Here’s more in the continuing “Year in Review” series. The inset photo is of the Jacob Weinberger US Courthouse (story here), home to the Bankruptcy Court for the Southern District of California in San Diego, where Bankruptcy Judges Adler, Bowie, Mann, Meyers, and Taylor sit.
- B-NY: Sentimental value of prop. held by family for generations doesnt outweigh benefit to crs. from sale per 363(h). https://bankruptcylitigationblog.lexblogplatform.com/wp-content/uploads/sites/427/uploads/file/Beck-BK-EDNY-Eisenberg-9-6-11.doc …
- B-FL: No admin. priority for severance pay arising from prepet. empl. agr. just bec employee was employed postpetition. https://bankruptcylitigationblog.lexblogplatform.com/wp-content/uploads/sites/427/uploads/file/RobbStuckyLtd-BK-MD-FL-Delano-9-7-11.doc …
- B-AZ: Legal mal. cplt. alleging attys knew of wrongdoing and took no actions to stop it adeq. alleges prox. causation. https://bankruptcylitigationblog.lexblogplatform.com/wp-content/uploads/sites/427/uploads/file/RadicalBunny-BK-D-AZ-Case-8-24-11.doc …
- B-AZ refuses to dismiss liq. trust legal mal claims vs. attys on in pari delicto grounds at motion to dismiss stage. https://bankruptcylitigationblog.lexblogplatform.com/wp-content/uploads/sites/427/uploads/file/RadicalBunny-BK-D-AZ-Case-8-24-11.doc …
- B-ID: Boise County didnt meet its burden of proving its insolvency per §109(c)(3) so it’s not eligible under chapter 9. https://bankruptcylitigationblog.lexblogplatform.com/wp-content/uploads/sites/427/uploads/file/BoiseCounty-BK-D-ID-Myers-9-2-11.doc …
- SDNY: Madoff ttee lacks standing per Wagoner & in pari delicto to bring particip/aiding & abetting claims vs. banks. https://bankruptcylitigationblog.lexblogplatform.com/wp-content/uploads/sites/427/uploads/file/PicardvJPMChase-SDNY-McMahon-11-1-11.pdf …
- SDNY: Dbtr has the burden of proof on the issue of adequate assurance of payment per §366(c). https://bankruptcylitigationblog.lexblogplatform.com/wp-content/uploads/sites/427/uploads/file/GreatA-P-Tea-SDNY-Seibel-11-14-11.pdf …
- SDNY-§366(c) doesnt mandate that only the utility provider in the 1st instance sets the form & amount of adeq assurance https://bankruptcylitigationblog.lexblogplatform.com/wp-content/uploads/sites/427/uploads/file/GreatA-P-Tea-SDNY-Seibel-11-14-11.pdf …
- 11th: Ponzi payments to equity interests by insolv entity not fr. tsfs except to extent pymts exceeded invested funds. https://bankruptcylitigationblog.lexblogplatform.com/wp-content/uploads/sites/427/uploads/file/perkins-11th-Hodges-10-27-11.pdf …
- B-NJ: The Petition Date is the operative date for purposes of determining the threshhold amt per §1409(b). https://bankruptcylitigationblog.lexblogplatform.com/wp-content/uploads/sites/427/uploads/file/BambooAbbott-BK-D-NJ-Kaplan-10-24-11(1).pdf …
- B-NJ rejects application of §1409(b) to preference claims. https://bankruptcylitigationblog.lexblogplatform.com/wp-content/uploads/sites/427/uploads/file/BambooAbbott-BK-D-NJ-Kaplan-10-24-11(1).pdf …
- B-FL: Pleading eq. subord ag. non-insider/non-fiduc requires partic. allegs. of egregious conduct (eg fraud/spoliation) https://bankruptcylitigationblog.lexblogplatform.com/wp-content/uploads/sites/427/uploads/file/HarbourEastDevp2-BK-SD-FL-Cristol-10-27-11.pdf …
