analysis of the 7th Circuit in Scholes. “The 11th Cir rejected only the argument that app’t of a BK trustee should be given the same effect as app’t of a receiver, automatically terminating the in pari delico defense. . . . .At the time the debtors filed their BK petitions, they had been cleansed of the bad actors and were no longer subject to the in pari delicto defense. As a result, under the holding in Edwards, the trustee is also free from the in pari delicto defense.” In re Palm Beach Finance Partners LP
  • B-ND-IL:  “The Barton doctrine does not apply to this matter as the Kraft Parties are not seeking to sue the Trustee in another court. Nothing in Barton or Linton or any of the foregoing stands for the proposition that a party cannot sue a trustee in BK Ct.” In re World Marketing Chicago LLC
  • B-ND-IL:  Ch 13 step-up plan providing for higher payments on secured car loan after admin. claims are paid violated the “equal monthly payment” requirement and could not be confirmed over the secured creditor’s objection. In re Williams
  • B-SD-NY:  Court reexamines whether claims are derivative or individual, complicated by the fact that Cayman law doesn’t authorize shareholder derivative actions. In re CIL Limited
  • B-SD-TX“A substantial majority of the 19 relevant factors” indicate that the truck drivers are independent contractors. Thus, individuals who have driven the Debtor’s trucks are not employees of the Debtor but rather are independent contractors. In re Pioneer Carriers LLC

Interesting Non-Bankruptcy Cases from Illinois Courts:

  • ND-IL:  “The Non-Compete Covenant clearly would prevent the employee from taking any number of plausible roles at another industry player, no matter how far removed from actual competition with Medix. Such a prohibition is unenforceable.” Medix Staffing Solutions Inc v Dumrauf


  • Injunctive ReliefProfessor Cass Sunstein in “Irreparability and Irreversibility” provides very valuable insights for those seeking injunctive relief and arguing irreparable harm.



Thanks for reading!

©2018, Steve Jakubowski

Here’s an aggregation of my daily Twitter posts from April 13-22, 2018,  linking to important cases, articles, and news briefs that restructuring professionals will find of interest. Don’t hesitate to reach out and contact me to discuss any posts.

April 13 – 22, 2018


  • BAP-9BAP-9 (Fitzhugh): BK court erred in applying the elements of § 727(d)(1) & (d)(2) bec Trustee had to prove, under both statutes, that he was unaware of the alleged fraud at the time the discharge was entered, not just at the time of the discharge bar date. In re Fitzhugh
  • BAP-6The sad story of this great hockey player continues, with the BAP-6 affirming his chapter 11 plan, premised upon a $5M five-yr contract. In re Johnson.  For further background, see How Jack Johnson’s Parents Screwed Him And Left Him Millions In Debt, from Deadspin
  • ND-IL:  Blixseth and others’ suits against Cushman and Wakefield for inflated appraisals are defended by the ins. carrier under a reservation of rights. Court court now begins untangling those rights, granting summary judgment on some claims and setting others for trial. Cushman And Wakefield Inc v Illinois Nat’i Ins. Co.
  • ND-IL:  State court foreclosure judgment & sale are “final judgments” for purposes of applying Rooker-Feldman notwithstanding the interlocutory character of the judgment of foreclosure under state law. Kyles v Federal Home Loan Mortgage Corp
  • B-ID:  Court doesn’t believe debtors no longer have the debtor-wife’s $46K diamond/platinum wedding ring given that a week before meeting with a bankruptcy attorney, and less than 2 months before filing for BK, the debtor-wife discovered that her debtor-hubby was having affair, and promptly threw ring into lake behind the home. Cutcliff v Reuter
  • B-ND-IL:  Judge Thorne disembowels Geraci Law and Semrad Law, while providing a good historical narrative on the law regarding attorneys fees in BK: “The court begins with the question as to whether or not the attorneys have violated any fiduciary obligations they owe to their clients in seeking payment of fees on an accelerated basis in their ch 13’s plans with the disclosures that were given in these cases. The court concludes that in these cases, since the cases are consumer chapter 13 cases where the attorney is to be paid at least partly over time pursuant to the chapter 13 plan, the attorneys had a minimum duty to disclose the negative ramifications of an early dismissal on the interests of the debtor prior to or simultaneously with entering into the retention agreement.” In re Carr
  • B-ED-LADebtor’s CEO is personally liable for the debtor’s admin. claims, not as alter ego, but for failing to perform maintenance and post-rejection turnover of the lenders’ aircraft collateral. In re FlyGLO Inc
  • B-MAEmploying a “multi-factor” approach, a Court will uphold contractual provisions waiving protections of the automatic stay when they are incorporated in court orders approving settlement agreements or orders confirming Chapter 11 plans. In re A Hirsch Realty LLC
  • B-ND-TX:  Single petitioning creditor gets order for relief entered with finding that the alleged debtors only have 11 creditors, which was really cutting it close given the court’s declaring a law firm with a questionable claim to be a non-creditor. In re Acis Capital Management LP
  • B-ED-WIWhen is a breach of contract case actionable as a 542 turnover claim? Court here denies Univ. of WI’s summary judgment motion against a claim it failed to fund a biodigester’s deficits & construction costs, ruling that the claim survives summary judgment because the action was brought as a 542 turnover claim. In re University of Wisconsin Oshkosh Foundation Inc

