Exploring Bankruptcy Cases 2017
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SUFFOLK ACADEMY OF LAW The Educational Arm of the Suffolk County Bar Association 560 Wheeler Road, Hauppauge, NY 11788 (631) 234-5588 EXPLORING RECENT BANKRUPTCY CASES AND THEIR IMPLICATIONS FACULTY Hon. Alan S. Trust, US Bankruptcy Judge for EDNY Bill Rochelle, Editor-at-Large, ABI Matthew V. Spero, Esq., Rivkin Radler Adam P. Wofse, Esq., LaMonica Herbst & Maniscalco, LLP Program Coordinator: Richard L. Stern, Esq. Thank you to Patrick McCormick, Esq., Campolo, Middleton & McCormick, LLP as Benefactor of this program. October 3, 2017 Suffolk County Bar Center, NY Timed Agenda: Abundant Splits and Other Significant Bankruptcy Decisions Nassau County Bar Associations Suffolk County Academy of Law EDNY Chapter, Federal Bar Association Mineola, New York October 3, 2017 6:00 – 8:00 p.m. Registration 5:30 p.m. to 6:00 p.m. Introductions and welcome 6:00 to 6:05 p.m. Richard Stern Macco & Stern, Islandia, NY Program 6:05 to 8:00 p.m. Panelists Bill Rochelle • Editor-at-Large American Bankruptcy Institute Judge Alan S. Trust EDNY Bankruptcy Court Matthew Spero Rivkin Radler, Uniondale, NY Adam Wofse Lamonica, Herbst & Maniscalco, Wantaugh, NY Abundant Splits and Other Significant Bankruptcy Decisions Nassau-Suffolk Bankruptcy Bar Mineola, New York October 3, 2017 Bill Rochelle • Editor-at-Large American Bankruptcy Institute [email protected] • 703. 894.5909 © 2017 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 This Term ........................................................................................................................... 5 Supreme Court Reverses Jevic, Bars Structured Dismissals that Violate Priority Rules .............. 6 Supreme Court Allows Debt Collectors to File Time-Barred Proofs of Claim ............................. 9 A Debt Purchaser Is Not a ‘Debt Collector’ Regulated by the FDCPA, Supreme Court Holds .. 12 Did the Supreme Court Hint that Bankruptcy Venue Is Too Broad? .......................................... 14 Next Term ....................................................................................................................................... 18 Supreme Court Grants ‘Cert’ on Appellate Standards for Non-Statutory Insider Status ............ 19 Supreme Court to Decide Whether Using a ‘Mere Conduit’ Invokes the 546(e) ‘Safe Harbor’ . 22 Supreme Court Will Not Resolve Circuit Split on Recharacterization ........................................ 24 Reorganization ...................................................................................................................... 26 Sales ................................................................................................................................................. 27 Ninth Circuit Joins Minority in Allowing Sales Free & Clear of Leases .................................... 28 Sixth Circuit Widens Split on Mooting Appeals from Sale Orders ............................................. 30 Estate Property ............................................................................................................................... 32 Circuit Says a Perfected Assignment of Rents Takes Property Out of the Estate ....................... 33 Jurisdiction & Power ..................................................................................................................... 35 Seventh Circuit Requires Stern Consent from Unserved Defendants in Non-Core Suits............ 36 Retention of Jurisdiction by Itself Does Not Confer Subject Matter Jurisdiction, Circuit Holds 39 Delaware District Judge Issues Important Opinion on Third-Party Releases .............................. 41 Refinancing & Tender Offers ....................................................................................................... 45 Third Circuit Splits with New York by Allowing Make-Whole Premiums in Chapter 11.......... 46 Second Circuit Blesses a Nonconsensual Out-of-Court Restructuring ........................................ 49 Plans & Confirmation .................................................................................................................... 52 Cramdown Value Is Not the Higher of Foreclosure or Replacement Value, Ninth Circuit Says 53 Ninth Circuit Now Requires Paying Default Interest to Cure a Default ...................................... 57 To Establish Record Dates, the Plan Applies, Not Securities Regulations .................................. 60 Fired Worker’s Entire Severance Claim Given Priority in Delaware by Judge Carey ................ 62 Committees ..................................................................................................................................... 