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    M&A Deal of Year Awards Go To Insolvency & Restructuring Practice
    Pillsbury Involved in Latin Lawyer  2015 Restructuring Deal of the Year
    Pillsbury Leads Novel $860M Deal between Conservation Fund and Mining Co.

    Insolvency & Restructuring


    New York Bankruptcy Court Authorizes Rejection of Midstream Contracts
    Authors: Andrew M. Troop, Samuel S. Cavior, Christopher R. Mirick
    Bad news for midstream counterparties of bankrupt oil & gas producers: you may not be able to rely (as much as you might have expected) on covenants “running with the land” to save your contracts from rejection in bankruptcy.
    Can Competition Produce Less for Creditors?
    Source: LinkedIn
    Author: Andrew M. Troop
    Working with distressed businesses always presents a wide array of challenges. Solving a distressed company’s problems, or your problems with it, rarely is limited to a single legal discipline, set of laws or state or federal policy. When a distressed enterprise is involved, all kinds of interests and policies can and do clash.
    Proper Planning Can Ease Stalking Horse’s Due Diligence Burden in a Section 363 Sale
    Source: LinkedIn
    Author: Gerry Hinkley
    In a sale of assets outside of the bankruptcy context, the buyer typically will obtain, through comprehensive representations, assistance with due diligence review of the seller’s assets and business and a measure of security, through post-closing indemnification, that the matters addressed by the representations are substantially true. In a Section 363 sale, the buyer acquires the assets “where is, as is,” and the representations of the debtor in the asset purchase agreement will not survive the closing. This has the potential impact of heightening the diligence burden on the buyer. The buyer may have to dig more deeply than in a non-bankruptcy context to uncover potential post-closing exposures, for example regarding operational compliance with regulatory requirements that could hinder the licensure process accompanying the closing.
    October 16, 2015
    Bankrupt Hospital Allowed to Recover Medicaid Provider Fees Paid to State
    Source: LinkedIn
    Author: Cecily A. Dumas

    This article also was published on Law360 on October 28, 2015.

    On October 1, 2015, the Seventh Circuit Court of Appeals held that Indiana’s post-petition reduction of Medicaid reimbursements to a debtor hospital to collect an unpaid provider fee violated the automatic stay, determining that the debt was a prepetition claim. The court also found that prepetition reductions in reimbursements constituted avoidable preferences. Saint Catherine’s Hospital of Indiana, LLC v. Indiana Family and Social Services Administration, 800 F.3d 312 (7th Cir. 2015).
    New York Court of Appeals Gives Global Banks Big Win on “Separate Entity” Issue
    Authors: Leo T. Crowley, David Babbott-Klein
    In Motorola Credit Corp. v. Standard Chartered Bank, 2014 N.Y. Slip Op. 07199, 2014 WL 5368774 (Oct. 23, 2014) (“Motorola”), the highest New York state court ended five years of uncertainty and for the first time expressly endorsed the "separate entity” rule, a New York common law doctrine limiting judgment creditors' ability to reach or restrain assets held by judgment debtors in overseas branches of global banks. A previous Court of Appeals ruling, Koehler v. Bank of Bermuda, 12 N.Y.3d 533 (2009), had sparked doubt about the separate entity rule’s continued viability. Motorola gives banks with New York branches renewed confidence that service made in New York will not affect deposits on the books of foreign branches, and it places the burden squarely back on creditors to attempt to reach overseas assets through local law proceedings.
    Supreme Court Ruling in Bellingham Offers Comfort but Little Clarity
    Authors: Richard L. Epling, Dina E. Yavich
    A unanimous Supreme Court, in Executive Benefits Ins. Agency, Inc. v. Arkinson (In re Bellingham Ins. Agency, Inc.), 573 U.S. ___ (2014), confirmed a bankruptcy court’s power to submit proposed findings of fact and conclusions of law for the district court’s de novo review, even though such court is constitutionally barred from entering a final judgment on a bankruptcy-related claim under Stern v. Marshall. While the Bellingham decision mitigates the jurisdictional uncertainty left in Stern’s wake, the Supreme Court’s decision leaves several significant questions unanswered. While Bellingham leaves the terrain of bankruptcy court jurisdiction somewhat clearer, the bankruptcy jurisdictional statute still contains provisions that the Court has found are unconstitutional.
    Third Circuit Concludes Personal Injury Causes of Action Against a Successor to Debtor’s Business are Generalized Claims
    Authors: Richard L. Epling, Dina E. Yavich
    In a novel decision, the United States Court of Appeals for the Third Circuit held, in its ruling In re Emoral, Inc., 740 F.3d 875 (3d Cir. 2014), that personal injury claims of individuals allegedly harmed by a bankrupt debtor’s products cannot be asserted against a pre-petition purchaser of the debtor’s assets, as they are “generalized claims” which belong to the debtor’s bankruptcy estate rather than to the individuals who suffered the harm.
    Lehman: New Limitations on Plan Payment of Individual Creditors’ Committee Members’ Professional Fees
    Authors: Peter A. Baumgaertner, Leo T. Crowley, Richard L. Epling, Dina E. Yavich

    This alert was originally published in Law360 on April 22, 2014.