Interesting Non-Bankruptcy Cases from Illinois Courts:

  • IL-AP (5th):  Settling parties failed to meet their burden to make a preliminary showing that the mass tort environmental settlement was legally valid and that the terms of the Settlement Agreement satisfied the “equitable apportionment policy” underlying the Contribution Act. Custer v Cerro Flow Products Inc
  • ND-IL “For Motorola, none of this matters, because – its lawyers assure us, with absolutely no evidentiary support – that the email was the necessary first step in the obtaining legal advice. Unfortunately saying so doesn’t make it so. It cannot be too often repeated or too strongly emphasized that while a particular communication may be privileged, the underlying facts are not.” Motorola Solutions Inc v Hytera Communications Corp
  • ND-IL:  Neptun’s clearest articulation of the alleged harm is that “[d]esiring & selecting a more expensive & poorly-performing product in advance of any bidding, & irrespective of performance is anticompetitive.” That theory has no recognition in the law, for good reason. Neptun Light Inc v City of Chicago
  • ND-IL:  Court reviews various types of website “consent to terms” agreements, including “clickwrap,” “browsewrap,” and hybrid or “sign-in wrap” agreements and rules that personal jurisdiction over a defendant cannot be based on an electronic forum selection clause merely based on having clicked an “I agree to terms and conditions” box as a condition to completing site’s application process. TopstepTrader LLC v OneUp Trader LLC
  • ND-IL:  “The Non-Compete Covenant clearly would prevent the employee from taking any number of plausible roles at another industry player, no matter how far removed from actual competition with Medix. Such a prohibition is unenforceable.” Medix Staffing Solutions Inc v Dumrauf



  • Weinstein BKCan a license agreement related to the Hotel Mumbai movie that was rescinded by virtue of an uncontested letter sent to The Weinstein Co prepetition still be sold in the 363 Sale. This adversary complaint seeks that answer.   Adv. Cplt. No. 18-50397, Hotel Mumbai Pty Ltd. v. TWC LLC.


Thanks for reading!

©2018, Steve Jakubowski

Here’s the second installment of My Twitter Feeds for Restructuring Professionals from April 2018.  Part 1 is here.

