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Spotlight
    Case Study—Insolvency & Restructuring

    Insolvency & Restructuring

    Contacts

    Richard L. Epling
    Partner
    New York   
    +1.212.858.1649
    M. David Minnick
    Partner
    San Francisco   
    +1.415.983.1351
    6/17/2014
    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.
    5/9/2014
    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.
    4/17/2014
    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.
    4/11/2013
    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.
    2/7/2013
    Update on Preparing Living Wills for Bank Holding Companies and Depository Institutions
    Authors: Joseph T. Lynyak, III, Rodney R. Peck
    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.
    11/28/2012
    Circuit Split in Enforceability of Arbitration Clauses in Bankruptcy Left Unresolved
    Authors: Kerry A. Brennan, Alexander K. Parachini
    In a recent summary opinion, the Supreme Court denied certiorari review of a decision, Continental Insurance Co. v. Thorpe Insulation Co. (In re Thorpe Insulation Co.), 671 F.3d 1011 (9th Cir. 2012), where the Ninth Circuit had affirmed a lower court’s decision refusing to enforce an arbitration clause in a settlement agreement between a debtor and an insurer. In doing so, the Supreme Court declined an opportunity to resolve what many believe to be an important and significant circuit split on the standard for the enforceability of arbitration clauses in bankruptcy proceedings.
    6/8/2012
    Supreme Court Upholds Right to Credit-Bid in 363 Sales Embedded in Reorganization Plans
    Authors: Richard L. Epling, Kerry A. Brennan, Alexander K. Parachini
    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.

    6/7/2012
    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, Philip S. Warden
    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.
    10/31/2011
    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.
    10/26/2011
    California Restricts Access of Municipalities to Chapter 9 of the Bankruptcy Code
    Authors: Brandon R. Johnson, Craig A. Barbarosh, Karen B. Dine
    Numerous municipalities in California and elsewhere are struggling financially. Indeed, Harrisburg, Pennsylvania and Central Falls, Rhode Island have both recently filed for Chapter 9 protection. State governments may have neither the economic reserves nor the political will to bail out troubled cities and counties. These circumstances have raised the focus on Chapter 9 as a tool for reorganizing municipality debt obligations and has deepened the debate between states and their municipalities about the best strategies for addressing a fiscal crisis.
    2/28/2011
    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?

    2/22/2011
    District Court Quashes Controversial TOUSA Fraudulent Transfer Decision
    Authors: Brandon R. Johnson, Craig A. Barbarosh, Erica Edman Carrig, Karen B. Dine
    In a recent 113-page decision, Judge Alan S. Gold of the U.S. District Court for the Southern District of Florida quashed the TOUSA Bankruptcy Court’s previous controversial fraudulent conveyance decision that required secured lenders (the "Transeastern Lenders") to disgorge approximately $480 million received in settlement of their claims against TOUSA. In a ruling with wide-ranging implications for the financing community, the District Court thoroughly rejected the Bankruptcy Court’s reasoning and held that the TOUSA subsidiaries that guaranteed the new loans necessary to fund the settlement had in fact received "reasonably equivalent value" in exchange for their commitments by, among other things, preserving the value of the troubled homebuilder’s entire corporate enterprise.
    November/December 2013
    Bankruptcy Issues in Trademarks
    Source: IP Litigator
    Authors: Samuel S. Cavior, Richard L. Epling, Philip S. Warden
    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, Kerry A. Brennan, Brandon R. Johnson
    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.

    4/25/2012
    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?
    January 2012
    California Restricts Access of Municipalities to Chapter 9 of the Bankruptcy Code
    Source: Pratt's Journal of Bankruptcy Law
    Authors: Brandon R. Johnson, Craig A. Barbarosh, Karen B. Dine
    Numerous municipalities in California and elsewhere are struggling financially. Indeed, Harrisburg, Pennsylvania, and Central Falls, Rhode Island, have both recently filed for Chapter 9 protection. State governments may have neither the economic reserves nor the political will to bail out troubled cities and counties. These circumstances have raised the focus on Chapter 9 as a tool for reorganizing municipality debt obligations and have deepened the debate between states and their municipalities about the best strategies for addressing a fiscal crisis.
    2011/12
    What Happens On the Outsourcers Insolvency: A Comparison of Relevant Insolvency Principles in the U.S., India and China
    Source: PLC Cross-border Outsourcing Handbook
    Authors: Joshua B. Konvisser, Yusuf H. Safdari, Nishith Desai, Joseph Chan, Michael Murphy
    Top-ranked IT and outsourcing lawyer Michael Murphy, nationally recognized outsourcing lawyer Joshua Konvisser and Pillsbury senior counsel Yusuf Safdari, along with Nishith Desai and Joseph Chan, explain U.S. bankruptcy law principles and issues most relevant to customers of insolvent outsourcing service providers. The authors provide a comparison of those principles with the insolvency frameworks in India and China in order to put customers in the best position to navigate the complexities of local insolvency laws. This article originally appeared in the PLC Cross-border Outsourcing Handbook 2011/12
    March 2011
    Monorail, Monorail, Monorail
    Source: Norton Journal of Bankruptcy Law and Practice
    Authors: Richard L. Epling, Kerry A. Brennan, Kent P. Woods
    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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