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Article List for for Recent, Significant Bankruptcy Preference Decisions

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).

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More articles on: " , ". First Published December 18th, 2011.

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].”  ). »»» Read rest of article . . .

More articles on: " ". First Published October 10th, 2011.

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].” »»» Read rest of article . . .

More articles on: " ". First Published September 30th, 2011.

Delaware Bankruptcy Judge Walsh Rejects Substantive Consolidation Retroactivity by Implication

District of Delaware, United States Bankruptcy Judge Peter J. Walsh issues his opinion in Giuliano v. Shorenstein Company LLC (In re Sunset Aviation, Inc. ), Adv. Proc. No. 11-50965 (Bankr. D. Del.  September 7, 2011)   holding that an order for substantive consolidation is not retroactively effective when it fails to expressly provide that it is nunc pro tunc.  Based on this holding, Judge Walsh dismisses, with prejudice, the bankruptcy preference count of the complaint by Alfred T. Giuliano, Chapter 7 Trustee for the Bankruptcy Estates of Sunset Aviation (the “Trustee”). Fundamentally, Judge Walsh rejected the Trustee’s urging for the Court to perfunctorily use a substantive consolidation order to rewrite Section 547 of the Bankruptcy Code. »»» Read rest of article . . .

More articles on: " , , ". First Published September 8th, 2011.

Bankruptcy Judge Lundin Opinion – Statutory Language, Legislative History – Venue Limitation Applies to Bankruptcy Preference Actions

Middle District of Tennessee, U.S. Bankruptcy Judge Keith M. Lundin opines that the small-dollar home court venue exception in 28 U.S.C. § 1409(b) applies to bankruptcy preference recovery litigation. To reach that conclusion, he holds that there is an “overlap between ‘arising under title 11′ and ‘arising in’ a case under Title 11 for purposes of venue under § 1409.”   Judge Lundin thereby honors the clear legislative intent found in his scholarly, exhaustive review of the legislative history of Section 1409. »»» Read rest of article . . .

More articles on: " ". First Published September 5th, 2011.

Badami v. Ainsworth Feed Yards, LLC (In re AFY, INC.), Adv. Proc. No. 10-04060 (Bankr. D. Neb. August 18, 2011)

Order, Report and Recommendation filed in the AFY, INC. Adversary Proceedings by Ainsworth Feed Yards, LLC before Chief, U.S. Bankruptcy Judge Thomas L. Saladino in the United States Bankruptcy Court for the District of Nebraska. Judge Saladino grants defendant’s motion for relief from a $4.5 million judgment based on the U.S. Supreme Court’s decision in Stern v. Marshall.  The defendant moved to set aside the judgment entered in the proceeding on June 1, 2011. The Bankruptcy Court had granted the trustee’s motion for summary judgment on the trustee’s efforts to collect approximately $4.5 million on an account receivable allegedly owed to the debtor from defendant. Although not mentioned by Judge Saladino as a factor in his decision, the defendant had not filed a claim in the underlying bankruptcy case. Judge Saladino focused on the nature of the action, concluding “What the trustee is pursuing is a demand on an alleged debt, which is beyond the scope of § 542.” »»» Read rest of article . . .

More articles on: " ". First Published August 20th, 2011.

Badami v. Sears Cattle Co. et al (In re AFY, INC.), Adv. Proc. No. 10-04062 (Bankr. D. Neb. August 18, 2011)

08/18/2011 – Order, Report and Recommendation filed in the AFY, INC. Adversary Proceedings by Sears Cattle Co. et al before Chief, U.S. Bankruptcy Judge Thomas L. Saladino in the United States Bankruptcy Court for the District of Nebraska. Judge Saladino grants defendant’s motion to set aside a judgment entered on July 6, 2011, granting the trustee’s claim for collection of an account receivable in the amount of $291,937. Judge Saladino acknowledges that the claim falls within the scope of § 542(b). However, he characterizes the claim as a “collection action”. Applying, the Supreme Court’s decision of Stern v. Marshall, Judge Saldino holds that “[b]ecause this action does not arise under Title 11 or arise in the bankruptcy case itself, nor would it be resolved in the claims allowance process, it is not a core proceeding within the constitutional authority of the bankruptcy court to enter judgment.” The key portions of Judge Saladino’s decision follow. »»» Read rest of article . . .

More articles on: " ". First Published August 20th, 2011.

Badami v. Sears et al (In re AFY, INC.), Adv. Proc. No. 10-04054 (Bankr. D. Neb. August 18, 2011)

08/18/2011 – Order filed in the AFY, INC. Adversary Proceedings by Sears before Chief, U.S. Bankruptcy Judge Thomas L. Saladino in the United States Bankruptcy Court for the District of Nebraska. Judge Saladino rules on the defendant’s one sentence motion to dismiss for “lack of subject matter jurisdiction” in light of Stern v. Marshall. In this turnover action under 28 U.S.C. § 157(b)(2)(E), the Court finds that the action is a core proceeding. Accordingly, the bankruptcy court “is not deprived of subject matter jurisdiction simply because resolution of the lawsuit may require the application of state law.” »»» Read rest of article . . .

More articles on: " ". First Published August 20th, 2011.

Lehman Brothers Holdings Inc. et al v. JPMorgan Chase Bank, N.A.: US Bankruptcy Judge Peck’s Order in Relation to the Impact of Stern v. Marshall

Lehman Brothers Holdings Inc. et al v. JPMorgan Chase Bank, N.A. (In re Lehman Commercial Paper Inc. Case No. 08-13555), Adv. Proc. No. 10-03266 (Bankr. S.D.N.Y.  August 15, 2011) : Southern District of New York, United States Bankruptcy Judge James M. Peck issues this Case Management Order in Relation to the Impact of Stern v. Marshall following the receipt of briefing from Plaintiff Lehman Brothers Holdings and Defendant JPMorgan Chase Bank on the impact of the U.S. Supreme Court’s decision in Stern. Far more than a “case management order”, Judge Peck indicates his initial impressions of the Stern decision.   Among the most significant of Judge Peck’s statements is his conclusion that: “JPMorgan reads Stern broadly—too broadly, in the Court’s view. The JPMorgan position paper argues that unless Plaintiffs move promptly to withdraw the reference, the Amended Complaint should be dismissed. JPMorgan is wrong: Stern does not support dismissal.” »»» Read rest of article . . .

More articles on: " , ". First Published August 18th, 2011.

$376 Million Preference Complaint against Quebecor Noteholders Dismissed

Concluding that the recent opinion of the Court of Appeals for the Second Circuit in In re Enron Creditors Recovery Corp. v. Alfa, S.A.B. de C.V., __F. 3d __, 2011 WL 2536101 (2d Cir. June 28, 2011) (“Enron“) left him no choice, Southern District of New York United States Bankruptcy Judge James M. Peck grants summary judgment to the defendant noteholders against a claim recovery of approximately $376 million received from Quebecor World (USA) Inc. during the preference period.  As interpreted in Enron, Judge Beck found that the “settlement payment” protection from avoidance in Bankruptcy Code Section 546(e) protected the transfer of cash made to complete a repurchase and subsequent cancellation of privately-placed notes.  Judge Peck makes clear that he did not agree with this result: “Purely from an equitable perspective, the disparity in relative recoveries between the Noteholders and Quebecor’s other creditors almost cries out for a remedy unless the payments fall within an appropriately more favored category of transfers that logically fits the definition of settlement payments under the Code.”  »»» Read rest of article . . .

More articles on: " , ". First Published July 29th, 2011.

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