APRIL 10-12, 2018


  • B-SDNY: “The issue in chapter 15 cases then is whether to recognize and enforce the foreign court order based on comity. Well-settled case law in the UK expressly authorizes third-party releases in scheme proceedings, particularly the release of affiliate-guarantees. The UK Court sanctioned the Avanti Scheme, and the Court concludes that the Avanti Scheme should be recognized and enforced in the US. Although no objections . . . were filed–and Court has already entered an order enforcing the Avanti Scheme –the Court believes that an explanation of the reasons for its ruling is appropriate.” In re Avanti Communications Group PLC
  • B-PA finds LLC’s voluntary petition was ultra vires in violation of the operating agreement, and then appoints a chapter 11 trustee instead of dismissing the case. In re Advanced Vascular Resources of Johnstown LLC
  • B-DE orders Richard, Layton can keep $75K retainer for chapter 7 case post-sale of all assets since “even if returned, [it]would not be property of the estate pursuant to the APA & thus the Trustee does not have standing to pursue this cause of action” In re EP Liquidation LLC
  • B-NC: “Individual shared responsibility payment” imposed for failure to obtain health insurance under the Affordable Care Act, 26 U.S.C. § 5000 is a penalty, not a tax, for priority purposes under 11 U.S.C. § 507(a). In re Parrish
  • B-TX: Postpetition interest that accrues on DSO claims under applicable nonbankruptcy law must be paid through Chapter 13 plans. In re Randall
  • B-TN: Any back child support payable to debtor on date that her bankruptcy petition was filed was held by debtor in constructive trust for benefit of any minor children over whom she had custody.  In re Rush
  • B-MI: property deeded to debtor and her husband as tenants by the entirety did not provide trustee with longer one-year period for objecting to debtor’s claim of exemption in property as fraudulently asserted. In re Rosich
  • D-MN: US prop assessor’s opinion testimony re FMV in quiet title action was expert opinion, so US’s failure to disclose him as expert precluded Court’s consideration in action seeking to remove federal tax lien
  • D-MN examines when a default judgment should be given preclusive effect in a nondischargeability proceeding. Seibert v Cedar Rapids Lodge And Suites LLC
  • BAP-9Case of first impression for any appellate court regarding the application of Barnhill to Section 549(a) transfers, prompting the Court to say “[t]his case brings to mind the adage: “No good deed goes unpunished.” In re Cresta Technology Corporation
  • D-FL: “Many courts have held that service of a subpoena can be proper under Rule 45, absent personal service, because there is no explicit requirement in the rule itself on the method of delivery” In re MTS Bank
  • B-AL: Transferee’s mere conclusory statements that it continued providing services until the filing of the petition were insufficient to support “subsequent new vale defense” absent factual allegations that services had value to the debtor. In re SpecAlloy Corporation

Interesting Non-Bankruptcy Cases from Illinois Courts:

  • D-IL: Gross negligence is insufficient to support a finding of intent as required under Rule 37(e)(2), but the lesser sanction under Rule 37(e)(1) is appropriate. . . . To address the prejudice resulting from Defendant’s spoliation of evidence, the Ct recommends that the parties shall be allowed to present evidence to the jury regarding the spoliated evidence & the likely relevance of the lost information.” Schmalz v Village of North Riverside
  • D-IL: Court cannot conclude that Taylor’s possibly “heavy-handed” control of Root constituted impermissibly “oppressive” conduct warranting his removal as an officer [per ILCS §§ 5/12.56(a)(3), (4)].” Root Consulting Inc v Insull
  • D-IL: “A corporate officer who personally negotiated the terms of a contract that gave rise to a tortious interference claim had ‘participated’ in the claim” and so can be sued in his personal capacity. CSX Transportation Inc v Five Star Enterprise of Illinois Inc
  • 7th Cir: Central issue is whether Illinois or Missouri tort law offers a remedy to card-holders’ banks against a retail merchant who suffered a data breach, and beyond the remedies provided by the network of contracts that link merchants, card-processors, banks and card brands to enable electronic card payments. The plaintiff banks assert claims under the common law as well as Illinois consumer protection statutes. Our role as a federal court applying state law is to predict how the states’ supreme courts would likely resolve these issues. We predict that both states would reject the plaintiff banks’ search for a remedy beyond those established under the applicable networks of contracts. Accordingly, we affirm the district court’s dismissal of the banks’ complaint. Community Bank of Trenton v Schnuck Markets Inc




Thanks for reading!