- B-MS: Venue tsf of BK denied bec case will be more efficiently & economically administered as affiliate to pending BK. https://bankruptcylitigationblog.lexblogplatform.com/wp-content/uploads/sites/427/uploads/file/RedDoorPyMgmt-BK-SD-MS-Samson-11-16-11.pdf …
- B-FL: Cr.’s eq. subord. & subrog. claims are solely BK issues not bound by State Ct holding that Bank owed Dbtr no duty https://bankruptcylitigationblog.lexblogplatform.com/wp-content/uploads/sites/427/uploads/file/HarbourEastDevp-BK-SD-FL-Cristol-10-27-11.pdf …
- B-MA: Failure to comply w/FRBP 2002(c)(3) for notice of plan injunction precludes confirmation w/injunctive provisions. https://bankruptcylitigationblog.lexblogplatform.com/wp-content/uploads/sites/427/uploads/file/QuincyMedicalCtr-BK-D-MA-Hoffman-11-16-11.pdf …
- B-MA: Plan’s third party releases are limited to those who actually submitted ballots accepting the plan. https://bankruptcylitigationblog.lexblogplatform.com/wp-content/uploads/sites/427/uploads/file/QuincyMedicalCtr-BK-D-MA-Hoffman-11-16-11.pdf …
- B-MA: Release of nondbtrs approp. but identity of interests alone is insufficient to justify releases of dbtr’s D&Os. https://bankruptcylitigationblog.lexblogplatform.com/wp-content/uploads/sites/427/uploads/file/QuincyMedicalCtr-BK-D-MA-Hoffman-11-16-11.pdf …
- B-MA follows majority that releases/exculp./injunc. for non-debtors may be approp per applic. of 5 factor BK-WD-MO test https://bankruptcylitigationblog.lexblogplatform.com/wp-content/uploads/sites/427/uploads/file/QuincyMedicalCtr-BK-D-MA-Hoffman-11-16-11.pdf …
- B-MA notes circuit split re plan provisions calling for expansive releases, exculpation and injunctions of non-debtors. https://bankruptcylitigationblog.lexblogplatform.com/wp-content/uploads/sites/427/uploads/file/QuincyMedicalCtr-BK-D-MA-Hoffman-11-16-11.pdf …
- D-SDNY: “Residual” waste, even if already cleaned up, can cause “ongoing pollution” per Chateaugay & not be discharged. https://bankruptcylitigationblog.lexblogplatform.com/wp-content/uploads/sites/427/uploads/file/MarkIV-SDNY-Scheindlin-9-28-11.pdf …
- D-SDNY: NM Env. Div. lack of a right to payment under Water Quality Act is dispositive that claim not discharged in BK. https://bankruptcylitigationblog.lexblogplatform.com/wp-content/uploads/sites/427/uploads/file/MarkIV-SDNY-Scheindlin-9-28-11.pdf …
- D-SDNY reviews law re extent to which an environmental cleanup obligation constitutes a dischargeable claim in BK. https://bankruptcylitigationblog.lexblogplatform.com/wp-content/uploads/sites/427/uploads/file/MarkIV-SDNY-Scheindlin-9-28-11.pdf …
- B-SDNY reminds that §1521(a)(4) may not authorize the “fishing expeditions” associated w/Rule 2004 exams. https://bankruptcylitigationblog.lexblogplatform.com/wp-content/uploads/sites/427/uploads/file/GlitnirBanki-BK-SDNY-Bernstein-8-19-11.pdf …
- B-SDNY reminds that indiv. whose bank records are subpoenaed has standing to quash subpoena served on nonparty bank. https://bankruptcylitigationblog.lexblogplatform.com/wp-content/uploads/sites/427/uploads/file/GlitnirBanki-BK-SDNY-Bernstein-8-19-11.pdf …