    In the recent case of Davis v. Elliot Mgmt. Corp. (In re Lehman Bros. Holdings Inc.), 2014 U.S. Dist. LEXIS 48102 (S.D.N.Y. Mar. 31, 2014), the District Court for the Southern District of New York issued a decision barring reorganization plans from paying legal fees of individual members of official creditors’ committees absent a showing of substantial contribution to the estate. In so holding, the District Court disapproved a trend among New York bankruptcy courts to permit such payments if they are expressly included in the reorganization plan, notwithstanding a lack of specific authorization in the Bankruptcy Code. As a result of this ruling, indenture trustees that serve on official creditors’ committees as part of their role in reorganization cases may find it increasingly difficult to recover their professional fees and expenses pursuant to plan payment provisions.
    7th Circuit Holds Successor Liable for FLSA Claims, Despite Buyer’s Disclaimer
    Authors: Paula M. Weber, Leo T. Crowley, Thomas N. Makris, Alexander K. Parachini
    In Teed v. Thomas & Betts Power Solutions, LLC, the 7th Circuit in an opinion written by Judge Posner held that, absent a good reason to withhold liability, a purchaser of assets was subject to successor liability for Fair Labor Standards Act (“FLSA”) claims and other federal labor and employment laws, even if the successor disclaimed liability when it acquired the assets.
    Update on Preparing Living Wills for Bank Holding Companies and Depository Institutions
    Authors: Rodney R. Peck, Joseph T. Lynyak, III
    This analysis updates a previous memo and incorporates advice we have received from the Federal Reserve Board (“FRB”) and the Federal Deposit Insurance Corporation (“FDIC”) regarding the preparation of living wills for bank holding companies and banks required to comply by July 1, 2103 or December 31, 2013.
    Supreme Court Upholds Right to Credit-Bid in 363 Sales Embedded in Reorganization Plans
    Authors: Richard L. Epling, Alexander K. Parachini, Kerry Brennan
    In the recent case of RadLAX Gateway Hotel, LLC v. Amalgamated Bank, 2012 WL 1912197 (May 29, 2012), the Supreme Court in a unanimous 8-0 opinion, delivered by Justice Scalia, held that the Bankruptcy Code statutory scheme mandates that secured creditors must be allowed to credit-bid in 363 sales of assets where the sale is incorporated into a plan of reorganization. While many in the finance and bankruptcy space view the right of a secured creditor to credit-bid as sacrosanct and uncontroversial, several recent circuit court opinions suggested that credit-bidding was not required for a 363 sale in connection with a plan of reorganization so long as the debtor provided such creditor alternatively with the "indubitable equivalent" of its claim. The Supreme Court resolved any uncertainty in favor of the right of a secured creditor to credit-bid.

    In Destabilizing Decision for Secured Lenders, 11th Circuit Reverses TOUSA District Court
    Authors: Andrew M. Troop, Brandon R. Johnson
    On May 15, 2012, the Eleventh Circuit Court of Appeals issued a fraudulent transfer ruling in TOUSA, Inc.'s chapter 11 case with wide-ranging implications for the financing community. As discussed herein, this decision weakens protections for secured lenders, especially when extending credit to distressed borrowers.