©2018, Steve Jakubowski

Thanks in large part to inspiration from the Seventh Circuit’s Chief Judge Diane Wood, it has been my habit since 2003 to review bankruptcy cases decided anywhere in the US sent to me via daily WESTLAW alerts. By 2013, however, with bankruptcy blogs proliferating, my 4 kids in grade school, junior high, and college, respectively, and everyone’s attention span narrowing as time demands multiplied exponentially, I found myself increasingly drawn to Twitter. 

It’s on Twitter that I transitioned from blogging to tweeting, often citing daily to cases, figuring that restructuring professionals can figure out the significance of a case for themselves without me having to explain it to them in a blog post. And even if they can’t, it’s likely at least one person has already written about it.

The problem with Twitter, however, is that it’s hard to find my professionally relevant posts since several of my tweets are not restructuring related. As such, the only way to find these posts is to scroll down through my posted tweets, which at 7,500 and counting is virtually impossible.

So starting today, I’ll be aggregating my old (and current) Twitter feeds here, working backwards through time. It’s a pretty good refresher course too for those who have followed me for a while.

You’ll also easily be able to find cases or articles of relevance to you by doing a search on this blog site alone. Given that this blog’s been around for over 12 years and has lots of uploads and posts, all searchable through this site, you never know what you’ll find! And with historical twitter posts continually being added along with the new, even more hits relevant to your practice may appear in your searches.

Thanks for reading both here and on my Twitter feed!

APRIL 1-9, 2018


  • IL AP 2d – plaintiff’s atty waited until less than 2 minutes before deadline to electronically file motion & was unable to upload it in time, & since deadline was jurisdictional, the trial ct lacked authority to consider the untimely motion to reconsider Peraino v County of Winnebago
  • 2d Cir: “It is axiomatic that judicial estoppel—an equitable doctrine—is to be construed in light of eq. principles. It seems equally evident…the balance of equities tips overwhelmingly in favor of debtor yet the D-CT found judicial estoppel. What went wrong? Judicial estoppel cannot extend to the ‘unusual case’ in which a debtor’s nondisclosure had at most a ‘de minimis effect’ on a prior bankruptcy proceeding.”Clark v AII Acquisition LLC
  • 5th Cir: In valuing, for cramdown purposes, collateral of creditor making 1111(b)(2) election, bankruptcy court had flexibility to select appropriate valuation date, while subtracting from collateral value the value of media-rights costs that would never be paid under reorg plan because they were waived, and since this would not benefit creditors it was in the nature of an impermissible surcharge. Matter of Houston Regional Sports Network LP
  • BK MD FL issues administrative order providing blanket confirmation that the automatic stay does not prohibit Florida Tax Collectors from selling tax certificates relating to property of a debtor in bankruptcy or a bankruptcy estate. In re Administrative Order Regarding Sale of Tax Certificates by Florida Tax Col
  • 11th Cir: Attorney violates Section 526(a)(4) if he instructs a client to pay his bankruptcy-related legal fees using a credit card. Cadwell v Kaufman Englett And Lynd PLLC
  • BK ND IL in Direct Media finds contempt for blatant violations of several cash collateral orders and permits damages measured by “reasonable attorneys’ fees on matters directly related to the actions in question.” In re Direct Media Power Inc
  • BK MD FL: A party may recover prevailing party fees for an improper invol. BK filing by post-trial motion, except-per Rule 7054-when substantive law requires the fees be proven at trial, thus post-trial fees not proven are disallowed. In re Kraz LLC
  • SDNY: Creditor that, per carve-out provision in amended plan, could opt into or out of the treatment that it would receive as result of decision to substantively consolidate Ch 11 estates of holding co wasn’t harmed by decision, so has no standing to appeal it. In re Republic Airways Holdings Inc
  • BK ND IL allows payment of attorney’s fees of assignee for benefit of creditors over objection of chapter 7 trustee. In re Stainless Sales Corporation




Copyright 2018, Steve Jakubowski

This case should sufficiently concern private equity investors who extend secured credit, appoint a board member, are granted an option to purchase the business, and then foreclose and take over the business when the debtor–predictably–defaults.

