Category Archives: Other Nationally Significant Cases

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Supreme Court To Decide Whether To Review Seventh Circuit Decision Holding That Bankruptcy Does Not Discharge Environmental Clean-Up Liability Under The Resource Conservation And Recovery Act

In a decision that may create a significant roadblock for companies saddled with environmental clean-up liability to continue as a going concern, the Seventh Circuit in U.S. v. Apex Oil Company, Inc., 579 F.3d 734 (7th Cir. 2009) affirmed a district court injunction requiring the clean-up of a contaminated site in Illinois under section 7003 … Continue Reading

Bankruptcy Court Allows General Growth’s “Bankruptcy-Remote”

In a decision made on August 11, 2009, the U.S. Bankruptcy Court for the Southern District of New York allowed solvent, special purpose entity subsidiaries of a bankrupt parent company, General Growth Properties, Inc., to maintain their Chapter 11 bankruptcy cases, raising several important issues related to the use of special purpose entities structured to … Continue Reading

New FCA Rules Put Lenders and Brokers Directly in Their Gun Sights

The author is a member of the Firm’s Government Contracts & Regulated Industries Practice Group. For additional articles and postings concerning this and related topics, please refer to Sheppard Mullin’s Government Contracts Blog, which can be found at www.governmentcontractslawblog.com. I.  INTRODUCTION Without a doubt, the False Claims Act ("FCA") has been dramatically changed in the … Continue Reading

Relief for Securitization Vehicles: Mortgage Modification under Foreclosure Prevention Programs

In a recently-issued Revenue Procedure (Rev. Proc. 2008-28), the IRS states that the modification of certain mortgage loans under foreclosure prevention programs involving, for example, interest rate reductions, principal forgiveness, extensions of maturity and alterations in the timing of changes in an interest rate generally will not cause the IRS either to challenge the tax … Continue Reading

Seventh Circuit finds that Issuer of Fairness Opinion Did Not Commit Gross Negligence

In the case of The HA2003 Liquidating Trust v. Credit Suisse Securities (USA) LLC, __ F.3d __ (7th Cir. 2008) ("HA2003"), HALO, an acquiring company, hired CSFB, an investment banker, to (i) renegotiate the economic terms of a stock acquisition of the dot-com target company, Starbelly.com, and (ii) issue a fairness opinion on behalf of … Continue Reading

Court Orders Case Transferred From New York To California

By Order, dated January 14, 2008, United States Bankruptcy Judge Martin Glenn for the United States Bankruptcy Court for the Southern District of New York, granted the motion (the "Motion") filed by a group of creditors seeking transfer of venue of the Dunmore Homes, Inc. (the "Debtor") bankruptcy case from the United States Bankruptcy Court … Continue Reading

Delaware Court Holds that Creditors Have No Direct Cause of Action Against Directors of Company Operating in the Zone of Insolvency for Breach of Fiduciary Duty

On May 18, 2007, the Supreme Court for the State of Delaware (the "Court") held that a creditor of a corporation that is operating within the zone of insolvency may not bring a direct action against the corporation’s directors for a breach of fiduciary duty under Delaware law.  The Court agreed with the lower court … Continue Reading

Second Circuit Holds That Most Important Factor In Assessing Pre-Plan Settlement Distribution Under Rule 9019 Is Whether It Complies With The Absolute Priority Rule

On March 7, 2007, the Second Circuit Court of Appeals held that "in the Chapter 11 context, whether a pre-plan settlement’s distribution plan complies with the Bankruptcy Code’s priority scheme will be the most important factor for a Bankruptcy Court to Consider in approving a settlement under Bankruptcy Rule 9019."  In re Iridium Operating LLC, … Continue Reading

On February 5, 2007, the United States Court of Appeals for the Eleventh Circuit affirmed defendants L’il Joe Records Inc. et al (“L’il Joe”).

The defendants were purchasers of certain copyrights and other assets of debtors Luke Records, Inc. and Luther Campbell under a confirmed chapter 11 plan.  Prior to the filing of the debtors’ bankruptcy cases, plaintiff Jeffrey J. Thompkins had conveyed his copyrights in sound recordings and musical compositions to the debtors in exchange for the payment … Continue Reading

ATTORNEY-CLIENT PRIVILEGE IS STRIPPED FROM COMMUNICATIONS IN FURTHERANCE OF CONTEMPLATED OR ONGOING CRIMINAL ACTIVITY

In Enron Broadband Services, L.P. v. Travelers Casualty and Surety Company of America (In re Enron) 2006 WL 2456203 (Bankr.S.D.N.Y. August 25, 2006), the bankruptcy court for the Southern District of New York held that communications between an attorney and a corporate client’s employees, for the purpose of obtaining legal advice, are privileged.  However, the … Continue Reading