- B-SDNY reviews “pending proceeding” rule & concerns of using Rule 2004 exam to circumvent rts. in pending litigation. https://bankruptcylitigationblog.lexblogplatform.com/wp-content/uploads/sites/427/uploads/file/GlitnirBanki-BK-SDNY-Bernstein-8-19-11.pdf …
- SDNY D-Cts & BK-Cts seem split on whether-and if so to what extent-§546(e) insulates Madoff ponzi pmts. Cases here: https://bankruptcylitigationblog.lexblogplatform.com/wp-content/uploads/sites/427/uploads/file/KeyMadoff546Cases-SDNY-2010-11.pdf …
- B-SDNY: Picard’s common law non-fraud claims ag insiders for failure to supervise, etc, not preempted by NY Martin Act. https://bankruptcylitigationblog.lexblogplatform.com/wp-content/uploads/sites/427/uploads/file/PicardvsMadoffs-BK-SDNY-Lifland-9-22-11.pdf …
- B-SDNY: Wagoner & in pari delicto rules don’t apply to insiders so Picard has standing sue them for common law fraud. https://bankruptcylitigationblog.lexblogplatform.com/wp-content/uploads/sites/427/uploads/file/PicardvsMadoffs-BK-SDNY-Lifland-9-22-11.pdf …
- B-SDNY: Failure to give modicum of specificity re §550 subseq tsfs so as to put Dfdts on notice warrants dismissal. https://bankruptcylitigationblog.lexblogplatform.com/wp-content/uploads/sites/427/uploads/file/PicardvsMadoffs-BK-SDNY-Lifland-9-22-11.pdf …
- B-SDNY: §546(e) inapplicable to settlement pmts to Madoff insiders bec it’s ag. 546(e) purposes & incompatible w/ SIPA. https://bankruptcylitigationblog.lexblogplatform.com/wp-content/uploads/sites/427/uploads/file/PicardvsMadoffs-BK-SDNY-Lifland-9-22-11.pdf …
- B-SDNY: Constructive fr tsf claims need not satisfy heightened pleading standards of FRCP 9(b) under BK Code or NYDCL. https://bankruptcylitigationblog.lexblogplatform.com/wp-content/uploads/sites/427/uploads/file/PicardvsMadoffs-BK-SDNY-Lifland-9-22-11.pdf …
- B-SDNY: Ttee suffic. pled applic. of discovery rule to maintain actual fr. tsf. case for pmts occurring > 6 yrs pre-BK. https://bankruptcylitigationblog.lexblogplatform.com/wp-content/uploads/sites/427/uploads/file/PicardvsMadoffs-BK-SDNY-Lifland-9-22-11.pdf …
- B-SDNY: The “Ponzi scheme presumption” establishes the dbtrs’ fraudulent intent as required under the BK Code & NYDCL. https://bankruptcylitigationblog.lexblogplatform.com/wp-content/uploads/sites/427/uploads/file/PicardvsMadoffs-BK-SDNY-Lifland-9-22-11.pdf …
- B-SDNY: DCT-Wood-8-31-11 op “instructive & pertinent” re relev. factors in FRCP 12(b) motion to dismiss a Madoff cplt. https://bankruptcylitigationblog.lexblogplatform.com/wp-content/uploads/sites/427/uploads/file/PicardvsMadoffs-BK-SDNY-Lifland-9-22-11.pdf …
- SDNY:§502(d) disallowance of claims by recipients of avoidable tsfs is overridden in SIPA trusteeship by SIPA §78fff-2. https://bankruptcylitigationblog.lexblogplatform.com/wp-content/uploads/sites/427/uploads/file/PicardvsKatz-Wilpon-SDNY-Rakoff-9-27-11.pdf …
- SDNY: Wilpon buying fraud ins. & creating hedge fund to limit Madoff exposure suffic. pled wilful blindness to fraud. https://bankruptcylitigationblog.lexblogplatform.com/wp-content/uploads/sites/427/uploads/file/PicardvsKatz-Wilpon-SDNY-Rakoff-9-27-11.pdf …