In this 12/8/17 decision (In re Comprehensive Power, Inc., 2017 WL 6327192, Bankr. D. Mass), Judge Panos notes that the lender (“Moog”) moved to dismiss the Chapter 7 Trustee’s recharacterization / fraudulent transfer complaint because “it is merely a non-insider creditor that extended a loan to the Debtor after the parties executed financing documents memorializing the transaction, which included a security agreement granting Moog a security interest in substantially all assets of the Debtor.”

All Moog did, it argued, was enforce its rights as a secured creditor post-default under the transaction documents by accepting surrender of the collateral through a strict foreclosure and then credit bidding about 1/3 of its $6 million loan at a UCC sale. And sure, its board designee was funneling confidential information, but don’t private equity lenders always designate a board member precisely to ensure they get confidential information given the amount of the lender’s capital that is at risk? What’s wrong with that?

Well, Judge Panos found enough wrong with it to sustain all of the Trustee’s counts against the lender except for equitable subordination.  He sustained the Trustee’s recharacterization count because 6 of 11 AutoStyle factors were present, stating:

Here, drawing reasonable inferences in his favor, the Trustee has pleaded sufficient facts in support of at least six of the recharacterization factors, sufficiently stating a plausible claim for recharacterization of Moog’s debt. While the Trustee admits that the names given to the documents align with traditional naming constructs for financial instruments, he argues that, overall, there were components of the transaction that revealed its true nature to be equity rather than debt. With respect to the recharacterization factors, the Trustee points to allegations relating to the presence or absence of a fixed maturity date and schedule of payments and the presence or absence of a fixed rate of interest and interest payments to support his contention that the terms of the instruments and circumstances of the transaction were “atypical.”

Specifically, the Trustee alleges: (i) Moog’s standard practice was to engage in acquisitions, not provide loans, thereby indicating that Moog was implementing a unique “loan-to-own” transaction rather than establishing a true lender-borrower relationship; (ii) monthly interest payments were outside of the norm; (iii) the Debtor could extend maturity if the option was not exercised by Moog in connection with the Option Agreement; and (iv) Moog obtained substantive rights in the context of the transaction which are not typically given to traditional lenders, such as the right to appoint a representative to the Debtor’s Board and an option to acquire the Debtor’s assets or stock. Compl. ¶¶ 24–26, 50.

With respect to the source of repayments, the Trustee alleges that parties contemplated that the Moog financing could be repaid through Moog’s acquisition of the Debtor’s assets or stock, which could potentially support a claim for recharacterization. Id. Exs. A–B. As to the adequacy or inadequacy of capitalization, the Trustee alleges that the Debtor was undercapitalized and/or insolvent during relevant times, including at the time of the Surrender Agreement. Id. ¶¶ 32–34. The Trustee supports the allegation that the Debtor was undercapitalized and/or insolvent by further alleging that the Debtor (i) suffered losses in 2012 and 2013 that would have bankrupted the Debtor if it did not receive cash advances; (ii) encountered cash flow problems just months after receiving “advances” from Becana and others; (iii) had “trouble keeping pace with payments owed to employees, vendors and others”; (iv) depleted the $6 million in funding received from Moog in just a few months; and (v) defaulted on obligations to Moog less than ten months after the financing transaction. Id. ¶ 49. Whether evidence supporting these allegations could contradict the Trustee’s theories regarding the value of the Debtor’s business at the time of the transactions with Moog is a consideration that is more appropriately addressed when the record has been developed.