    February 2012
    PLI’s Intellectual Property Institute 2010 - Bankruptcy Issues in Copyright
    Authors: Ana N. Damonte
    Software licenses are copyright licenses. The license specifies the extent to which “copying” is permitted under the license. In this article, we address various bankruptcy issues related to computer software, computer software licenses and other intellectual property assets. First, we provide basic background applicable to licensor/licensee bankruptcies. Second, we discuss the Intellectual Property Bankruptcy Protection Act of 1988 (Bankruptcy Code Section 365(n), including identification of risk and potential strategies for minimizing those risks. Third, we consider issues relating to the assumption of technology licenses by debtor-licensees. Fourth, we provide an overview of benefits and risk of working with a financially troubled licensor. Fifth, we discuss the necessity of perfecting security interests. Lastly, we discuss the dischargeability of copyright infringement judgments (and other IP infringement judgments) in bankruptcy.
    Seventh Circuit Rejects Bond Indenture and Its Waiver of Tribal Sovereign Immunity, But Allows Leave to Amend for Equitable Claims
    Authors: Blaine I. Green, Craig A. Barbarosh, Daron T. Carreiro
    A recent ruling by the United States Court of Appeals for the Seventh Circuit affirmed the invalidity of a trust indenture between a tribal corporation and bond trustee that was not approved by the National Indian Gaming Commission ("NIGC"). However, the Seventh Circuit granted the trustee leave to amend its complaint to assert equitable claims, remanding the case for the district court to determine if other bond documents could support a waiver of the tribal corporation’s sovereign immunity, and whether the trustee has standing to sue for the return of funds to the bondholder.
    Is Corporate Bankruptcy an Option for Tribal Casinos?
    Authors: Blaine I. Green, Craig A. Barbarosh, Mark Houle, Daron T. Carreiro
    Tribal economies are not immune to the recent global financial crisis and economic downturn. The Indian gaming industry was hit especially hard. After consistent year-over-year growth in tribal gaming revenues during the 1990s and continuing through 2008, industry revenues declined in 2009 and have continued to stagnate. Amid reports of several tribal casino defaults—and many more tribes with significant debt maturing in the near future that will need to be restructured—tribes and creditors must consider two questions: Are tribes and their corporations eligible for bankruptcy? If so, is bankruptcy an attractive option for a tribal casino?

    December 2016
    Two Health Care Providers’ Critical—Yet Curious—Search for Bankruptcy Court Jurisdiction
    Source: American Bankruptcy Institute Journal
    Authors: Andrew M. Troop, Patrick J. Potter
    Two recent decisions reached completely opposite results about whether disputes affecting the fate of a health care debtor’s business operations (not to mention patient care and treatment of creditors) might be litigated and resolved in the bankruptcy courts. Both decisions turned in large part on the interpretation of statutory provisions that are not models of clarity. Although these differing results might be explained in part by the specifics of the disputes and their procedur- al postures, the decisions are instructive to future health care debtors aiming to continue operations while availing themselves of chapter 11’s perceived hospitable and speedy dispute-resolution process.
    Don’t Count on the Bankruptcy Code to Preserve Payments from CMS While Closing or Repurposing a Hospital
    Source: LinkedIn
    Author: Andrew M. Troop

    The Takeaway

    Using chapter 11 to manage the orderly closing or repurposing of a hospital, without the consent of CMS, has become more difficult because, once any service necessary to be a Medicare-qualified hospital is suspended, CMS can terminate all participation in the Medicare program without regard to the Bankruptcy Code’s automatic stay.
    October 2016
    When Can a Bondholder Insist on Prompt Payment of Principal or Interest: Recent Developments under the Trust Indenture Act
    Source: Norton Annual Survey of Bankruptcy Law, 2016 Edition
    Authors: Richard L. Epling, Dina E. Yavich
    In December 2014 and January 2015, the United States District Court for the Southern District of New York issued two sets of decisions—Marblegate Asset Mgmt. v. Educ. Mgmt. Corp.1 and MeehanCombs Global Credit Opportunities Funds, LP v. Caesars Entm't Corp.2—analyzing a provision of the Trust Indenture Act of 1939 (the “TIA”)3 that has rarely found its way into judicial decisions since the statute's enactment.
    Medicare Provider Agreements in Bankruptcy: Executory Contracts or Assets that Can Be Sold Free and Clear (or Effectively Neither)?
    Source: LinkedIn
    Author: Dania Slim
    A hospital is struggling financially. Patient admissions are down and operating costs are up. Worse, the hospital’s chief financial officer recently received a letter from the Centers for Medicare and Medicaid Services (CMS) indicating that the hospital has been overpaid millions of dollars under Medicare’s periodic interim payment system (under which Medicare pays providers for services before making a determination that the services are covered).
    When May Antitrust Not Stop a Health Care Combination? When a Court Decides other Federal Law May Compel It.
    Source: LinkedIn
    Author: Andrew M. Troop
    [The Court’s] determination reflects the healthcare world as it is, and not as the FTC wishes it to be. We find it no small irony that the same federal government under which the FTC operates has created a climate that virtually compels institutions to seek alliances such as the Hospitals intend here. Like the corner store, the community medical center is a charming but increasingly antiquated concept. It is better for the people they treat that such hospitals unite and survive rather than remain divided and wither.
    Considerations for Power Generation Co. Restructuring
    Source: Law360
    Authors: Richard L. Epling, David S. Forsh, Deryck A. Palmer, Matthew J. Oliver
    Many power generation companies (PGCs) are experiencing difficulties under current market conditions. In addition to being exposed to the industrywide difficulties resulting from depressed energy prices and unexpectedly warm weather, many PGCs have been reliant on easy access to the capital markets to develop or acquire generation capacity, or to meet other capital needs, and now face upcoming debt maturities and skepticism regarding their ability to refinance. As restructuring discussions commence across the capital structure, creditors seeking to improve their recoveries should bear in mind lessons learned from recent PGC restructurings such as Dynegy and Edison Mission Energy.
    March 4, 2016
    Beware of Violating Patient Privacy Laws in Bankruptcy Claim Filings
    Source: LinkedIn
    Author: Cecily A. Dumas
    Recent court filings highlight the need for health care providers to protect patient privacy by implementing specific procedures when filing claims in bankruptcy cases of their patients, as a matter of federal bankruptcy and other law.  Last year, WakeMed, a Raleigh, North Carolina-based health care system, asserted a claim for $553.00 for unpaid medical services in a chapter 13 consumer bankruptcy case.  In requesting payment of this small amount, WakeMed set off a chain of events that may well end up costing it thousands of dollars in court sanctions and civil, and possibly even criminal, penalties.
    Public Hospital Bankruptcy Under Chapter 9: A Success Story and a Powerful Tool
    Source: LinkedIn
    Author: Brian R. Hayag