64 Delaware Judge Narrows Jevic to Prohibit Only End-of-Case Priority Skipping ....................... 65 Split Sixth Circuit Bars Litigation Trustees from Suing on D&O Policies ................................. 67 Existence of a Committee Precludes Tolling the Statute for Adverse Domination ..................... 70 Ninth Circuit Extends Barton to Protect Creditors’ Committee Members .................................. 72 New York Judge Requires Hedge Funds to Disclose Their Investors ......................................... 74 Stays & Injunctions ........................................................................................................................ 76 Circuit Split Widens on Stay Violation for Failure to Turn Over Repossessed Collateral .......... 77 State Law Determines Whether Post-Filing Mechanic’s Liens Are Voidable ............................ 80 Cutting Off Medicare Funding Is Exempt from the Automatic Stay, First Circuit Says ............. 82 Executory Contracts & Leases ...................................................................................................... 84 Lease Rejection Cap Doesn’t Apply to Past-Due Rent Accrued Before Rejection ..................... 85 First Circuit BAP Rejects Lubrizol on Rejection of Trademark Licenses ................................... 87 Compensation ................................................................................................................................. 89 American Bankruptcy Institute • 66 Canal Center Plaza, Suite 600 • Alexandria, VA 22314 1 www.abi.org Delaware Judge Disregards Committee Fee Cap if a Chapter 11 Plan Is Confirmed ................. 90 Baker Botts Read Narrowly on Compensation for Defending Fee Application .......................... 92 Fraudulent Transfers ..................................................................................................................... 94 Ninth Circuit Splits with Seventh on Sovereign Immunity and Derivative Suits by a Trustee ... 95 Circuits Split on Objective vs. Subjective Value for Fraudulent Transfer Consideration ........... 98 New York District Judges Are Split on Drawing Inferences of Fraud from Executives ........... 100 Sixth Circuit Pens Major Decision on Duty to Investigate Suspicions of Fraud ....................... 103 Judge Bonapfel Sides with Fifth Circuit on ‘Equivalent Value’ in Ponzi Schemes .................. 106 Preferences & Claims .................................................................................................................. 110 Receipt under Section 503(b)(9) Occurs on Physical Possession, Third Circuit Holds ............ 111 Preference Analysis Permits ‘Hypothetical-Within-a-Hypothetical’ on Chapter 7 Recovery ... 113 Allowing WARN Claims in Liquidating Chapter 11s, Chicago Judge Splits with 3d Circuit .. 117 Courts Divided on Electric Service as ‘Goods’ Under Section 503(b)(9) ................................. 120 Subordination & Dismissal.......................................................................................................... 122 No Subordination in Ninth Circuit for a Stock Conversion Claim ............................................ 123 Judge Punts on How the Rule of Explicitness Survived Adoption of the Code ........................ 125 Consumer Bankruptcy ....................................................................................................... 127 Fair Debt Collection Practices Act ............................................................................................. 128 Eighth Circuit Broadly Interprets the FDCPA to Protect Consumers ....................................... 129 Lawyers Violate FDCPA with Factually Inaccurate Allegations in Bankruptcy Pleadings ...... 132 Courts Can’t Sanction Debt Collectors for Filing Stale Claims after Midland Funding ........... 134 Discharge/Dischargeability.......................................................................................................... 136 Discharge Denied for Omitting Name of a Retirement Account ............................................... 137 Co-Conspirator’s Intent Is Enough for Nondischargeability, Fifth Circuit Holds ..................... 139 Circuits Now Split on Dischargeability for Third Party’s Violation of Securities Laws .......... 141 Falsely Misrepresenting One Asset Isn’t Grounds for Nondischargeability, Circuit Holds ...... 143 Undervaluing One Asset Can Result in Denial of Discharge, Fourth Circuit Holds ................. 145 Subjective Feeling of Coercion Doesn’t State a Claim for Discharge Violation ....................... 147 No Contempt