Bankruptcy 2018: Important Decisions of the Last Twelve Months
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Institute for Professional Education Center for Corporate Law and Governance The American College of Bankruptcy Third Circuit Fellows, Rutgers Center for Corporate Law and Governance, and Rutgers Institute for Professional Education proudly present: BANKRUPTCY 2018: IMPORTANT DECISIONS OF THE LAST TWELVE MONTHS Hon. Kevin J. Carey United States Bankruptcy Judge District of Delaware Hon. Ashely M. Chan United States Bankruptcy Judge Eastern District of Pennsylvania Hon. Rosemary Gambardella United States Bankruptcy Judge District of New Jersey Chrystin Ondersma Professor of Law and Judge Morris Stern Scholar Rutgers Law School Hon. Christopher S. Sontchi United States Bankruptcy Judge District of Delaware Moderator: Bill Rochelle Editor-at-Large American Bankruptcy Institute (ABI) Wednesday, September 12, 2018 | Newark, New Jersey [email protected] Rutgers Institute for Rutgers Law School t: 973-353-5928 Professional Education 123 Washington Street t: 856-225-6658 rutgerscle.com Newark, NJ 07102 and Rutgers, The State University of New Jersey Rutgers Law School 217 N. Fifth Street rutgers.edu law.rutgers.edu Camden, NJ 08102 Abundant Splits in Consumer and Reorganization Law American College Third Circuit Fellows Rutgers Law School Newark, New Jersey September 12, 2018 Bill Rochelle • Editor-at-Large American Bankruptcy Institute [email protected] • 703. 894.5909 © 2018 66 Canal Center Plaza, Suite 600 • Alexandria, VA 22014 • www.abi.org American Bankruptcy Institute • 66 Canal Center Plaza, Suite 600 • Alexandria, VA 22314 1 www.abi.org Table of Contents Supreme Court ........................................................................................................................ 4 Decided Last Term ........................................................................................................................... 5 Supreme Court Narrowly Interprets the Safe Harbor, Overrules the Majority of Circuits ............ 6 Supreme Court Says Insider Status Is Reviewed for Clear Error Under Existing Test ............... 10 A False Statement About One Asset Isn’t Grounds for Nondischargeability .............................. 14 Possible for Next Term .................................................................................................................. 17 ‘Cert’ Petition Asks Supreme Court to Overrule Lubrizol on Trademark Licenses .................... 18 ‘Cert’ Petition Wants Discharge Violations to Be Arbitrated ..................................................... 21 Reorganization ...................................................................................................................... 23 Dismissal ......................................................................................................................................... 24 Fifth Circuit Issues a Narrow Opinion Requiring Corporate Authority to File a Petition ........... 25 Executory Contracts & Leases ...................................................................................................... 29 Circuit Split Deepens on Rejection of Trademark Licenses ........................................................ 30 Seventh Circuit Opens a Can of Worms on Bankruptcy Sales and Adequate Protection............ 34 Flip Clauses in Swaps Held Enforceable by District Judge in New York ................................... 38 Sales ................................................................................................................................................. 41 Third Circuit Explains When Sale Orders Are Not Automatically Moot .................................... 42 Estate Property ............................................................................................................................... 44 California Supreme Court Kills the Jewel Doctrine on a Certified Question .............................. 45 Jurisdiction & Power ..................................................................................................................... 48 Automatic Stay Doesn’t Apply to Enforcement of Maritime Liens, Ninth Circuit Says ............ 49 Delaware’s Judge Sontchi Writes a Seminal Opinion on Sovereign Immunity .......................... 52 Bankruptcy Court Finds Constitutional Power to Grant Releases in Confirmation Orders ........ 56 Makewhole Premiums ................................................................................................................... 60 Third Circuit Splits with New York by Allowing Makewhole Premiums in Chapter 11 ............ 61 Second Circuit Splits with Third on Makewholes Occasioned by Bankruptcy ........................... 64 Plans & Confirmation .................................................................................................................... 