- SDNY: Lack of due diligence in suspicious circs (compared with “red flags”) isnt lack of good faith in SIPA §548 cases. https://bankruptcylitigationblog.lexblogplatform.com/wp-content/uploads/sites/427/uploads/file/PicardvsKatz-Wilpon-SDNY-Rakoff-9-27-11.pdf …
- SDNY: Madoff ponzi recipients can rebut §548 actual fr tsf for profits by proving they took in good faith & for value. https://bankruptcylitigationblog.lexblogplatform.com/wp-content/uploads/sites/427/uploads/file/PicardvsKatz-Wilpon-SDNY-Rakoff-9-27-11.pdf …
- SDNY doesnt decide if Madoff Ttee can only avoid profits of §548 2 yr lookback or profits recv’d over whole investment. https://bankruptcylitigationblog.lexblogplatform.com/wp-content/uploads/sites/427/uploads/file/PicardvsKatz-Wilpon-SDNY-Rakoff-9-27-11.pdf …
- SDNY: But §546(e) safe harbor protects recipients of Madoff ponzi pmts against §544(b) allegations of actual fr transf. https://bankruptcylitigationblog.lexblogplatform.com/wp-content/uploads/sites/427/uploads/file/PicardvsKatz-Wilpon-SDNY-Rakoff-9-27-11.pdf …
- SDNY: §546(e) safe harbor protects recipients of Madoff Securities ponzi scheme transfers unless there’s actual fraud. https://bankruptcylitigationblog.lexblogplatform.com/wp-content/uploads/sites/427/uploads/file/PicardvsKatz-Wilpon-SDNY-Rakoff-9-27-11.pdf …
- Law of Fraudulent Conveyances Outlined by Virginia Supreme Court http://bit.ly/pnvNJk
- B-NJ: Jr. noteholders can’t contest an invol. petition filed by sr. noteholders that the debtor itself didn’t contest. https://bankruptcylitigationblog.lexblogplatform.com/wp-content/uploads/sites/427/uploads/file/ZaisInv-BK-D-NJ-Lyons-8-26-11.pdf …
- B-IL: Ctcls. vs. secured cr. necessarily resolved in order to rule on cr.’s claim & parties consented to jdgmt anyway. https://bankruptcylitigationblog.lexblogplatform.com/wp-content/uploads/sites/427/uploads/file/OldePrairie-BK-ND-IL-Schmetterer-8-25-11.pdf …
- B-WI reviews when a forward contract matures in order to invoke the §546(e) safe harbor exception to avoidance actions. https://bankruptcylitigationblog.lexblogplatform.com/wp-content/uploads/sites/427/uploads/file/RenewEnergy-BK-WD-WI-Martin-8-24-11.pdf …
- B-WI: No SJ for either side on ord. course pref. defense where avg days late in pre-pref. & pref pds are 18 v 15 days. https://bankruptcylitigationblog.lexblogplatform.com/wp-content/uploads/sites/427/uploads/file/RenewEnergy-BK-WD-WI-Martin-8-24-11.pdf …
- D-TX: Inv. Bkr. fees altered per §328 bec circs. of retention “incapable of anticipation, not merely unanticipated.” https://bankruptcylitigationblog.lexblogplatform.com/wp-content/uploads/sites/427/uploads/file/Asarco-SD-TX-Hanen-8-19-11.pdf …
- D-TX: Inv Bkr gets enhanced fees per §328 but not $2M success fee bec §330 factors dont apply to §328 fee arrangements. https://bankruptcylitigationblog.lexblogplatform.com/wp-content/uploads/sites/427/uploads/file/Asarco-SD-TX-Hanen-8-19-11.pdf …
- B-SDNY: Earlier ch 15 filing date is proper reference date in §553(b) action brought in subsequently filed ch 11 case. https://bankruptcylitigationblog.lexblogplatform.com/wp-content/uploads/sites/427/uploads/file/AwalBank-BK-SDNY-Gropper-8-4-11.pdf …
