Delaware Bankruptcy Judge Sontchi Holds Subsequent New Value Defense Not Reduced by Post Petition Payments

In a case of apparent first impression, U.S. Bankruptcy Judge Christopher S. Sontchi considers whether post-petition “critical vendor” payments of pre-petition claims reduced “new value”. Judge Sontchi holds that such post petition payments do not reduce the amounts available for the subsequent new value defense under 11 U.S.C. § 547(c)(4).  [The decision is currently on appeal to the United States Third Circuit Court of Appeals in In re Friedman’s Inc. Appeal Docket No. 13-1712.   Briefing before the Court of Appeals is complete and oral argument is scheduled for October 17, 2013.]

Filene’s Basement, LLC and Syms Corp. Bankruptcies – Largest Unsecured Creditors Lists

Syms Corp. (“Syms”) and Filene’s Basement, LLC, (“Filene’s”) together with 2 associated debtors (the “Debtors”) filed  voluntary petitions under Chapter 11 of the Bankruptcy Code on November 2, 2011  in the Bankruptcy Court for the District of Delaware.  The Honorable Kevin J. Carey has been assigned to the case.  The Debtors have moved to have the cases administratively consolidated under the Filene’s Basement, LLC case (Case No. 11-13511).  However, each of the Debtors has filed its own, separate list of its largest unsecured creditors.   This  initial note provides the list of the 20 largest unsecured creditors for each of Filene’s and Syms.

N.Y. Bankrutpcy Judge Peck Rejects Contract Exception to Mutuality Requirement for Sec. 553 Setoff

10/04/2011 – Memorandum Decision Enforcing the Automatic Stay filed in the Lehman Brothers Inc. Securities Investor Protection Act proceedings before U.S. Bankruptcy Judge James M. Peck in the United States Bankruptcy Court for the Southern District of New York.

Southern District of New York Bankruptcy Judge James M. Peck grants the motion of James W. Giddens, as Trustee (the “SIPA Trustee”) of Lehman Brothers Inc. (“LBI”) and orders UBS AG (“UBS”) to turn over $23 million of “excess collateral” under a terminated swap agreement.  Judge Peck rejects UBS argument that a setoff right created by contract, either renders inapplicable or satisfies the mutuality requirement specified in 11 U.S.C. § 553(a). Judge Peck holds that “a contractual right of setoff that permits netting by multiple affiliated members of the same corporate family outside of bankruptcy may no longer be enforced after commencement of a [bankruptcy case].”  ).

Real Mex Restaurants, Inc. – 20 Largest Unsecured Creditors

Real Mex Restaurants, Inc. and 16 associated debtorsFN1 (the “Debtors”) filed voluntary petitions under Chapter 11 of the Bankruptcy Code on October 4, 2011 in the Bankruptcy Court for the District of Delaware (Case No. 11-13122). The Honorable Peter J. Walsh has been assigned to the case. This initial note provides the Debtors’ consolidated list of their 20 largest unsecured creditors.

Northern District of California Bankruptcy Judge – Post Stern, Business as Usual in Hearing “Jewel Waiver” Fraudulent Conveyance Claims

09/28/2011 – Recommendation of Bankruptcy Judge Regarding Motions To Withdraw The Reference filed in the Heller Ehrman LLP Adversary Proceedings by Arnold and Porter, LLP before U.S. Bankruptcy Judge Dennis Montali in the United States Bankruptcy Court for the Northern District of California.

U.S. Bankruptcy Judge Dennis Montali minces no words in his recommendation to the District Court against the motions of sixteen law firm defendants[FN1] to withdraw of the reference under Stern v. Marshall, 131 S.Ct. 2594 (2011).  The adversary proceedings were filed by the law firm Heller Ehrman LLP (“Heller”) as liquidating debtor.  Heller seeks avoidance of a California “Jewel Waiver” as an actual and fraudulent conveyance and recovery of the value of “unfinished business” taken to the defendant law firms by former Heller partners.  Judge Montali refuses find any applicability of Stern beyond its narrow holding.  He concludes that “given that Heller’s claims do arise from bankruptcy law (11 U.S.C. §§ 544(b) & 548) and would not exist but for the bankruptcy (unlike the counterclaims in Stern), … Stern may not limit [the bankruptcy court’s] power to enter a final judgment on [Heller’s claims].”

Lehman Brothers Holdings Inc. et al v. JPMorgan Chase Bank, N.A. – JPMorgans Submission in Response to Case Management Order

09/26/2011 – JPMorgans Submission in Response to Case Management Order filed in the Lehman Brothers Holdings Inc. Adversary Proceedings by JPMorgan Chase Bank, N.A. before U.S. Bankruptcy Judge James M. Peck in the Southern District of New York (Manhattan) filed by Wachtell, Lipton, Rosen & Katz (New York, NY) attorney Paul Vizcarrondo, Jr., Of Counsel: Harold S. Novikoff; Amy R. Wolf; Douglas K. Mayer; Emil A. Kleinhaus; Alexander B. Lees.

On August 15, 2011, U.S. Bankruptcy Judge James M. Peck issued a Case Management Order in Relation to the Impact of Stern v. Marshall (the “Stern Order”). Both the Plaintiffs, Lehman Brothers Holdings Inc. and Official Committee of Unsecured Creditors of Lehman Brothers Holdings Inc. (“Lehman”) and Defendant JPMorgan Chase Bank, N.A. (“JPMorgan”) each were directed, inter alia, to address each count of the 49 count amended complaint separately in stating whether such court was susceptible to: a ruling by the Bankruptcy Court on the pending motion to dismiss; either final adjudication by the Bankruptcy Court; or issuance of a report and recommendation by the Bankruptcy Court. JPMorgan’s response to this directive from Judge Peck is set forth below. Whether ultimately determined to be a correct or incorrect analysis of Stern, the issue analysis and presentation of JPMorgan is impressive.