Regarding the Debtor’s ability to obtain financing from outside lending institutions, the Trustee alleges that the Debtor encountered cash flow problems and required further cash only months after receiving $6 million from Moog, suggesting the Debtor would be unlikely to obtain a traditional loan because of its cash flow issues. Id. ¶¶ 49, 51. The Trustee further alleges that no sinking fund was available to the Debtor to provide repayments, which Moog acknowledges, but argues is a “neutral” factor with respect to recharacterization. Mot. ¶ 61.

In sum, taken together, the factual allegations and the inferences drawn in favor of the Trustee are sufficient to state a plausible recharacterization claim.

In sustaining the actual fraudulent transfer claims against the lender, he stated:

In October 2005, LexBlog went live with my Bankruptcy Litigation Blog, then the internet’s first bankruptcy-related blog and only the 16th blog that LexBlog had taken live. The blog had a strong 8 year run, earning more than 1 million substantive hits, including from courts in every federal district as well as the United States Supreme Court. Each year, new friendships developed, many of which have stood the test of time.

By 2013, however, with bankruptcy blogs proliferating, my 4 kids in grade school, junior high, and college, respectively, and everyone’s attention span narrowing as time demands multiplied exponentially, I found myself increasingly drawn to Twitter, where I barked over 6,800 tweets, many of which included links to topical cases, articles, or news reports that interested me, and hopefully other restructuring professionals.

Then, early this year, I went looking for my blog, but it was gone!  Notices of the pending expiration of my blog’s domain never reached me, so the domain expired, and eight years of content was erased in an instant (proving yet again that “an ounce of prevention is worth a pound of cure,” as the English lawyer Henry De Bracton said about 750 years ago )!

It’s one thing not to blog for 4 years; it’s another to lose 8 years of content, 1,500 hours of labor, and nearly 400 substantive posts and have nothing to show for it!  So I decided to relaunch the blog. What everyone originally thought would be a simple reboot of content from LexBlog’s archives turned out to be a gargantuan task taking LexBlog’s superb and unflappable staff five more months to complete as they painstakingly recreated the blog from scratch, link by link, post by post.

So, the Bankruptcy Litigation Blog is back, and what better time to start than Chanukah (discussed in this prior post)! 

Some blogs only aggregate content. Some blogs only create content. This blog has done both, and will continue to do so, though likely in shorter posts that make the point succinctly.

As before, guest posting is always available for professionals looking for a platform to establish their voice on bankruptcy and restructuring issues. Timely ideas always welcome!

Happy Holidays to all!

Steve Jakubowski

© Steve Jakubowski 2017



Blogging has enabled me to meet many people I otherwise likely would never have met.  On such person is Yitzhak Greenberg, a bankruptcy attorney in New York City who clerked for Judge Arthur Gonzalez and whose practice is focused on all aspects of bankruptcy (including the representation of both debtors and creditors).  Yitzhak is passionate about contributes to the advancement of our understanding of complex bankruptcy law issues.  Among other things, he has written for The Bankruptcy Strategist and the Norton Bankruptcy Advisor and has participated in panels sponsored by the PLI and Law Journal Newsletters.  He can be reached at or

Yitzhak has long taken an interest in the bankruptcy jurisprudence expounded by the US Supreme Court.  His discussion in the July 2011 issue of the Norton Bankruptcy Advisor, entitled Credit Bidding After Philadelphia Newspapers: The Fat Lady Has Not Sung, merited citation by the Radlax petitioner in its opening merits brief on the subject of credit bidding.

Yitzhak now graciously offers, through this guest post, an analysis of whether a bankruptcy court can enter a final order in a Stern proceeding with the parties’ consent.  Yitzhak shows that the seemingly obvious answer is anything but.  His discussion is a good preview of the issues that the Supreme Court will address this coming term in Bellingham (see also Weil Bankruptcy Blog for further background into case).  