    This piece also was published on Law360 as a bylined article on February 24, 2016.

    To the extent authorized by a State, Chapter 9 of the Bankruptcy Code allows municipalities (defined as a “political subdivision or public agency or instrumentality”) of that State – including public hospitals – to reorganize their debts in the face of insolvency. Municipalities achieve this goal through implementation of a court-approved plan of adjustment. Although the standards for confirming (approving) a Chapter 9 plan resemble the well-established standards for confirming a Chapter 11 plan, differences exist. These differences can be particularly impactful on the ability to confirm a plan that does not pay creditors in full over their objection. Accordingly, public hospitals should be aware of Chapter 9’s different standards for ensuring continuity of the hospital’s operations and preserving funds to enable continued operations and necessary improvements.
    January 2016
    Avoiding Pitfalls in the Appraisal Valuation of Health Care Facilities
    Source: LinkedIn
    Author: Patrick J. Potter
    Accurately valuing the owned real estate and operations of an insolvent health care business is critical to analyzing and resolving a variety of business and litigation issues. Outside of formal bankruptcy proceedings, secured lenders rely upon appraisals to support regulatory-reporting obligations and to assist in developing exit strategies (e.g., to price a discounted loan sale). Inside of bankruptcy proceedings, appraisals are used by both lender and borrower parties to take positions on disputes over (i) adequate protection, both for use of cash collateral and obtaining debtor-in-possession financing, (ii) relief from the automatic stay, and (iii) plan treatment.
    The Clock Keeps Ticking: Time Considerations When Buying Healthcare Assets and Funding a Bankruptcy Case through Closing
    Source: LinkedIn
    Author: Dania Slim
    Today, it is typical for a prospective buyer of distressed healthcare assets to finance a bankruptcy case for a brief period of time to get to a closing (a strategy equally used in the sale of non-healthcare assets). This strategy typically follows a common pattern: The prospective buyer or an affiliate makes a so-called DIP loan to the debtor, and the loan later is used to credit bid at the auction of the debtor’s assets.
    Pre-Insolvency Planning Is Key for Employers with Self-Funded Health Plans
    Source: LinkedIn
    Authors: Allen Briskin, Gerry Hinkley
    Debtors that self-fund for their employees’ health care claims, rather than purchase insurance or health plan coverage for their employees, and that fall behind in the payment of those claims before coming under bankruptcy protection, may face special challenges when seeking to resolve pre-bankruptcy health care claims and arrange for orderly claims payment thereafter through third party administrators (“TPAs”) who prove to be uncooperative. Pre-insolvency planning is key to making certain that an employer with a self-funded health benefits plan can be more secure in its ability to have its employees’ claims paid timely and continue to benefit from favorable financial terms and downstream contractual arrangements afforded by the TPA.
    U.S. P3's Tenuous Balance
    Source: International Financial Law Review
    Authors: Peter A. Baumgaertner, Richard L. Epling, Matthew J. Oliver

    Both public-private partnerships and tax-exempt financing have the potential to improve US infrastructure. But it’s difficult to benefit from both.