- B-SDNY applies plain meaning rule & holds that omission of §553(b) from §1521(a)(7) probably wasn’t a drafting error. https://bankruptcylitigationblog.lexblogplatform.com/wp-content/uploads/sites/427/uploads/file/AwalBank-BK-SDNY-Gropper-8-4-11.pdf …
- B-SDNY: Ok for ch 15 dbtr that files ch 11 case so as to preserve avoidance actions to omit key claim info from sched. https://bankruptcylitigationblog.lexblogplatform.com/wp-content/uploads/sites/427/uploads/file/AwalBank-BK-SDNY-Gropper-8-4-11.pdf …
- B-TX: Applies Till to cramdown of apt complex lender using blend of sr./mezz/equity rates at diff. % collateral values. https://bankruptcylitigationblog.lexblogplatform.com/wp-content/uploads/sites/427/uploads/file/CampBowie-BK-ND-Tex-Lynn-8-4-11.pdf …
- REALLY REALLY bad complaints in the 7th Cir. like this one will get you sanctioned, suspended & referred to the ARDC. https://bankruptcylitigationblog.lexblogplatform.com/wp-content/uploads/sites/427/uploads/file/7th-Cir-Opinion-on-Horrible-Sanctionable-Writing.pdf …
- B-TX: Code doesn’t prohibit “artificial impairment” by minimally impairing a cr. class to enable cramdown of others. https://bankruptcylitigationblog.lexblogplatform.com/wp-content/uploads/sites/427/uploads/file/CampBowie-BK-ND-Tex-Lynn-8-4-11.pdf …
- B-TX: Given Congr. obvious concern for fair treatment of equity, motive in plan to preserve equity isnt inappropriate. https://bankruptcylitigationblog.lexblogplatform.com/wp-content/uploads/sites/427/uploads/file/CampBowie-BK-ND-Tex-Lynn-8-4-11.pdf …
- B-DE grants bank motion to dismiss equitable subord claim bec alleging inequitable conduct is required for such claim. https://bankruptcylitigationblog.lexblogplatform.com/wp-content/uploads/sites/427/uploads/file/MollIndus-BK-D-Del-Walrath-8-3-11.pdf …
- B-DE grants banks’ motion to dismiss recharacterization claims per review of 11 factors relevant to propriety of claim. https://bankruptcylitigationblog.lexblogplatform.com/wp-content/uploads/sites/427/uploads/file/MollIndus-BK-D-Del-Walrath-8-3-11.pdf …
- B-TN: New legal theory or claim for relief arising out of same transaction as orig. cplt ok after 2 yr. lim pd expires. https://bankruptcylitigationblog.lexblogplatform.com/wp-content/uploads/sites/427/uploads/file/AppalachianOilCo-BK-ED-TN-Parsons-8-25-11.pdf …
- B-MD: §366 adeq. assurance to utility doesn’t include ordering special condo assessments to be assigned to the utility. https://bankruptcylitigationblog.lexblogplatform.com/wp-content/uploads/sites/427/uploads/file/BedfordTownCondo-BK-D-MD-Catliota-8-25-11.pdf …
- B-AR: Dbtrs’ prop. interest in noncompete payments received per prepetition APA made their subseq tsf out preferential. https://bankruptcylitigationblog.lexblogplatform.com/wp-content/uploads/sites/427/uploads/file/Frankum-BK-ED-ARK-7-18-11.pdf …
- B-MA:Allonges dont give bank security int. in install. sale contracts bet consumers & dealers that bank wasnt party to. http://www.bankruptcylitigationblog.com/wp-content/uploads/sites/427/uploads/file/Inofin-BK-D-MA-Feeney-7-27-11.pdf …
Thanks for reading! More to follow.