The famed Professor Karl Llewellyn equated the study and practice of law to the boy in the nursery rhyme who jumps into a bramble bush, thereby scratching out his eyes, and then summons "all his might and main" to jump into a second bush, thereby having them scratched back in.  Yitzhak in this guest post offers "a modest proposal" out of the bramble bush through amendments to the local district courts’ standing orders of reference.  Still, even if Courts were to adopt Yitzhak’s proposal, thereby avoiding further needless brain damage on the issue, the Supreme Court will rule on the issue, thus allowing us to both have the bramble bush and eat it (as suggested by John Heywood in his book of proverbs in 1546).

Special thanks to Yitzhak for offering to share his wisdom with readers of this blog.  My blogging has been a definite casualty of a busier work schedule and pretty mischievous twin boys (now five years older than in this post).  I hope Yitzhak’s second guest post (first one on "Stub Rent") encourages other guest post submissions (and his return).  With total page views on the blog to date at over 750,000, it’s a good way to hit one’s target audience.

Continue Reading A Guest Post by Yitzhak Greenberg: “Deeper into the Darkling Abyss: The 5th Circuit joins the 6th and 7th Circuits in Finding that Consent Cannot Cure A Bankruptcy Court’s Stern Infirmity”

Last week I published a blog post on the US Supreme Court’s unanimous decision in Bullock v. BankChampaign, N.A., No. 11-1518 (May 13, 2013) (pdf), that focused on the Court’s application of the noscitur a sociis canon to the bankruptcy nondischargeability statute dealing with “defalcation in a fiduciary capacity.”

I write this second blog post discussing Bullock because I think the case will prove especially noteworthy for those who deal with the concept of “recklessness” in their civil practice.

Professor Ann Morales Olazábal authored an article entitled Defining Recklessness: Doctrinal Approach to Deterrence of Secondary Market Securities Fraud, 2010 Wis. L. Rev. 1415, in which she looked at attempts to define “recklessness” in tort, criminal, patent, securities, and employment law (among others) and concluded that “the single common thread among the recklessness standards employed in this mixed bag of legal inquiries may be their opacity and lack of susceptibility to any kind of uniform application.”  Id. at 1422.  In the federal securities context, she writes, “[a]s in other legal arenas, recklessness in the 10(b) context has nowhere been defined serviceably or with any real consistency.”  Id. at 1424.

In What Is Securities Fraud?, 61 Duke L.J. 511, 534-36 (2011), Professor Sam Buell wrote that courts in the securities law context differ on whether recklessness should be defined by a “conscious disregard” or a “super-negligence” standard:

Continue Reading US Supreme Court’s Decision in Bullock: A Significant Development in Determining “Recklessness” Under Federal Law?

The US Supreme Court has long taught the importance of certain canons of interpretation unique to bankruptcy law, the more significant ones being:

  • The Fresh-Start Policy:  A primary purpose of bankruptcy is to relieve the debtor “from the weight of oppressive indebtedness and permit him to start afresh….” (Local Loan Co. v. Hunt, 292 U.S. 234, 244 (1934).
  • Equality of Distribution:  “[H]istorically one of the prime purposes of the bankruptcy law has been to bring about a ratable distribution among creditors of a bankrupt’s assets….”  Young v. Higbee Co., 324 U.S. 204, 210 (1945); Union Bank v. Wolas, 502 U.S. 151, 161 (1991).  “Any doubt concerning the appropriate characterization [of a bankruptcy statutory provision] is best resolved in accord with the Bankruptcy Code’s equal distribution aim.”  Howard Delivery Serv., Inc. v. Zurich American Ins. Co., 547 U.S. 651, 667 (2006) (discussed at length in this blog post).
  • Narrow Construction of Priority Provisions:  Canon favoring equality of distribution gives rise to a “corollary principle that provisions allowing preferences must be tightly construed.”  Howard Delivery Serv., Inc. v. Zurich American Ins. Co., 547 U.S. 651, 667 (2006).
  • Narrow Construction of Exceptions to Discharge:  “[E]xceptions to the operation of a discharge … should be confined to those plainly expressed.”  Gleason v. Thaw, 236 U.S. 558, 562 (1915).  This furthers bankruptcy’s policy of achieving a “fresh start.”  Kawaauhau v. Geiger, 523 U.S. 57, 62 (1998).
  • Significance of Past Bankruptcy Practice:  “[Do] not read the Bankruptcy Code to erode past bankruptcy practice absent a clear indication that Congress intended such a departure.”  Pennsylvania Dept. of Public Welfare v. Davenport, 495 U.S. 552, 563 (1990).