70 Ninth Circuit Holds that One Accepting Class in Joint Plan Is Sufficient .................................. 71 Buying Just Enough Unsecured Claims to Defeat Confirmation Is Ok, Ninth Circuit Says ....... 75 Non-Bankrupt Nonprofit Entities Are Not Subject to Substantive Consolidation ...................... 77 Non-Voting Creditors’ Consent to Third Party Releases Can’t Be Inferred ............................... 79 District Court Endorses Opt-Out to Confirm Substantive Consolidation Plans .......................... 82 Committees ..................................................................................................................................... 84 Delaware Judge Narrows Jevic to Prohibit Only End-of-Case Priority Skipping ....................... 85 First Circuit Widens a Circuit Split on a Committee’s Intervention Rights ................................ 87 Existence of a Committee Precludes Tolling the Statute for Adverse Domination ..................... 89 Stays & Injunctions ........................................................................................................................ 91 Tenth Circuit Direct Appeal to Decide Whether the Automatic Stay Is Really Automatic ........ 92 Compensation ................................................................................................................................. 94 Retention Agreements Allowing Defense Fees Ok in New Mexico, but Not in Delaware ......... 95 ASARCO Read to Bar Fee-Defense Costs Even with a Fee-Shifting Agreement ........................ 97 Fraudulent Transfers ..................................................................................................................... 99 American Bankruptcy Institute • 66 Canal Center Plaza, Suite 600 • Alexandria, VA 22314 1 www.abi.org Ninth Circuit Splits with Seventh on Sovereign Immunity and Derivative Suits by a Trustee . 100 In a Circuit Split, Ninth Circuit Tags Innocent Sellers with Fraudulent Transfer Liability ...... 103 Third Circuit Narrowly Interprets Delaware Fraudulent Transfer Law ..................................... 106 Delaware District Judge Seemingly Splits with Second Circuit on the Safe Harbor................. 109 Fraudulent Transfer Claims Aren’t Capped by Creditors’ Losses ............................................. 112 Structured Finance Protects Tuition Payments from Fraudulent Transfer Suits ....................... 115 Preferences & Claims .................................................................................................................. 117 Circuit Split Narrows on the New Value Defense to a Preference ............................................ 118 A Casually Written Email by Counsel Can Be an Agreement in the Second Circuit ................ 121 Eighth Circuit Broadly Draws the Line to Identify ‘Unknown’ Claims that Are Discharged ... 124 Perishable Commodities Act ....................................................................................................... 126 En Banc, Ninth Circuit Holds: Only ‘True Sales’ of Receivables Comply with PACA ........... 127 Consumer Bankruptcy ....................................................................................................... 130 Fair Debt Collection Practices Act ............................................................................................. 131 FDCPA Applies to Debt Collectors Even if They Own the Debt .............................................. 132 Eighth Circuit Broadly Interprets the FDCPA to Protect Consumers ....................................... 135 Courts Can’t Sanction Debt Collectors for Filing Stale Claims after Midland Funding ........... 138 Discharge/Dischargeability.......................................................................................................... 140 First Circuit Splits with the Ninth over Good Faith Defense to Discharge Violation ............... 141 Violation of Discharge Is Now Difficult to Prove in the Ninth Circuit ..................................... 146 No Contempt on Discharge Violation of Nondischargeable Debt, Circuit Says ....................... 149 Prejudgment Interest at the Higher State Rate Can Be Ok on Nondischargeability .................. 151 Penalties for Fraud Are Nondischargeable Despite Chapter 13’s ‘Superdischarge’ ................. 153 Sixth Circuit Expounds on a Loophole in the Rooker-Feldman Doctrine ................................. 155 Chapter 13 Discharges Post-Filing Condo Assessments in the Ninth Circuit ........................... 158 Personal Liability for a PACA Trust Is Dischargeable, Judge Mark Says ................................ 161 Arbitration ...................................................................................................................................