If it looks like a duck (KERP) and quacks like a duck (KERP), it’s a duck (KERP) [1]

Since the enactment of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, there have been discussions about the impact of Bankruptcy Code Section 503(c) a/k/a the "KERP Killer." As long as there have been KERPs (or key employee retention plans), creditors, creditors’ committees and United States Trustees have argued about executive excesses and abuses. … Continue Reading

Supreme Court Decision in the Anna Nicole Smith Bankruptcy Case Resolves Confusion About the Probate Exception to Federal Court Jurisdiction

On May 1, 2006, the Supreme Court used an opportunity presented by the Anna Nicole Smith bankruptcy case to resolve some confusion among federal courts about the probate exception to federal court jurisdiction. In Marshall v. Marshall, 126 S. Ct. 1735 (2006), the Court clarified and reaffirmed its sixty-year old holding in Markham v. Allen, 326 … Continue Reading

World Health Alternatives Upholds a Secured Creditor’s Carve-Out Inuring Solely to the Benefit of General Unsecured Creditors

In In re World Health Alternatives, Inc., Case No. 06-10166 (July 7, 2006), the Bankruptcy Court for the District of Delaware held that—notwithstanding the Third Circuit’s recent opinion, In re Armstrong World Indus., Inc., 432 F.3d 507 (3d Cir. 2005)—a secured creditor "give-up" or "carve out" that inures solely to the benefit of general unsecured … Continue Reading

Internal Revenue Bulletin No. 2006-22 Sets Forth Procedures for Prompt Determination of Unpaid Tax Liabilities of a Bankruptcy Estate

On May 30, 2006, the Internal Revenue Service (IRS) published Internal Revenue Bulletin No. 2006-22, Revenue Procedure 2006-24.  This bulletin sets forth the steps for a bankruptcy trustee or debtor in possession to follow in order to obtain a prompt determination by the IRS of any unpaid tax liability of the estate incurred during the … Continue Reading

In Pari Delicto Bars Debtor’s Claim For Unfair Trade Practices Against Accounting Firm

On June 22, 2006, the First Circuit decided Baena v. KPMG, Case No. 05-2868, affirming the district court’s holding that the in pari delicto defense barred a trustee from bringing an action against an accounting firm that failed to notify the Debtor’s corporate directors of accounting irregularities because the wrongful actions of the corporate officers … Continue Reading

Supreme Court Declines to Take Appeal of Owens Corning: Third Circuit’s Substantive Consolidation Guidelines Are Now Settled

On May 1, 2006, the United States Supreme Court denied the petition for a hearing filed by the Creditors’ Committee in the Chapter 11 case of Owens Corning, Inc. See Official Representatives of the Bondholders and Trade Creditors of Debtors Owens Corning v. Credit Suisse First Boston, 126 S. Ct. 1910 (2006). The Creditors’ Committee had sought … Continue Reading

Thickstun Brothers: Bankruptcy Court Lacks Jurisdiction to Determine Whether Debtor’s Failure to Object to Claim is Preclusive in Related State Court Litigation

In In re Thickstun Brothers Equipment Co., Inc. No. 05-8054 (6th Cir. 06/02/2006), the Bankruptcy Appellate Panel for the Sixth Circuit held that a bankruptcy court lacks subject matter jurisdiction to determine whether a debtor’s failure to object to a claim is preclusive in related state court litigation.… Continue Reading

Supreme Court Update: Katz Eviscerates Constitutional Sovereign Immunity in Federal Bankruptcy Proceedings

Central Virginia Community College v. Katz, 126 S. Ct. 990 (U.S. 2006), has significantly expanded the scope of the bankruptcy exception to states’ constitutional sovereign immunity. In this 5-4 opinion, the U.S. Supreme Court held that state agencies do not enjoy sovereign immunity with respect to a proceeding to set aside a debtor’s preferential transfer because … Continue Reading

New Report Examines the Effect of BAPCPA

The National Association of Consumer Bankruptcy Attorneys (NACB) has issued a report that provides the first analysis of over 60,000 consumers who have filed for bankruptcy protection since the enactment of the Bankruptcy Abuse Prevention and Consumer Protection Act in October of 2006. The report, Bankruptcy Reform’s Impact: Where Are All the Deadbeats, is available … Continue Reading

In re Dairy Mart: State Officials Not Immune from Suit for Injunctive Relief

In In re Dairy Mart Convenience Stores, Inc., 411 F.3d 367 (2nd Cir. 2005), the Second Circuit held that a Chapter 11 debtor was entitled to injunctive relief compelling state officials to accept the debtor’s claims against the state’s environmental clean-up fund as timely filed, based on the extension of time provided to debtors by … Continue Reading
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