  • Property Rights in Estate Assets Dependent on State Law:  “Property interests are created and defined by state law…. Unless some federal interest requires a different result, there is no reason why such interests should be analyzed differently simply because an interested party is involved in a bankruptcy proceeding.”  Butner v. United States, 440 U.S. 48, 57 (1979).

  • Creditors’ Rights Dependent on State Law:  “What claims of creditors are valid and subsisting obligations against the bankrupt at the time a petition in bankruptcy is filed is a question which, in the absence of overruling federal law, is to be determined by reference to state law.”  Vanston Bondholders Protective Comm. v. Green, 329 U.S. 156, 161 (1946).

Last year, Justice Scalia and Professor Bryan Garner published a phenomenal book, Reading Law: The Interpretation of Legal Texts.  Many know of Justice Scalia, though he’s probably at the low end of the already (unfairly) historically low favorability rating for the Supreme Court.  Many fewer know of Professor Garner, but if you’re not his fan, you should be.  He’s prolific beyond words, which are his specialty (and as to which he has no modern equivalent).  His writings include: Garner’s Modern American Usage, Legal Writing in Plain English, Garner’s Dictionary of Legal Usage, and The Winning Brief, each one of which should be on your bookshelf.  He also has been the Editor-in-Chief of Black’s Law Dictionary since 1995.  Follow Professor Garner on Twitter and learn, among other things, of the latest smiling antiquarian bookseller whose shelves he recently raided.  Before Reading Law, Justice Scalia and Professor Garner published an invaluable guide to litigators entitled, Making Your Case: The Art of Persuading Judges (2008).

In the book’s introduction, Chief Judge Easterbrook called Reading Law “a great event in American legal culture.”  Judge Posner, however, wasn’t quite as enamored with it, which apparently got a bit under Justice Scalia’s skin, prompting this retort from Judge Posner.  (All seems well now, however, as Judge Posner was placed at the same table as Justice Scalia at last month’s Chicago Lawyers’ Club luncheon event promoting the book, though as fate would have it Justice Scalia’s plane was late, so we’ll never know how that seating arrangement would have worked out.)

The book cites to 57 interpretive canons (split among 5 “fundamental principles,” 11 “semantic” canons, 7 “syntactic” canons, 14 “contextual” canons, 7 “expected-meaning” canons, 3 “government-structuring” canons, 4 “private right” canons, and 6 “stability” canons) and concludes by “exposing” 13 far more controversial “falsities” (such as “the false notion that committee reports and floor speeches are worthwhile aids in statutory construction”).  It also contains the best bibliography imaginable of over 1,500 books and articles on legal interpretation dating back as early as 1621 (Coke’s First Part of the Institutes of the Laws of England) and 1677 (Hatton’s Treatise Concerning Statutes).

The Supreme Court’s recent unanimous decision in Bullock v. BankChampaign, N.A., No. 11-1518 (May 13, 2013) (pdf), which was decided primarily based on the book’s Canon No. 31, the “Associated-Words Canon” (better known as noscitur a sociis–“it is known by its associates”), highlights the importance of keeping Justice Scalia’s and Professor Garner’s book close at hand.  In describing how this canon works, Justice Scalia and Professor Garner call it “a classical version, applied to textual explanation, of the observed phenomenon that birds of a feather flock together.”  They further explain:

Continue Reading US Supreme Court Deciphers “Defalcation” in Bullock: A Canonical Exercise in “Reading Law” (Scalia/Garner)