    In the US, government assets may be financed with tax-exempt bonds if the state or municipality has enacted authorising legislation, and the bonds are permitted under the state constitution. That landscape changes, however, when those same assets become part of a public-private partnership (P3). Failure of a P3 to comply with the requirements of the US Tax Code can cause the project debt to lose its tax-exempt status.
    April, 2015
    The Draft U.S. Consumer Privacy Bill of Rights Act: Proposing Changes Large and Small
    Source: Bloomberg BNA
    Author: Catherine D. Meyer
    On February 27, 2015, the Obama Administration released its discussion draft of the Consumer Privacy Bill of Rights Act (‘‘Draft’’)1 (see WDPR, March 2015, page 30). Its stated purpose is to ‘‘establish baseline protections for individual privacy’’ and to implement and enforce those protections.
    Buyer be Prepared
    Source: LatinFinance
    Authors: Richard L. Epling, Dina E. Yavich

    This article was originally published by LatinFinance on November 25, 2014.

    A rise of cross-border insolvencies in recent years has generated substantial litigation. In some cases, US bondholders, perceiving their treatment under a foreign reorganization plan to be inequitable, have sought a second chance by opposing the plan in the US on the grounds that its enforcement would be contrary to domestic public policy.
    October 2014
    Lehman Decision Transmutes Structured Finance Investors into General Unsecured Creditors
    Source: Journal of Bankruptcy Law
    Authors: Leo T. Crowley, Margot P. Erlich

    This article was originally published in the October 2014 Journal of Bankruptcy Law.

    The U.S. Bankruptcy Court for the Southern District of New York recently ruled that Lehman Brothers Holdings Inc. cannot subordinate securities fraud claims filed by holders of mortgage-backed securities under Bankruptcy Code Section 510(b) even though a Lehman Brothers affiliate and co-debtor was the depositor of, and considered the issuer for securities law purposes of, the mortgage-backed securities. The authors of this article discuss this very significant ruling and its consequences.
    November/December 2013
    Bankruptcy Issues in Trademarks
    Source: IP Litigator
    Authors: Samuel S. Cavior, Richard L. Epling
    This article was originally published in IP Litigator, Volume 19, Number 6, November/December 2013.
    June 2012
    Intersections of Bankruptcy Law and Insurance Coverage Litigation
    Source: Thomson Reuters' Norton Journal of Bankruptcy Law and Practice, Vol. 21 #2
    Authors: Richard L. Epling, Brandon R. Johnson, Kerry A. Brennan
    Bankruptcy and insurance law frequently intersect and sometimes conflict. This article addresses the most important of these intersections, including the ability of a debtor to satisfy insured claims by the assignment of coverage proceeds in bankruptcy, the treatment of D&O insurance in bankruptcy, a debtor’s non-payment of a deductible or self insured retention (“SIR”) as a defense to coverage, “buy back” agreements and coverage-in-place settlements in bankruptcy, the ability of insurers and/or debtor-affiliates to obtain third-party releases, insurer insolvency and potential gaps in coverage, and paid-loss retrospective policies and a bankruptcy estate’s bad faith claims. As discussed throughout, this is an area of law that is quickly developing and where several issues remain unsettled.
    May 2012
    Restructuring Strategies Can Shield a Business From Future Trouble
    Source: Scotsman Guide's Commercial Edition, May 2012
    Authors: Deryck A. Palmer
    Commercial mortgage brokers can guide clients in the commercial real estate industry to look into how to employ the same approaches used by sound companies in other industries to shield their businesses against liquidity or cash-flow problems down the road. They also can advise clients when seeking rearrangements of contractual terms, pursuing refinancing or making restructuring plans.

    Cross-border Restructuring Know-how
    Source: The Deal
    Authors: Deryck A. Palmer
    When businesses in the U.S. face challenges, powerful laws are available that permit both operational and financial restructuring. By contrast, European and other global businesses are largely stuck with a model based on business cessation and asset liquidation. Can U.S.-style restructuring practices be used to help right the global economy?

    March 2011
    Monorail, Monorail, Monorail
    Source: Norton Journal of Bankruptcy Law and Practice
    Authors: Richard L. Epling, Kent P. Woods, Kerry A. Brennan
    Where a city's financial fortunes are tied up with a municipal authority or other type of quasi-municipal entity and the underlying project proves unsuccessful, what options does the city or project have to restructure? Richard Epling, leader of Pillsbury's Insolvency & Restructuring practice and top-ranked Bankruptcy lawyer by Best Lawyers in America, with Litigation partner Kerry Brennan and Insolvency & Restructuring associate Kent Woods, lay out practical concerns and solutions regarding Chapter 9 and restructuring issues relating to municipal authorities. This article originally appeared in the March 2011 issue of the Norton Journal of Bankruptcy Law and Practice.

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