Some more Sunday reading for you with an aggregation of 25 of my Twitter posts from mid-June 2018, with links to important cases, articles, and news briefs that restructuring professionals should find of interest. Don’t hesitate to reach out and contact me to discuss any posts, and thank you for reading!


  • Automatic Stay – Lien Priority Proceedings – ND-AL:  Court refuses to stay proceedings to determine priority of creditors’ liens on collateral owned by a recently filed bankruptcy debtor. ServisFirst Bank v Harding Enterprises LLC
  • Avoidance Actions – 544(b) Limitations – BK-ND-IL:  The Trustee “asserts that because Concepts has claims against the HoldCos who made the transfers, Concepts (and therefore the Trustee) is a creditor who has standing to avoid those transfers, [stating]: ‘So in other words, the Trustee does not need to rely on Section 544’s ‘hypothetical creditor’ standing since the Debtor is itself a creditor of the transferor entities.’ ” The Court rules, however, that “the argument is flawed. . . . If the Trustee wishes to avoid a transfer of an interest of Concepts in property that is voidable under IL law by an unsecured creditor, he must use § 544(b) as the legal basis for his suit. And§ 544(b) limits his avoidance claims to prepetition transfers.” In re Concepts America Inc
  • Bond Collateral – Specific or Cross-Collateralized – BK-ED-LA:  Was the collateral security “bond specific” or “cross-collateralized” among several bonds? Court find that the collateral security here is not bond specific and that sureties may retain the collateral security they hold and apply it to obligations on all outstanding bonds. Otto Candies LLC v Citigroup Inc In re Factory Sales And Engineering Inc
  • Collateral Disposition – Crushed Cars – BK-ND-IL:  Judge Schmetterer, who sure liked this case, rules that a creditor loses its security interest when the impounded vehicle that secured its loan was inadvertently crushed for disposal. Nor was it entitled to be “specially classified” or obtain other special treatment as an unsecured creditor. In re Hill
  • Corporate Opportunity – Standards – BK-ND-IL:  “There are no allegations in the complaint from which the court could plausibly infer that the Trustee stated a claim for usurpation of corporate opportunity against Draft Town. . . . [The Defendant, Ted] used DraftTown to collect to collect what he asserts are management fees from various HoldCos, . . . but [t]his allegation is wholly insufficient to support a claim against Draft Town for usurpation of corporate opportunity. As stated above, there must be allegations from which the court can plausibly infer that Draft Town was a fiduciary of Concepts who took advantage of a business opportunity that belonged to Concepts and failed to disclose and tender the opportunity to Concepts.this is insufficient to support a claim against Draft Town for usurpation of corporate opportunity.” In re Concepts America Inc
  • Discovery Violations – Sanctions – Default Judgment – BK-WD-MI:  Another interesting opinion from Judge Dales, holding that the debtor’s failure to comply with discovery orders warrants entry of default judgment. The argument that the debtor was working 2-3 jobs and that his schedule prevented him from responding to discovery wasn’t credible and did not hold up on cross-examination as the timing of his supposed professional engagements became less clear. In re Aroney
  • Fee Orders – Res Judicata Effect – BK-D-NM:  Court reminds that, per the NM Supreme Court, malpractice claims by a debtor against its bankruptcy court is precluded by the bankruptcy court’s prior final order approving fees, which held that “a claim for attorney fees can have a res judicata effect on a later claim for malpractice.”  In re Aquatic Pools Inc
  • Forum Non Conveniens – Conditions to Dismissal – SD-FL:  Here’s a creative order granting a forum non conveniens motion to dismiss. This one conditions dismissal on a host of conditions, including that “Defendant shall consent to the enforcement of any final Mexican judgment against it in Mexico or the US.” Otto Candies LLC v Citigroup Inc


  • Contract Interpretation – Last Antecedent Rule – IL AP-1st:  “We interpret the contracts in light of their punctuation and the last antecedent rule. The last antecedent doctrine, a long-recognized grammatical canon . . . provides that relative or qualifying words, phrases, or clauses are applied to the words or phrases immediately preceding them and are not construed as extending to or including other words, phrases, or clauses more remote. Courts apply the doctrine generally to all written instruments.” Henning v Smithfield Construction Group Inc
  • Injunctions – Timeliness – SCOTUS:  Benisek reminds that delay in seeking injunctive relief is contrary to first principles, and probably fatal to the request: “The balance of equities & public interest tilt against preliminary injunctive relief. A party requesting it must show reasonable diligence.” Benisek v Lamone
  • Settlement Agreement – Releases – Scope – IL-AP-3d:  Dismissal of a complaint against former employees was upheld because broad release language in a settlement agreement in a federal action involving the same parties was unambiguous and, by its express terms, released all claims and liabilities between the parties, including those alleged in the state action under Illinois Trade Secret Act. Engineered Abrasives Inc v Richerme
  • Standing – Article III – SCOTUS:  Justice Robert pulls together another impressive 9-0 sweep on Art III standing, getting all 9 justices to agree that (i) the “threshold requirement” for Article III standing, under which a plaintiff must show “a personal stake in the outcome, distinct from a ‘generally available grievance about government’ ” and (ii) “[a] citizen’s interest in the overall composition of the legislature is embodied in his right to vote for his representative [a]nd the citizen’s abstract interest in policies adopted by the legislature on the facts here is a nonjusticiable ‘general interest common to all members of the public.’ ” Gill v Whitford



  • Arguments – Syllogisms – Universality:  “It is possible to reduce every argument to a syllogism, and it is possible to reduce every reason offered in support of an argument to a syllogism. Our reasoning is always stretched on this frame: If this is true, and that is true, then such and such must follow.” Twitter post from Prof. Bryan A. Garner, quoting Percy Marks
  • Collateralized Loan Obligations – Weakened Protections:  “Now investors are wholeheartedly embracing the CLO. Collateralized loan obligations — vehicles underpinned by bank lending — are enjoying a boom. Institutional investors have piled into the products, which pool predominantly US or European corporate loans into one portfolio, before divvying up slices of the vehicle based on perceived risks.” High demand for collateralised loans weakens lender protections: Clamour for the products as rates rise risks driving down the quality of assets, by Eric Platt at Financial Times
  • Covenant Lite – Enhancing Voting Rights:  “Covenant Review, a credit research firm, warned that the significant loosening of covenants remains a risk and that lenders need to make sure they have proper voting standards in the credit agreements. ‘While it is encouraging to see that at least one judge reads the commercial reasonableness standard to potentially preclude NYDJ-style attacks, it would be ill-advised for investors to view that as the takeaway in this case,’ Covenant Review said in a note.” Tensions rise as private equity-backed companies push limits, via Jonathan Schwarzberg at Reuters


©2018, Steve Jakubowski