Abundant Splits and Other Significant Bankruptcy Decisions 38th Annual Commercial Law & Bankruptcy Seminar McCall, Idaho Feb. 6, 2020; 2:30 P.M. Bill Rochelle • Editor-at-Large American Bankruptcy Institute [email protected] • 703. 894.5909 © 2020 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 Nonjudicial Foreclosure Is Not Subject to the FDCPA, Supreme Court Rules ............................. 6 Licensee May Continue Using a Trademark after Rejection, Supreme Court Rules .................. 10 Court Rejects Strict Liability for Discharge Violations ............................................................... 15 Supreme Court Decision on Arbitration Has Ominous Implications for Bankruptcy ................. 20 Decided This Term ......................................................................................................................... 24 Supreme Court Rules that ‘Unreservedly’ Denying a Lift-Stay Motion Is Appealable .............. 25 Supreme Court Might Allow FDCPA Suits More than a Year After Occurrence ....................... 28 Cases Argued So Far This Term ................................................................................................... 31 Supreme Court to Tackle a Bankruptcy Tax Refund Circuit Split .............................................. 32 The Supreme Court May Duck a Case Involving Federal Common Law vs. State Law ............ 35 Case Still to Be Argued This Term ............................................................................................... 39 Supreme Court Grants ‘Cert’ to Decide Whether Inaction Violates the Automatic Stay ............ 40 Seventh Circuit Solidifies a Circuit Split on the Automatic Stay ................................................ 43 Circuit Split Widens on the Automatic Stay and Turnover of Repossessed Cars ....................... 47 ‘Cert’ Pending ................................................................................................................................ 50 No Decision Soon on Extraterritorial Fraudulent Transfers ........................................................ 51 Second Circuit Allows Extraterritorial Application of Sections 548 and 550 ............................. 53 Reorganization ...................................................................................................................... 58 Fraudulent Transfers ..................................................................................................................... 59 Second Circuit Again Applies the ‘Safe Harbor’ to Protect Selling Shareholders in an LBO .... 60 Trustee Allowed to Sue for Fraudulent Transfer on an Unenforceable Contract ........................ 64 Executory Contracts & Leases ...................................................................................................... 67 Sixth Circuit Gives Primacy to the Bankruptcy Court in Rejecting Power Contracts ................. 68 Executory Contracts Are Automatically Rejected Even if Unscheduled, Fifth Circuit Holds .... 73 Sales ................................................................................................................................................. 75 Section 363 Doesn’t Apply to Asset Sales in a Chapter 11 Plan, Judge Garrity Rules ............... 76 Estate Property ............................................................................................................................... 80 The Debtor or Trustee Control the Privileges of an Independent Audit Committee ................... 81 New York Judge Refuses to Waive Collateralization for Debtors’ Bank Accounts ................... 83 Different Rules Govern When Claims Accrue By or Against an Estate ..................................... 85 Jurisdiction & Power ..................................................................................................................... 88 Circuits Split on Bankruptcy Jurisdiction for Social Security, Medicare Suits ........................... 89 Reading Stern Narrowly, Delaware Judge to Issue Final Order in Fraudulent Transfer Suit ...... 93 Final Orders Allowed in Preference Suits Against Defendants Who Didn’t File Claims ........... 96 ‘Related To’ Jurisdiction Is Measured When the Suit Is Filed, Not Later, Circuit Says ............. 99 Section 505(a) Doesn’t Confer Jurisdiction to Determine Amount of a Tax, Circuit Says ....... 101 Another Court Limits ‘Related To’ Jurisdiction Based on Indemnification Claims ................. 105 Courts Divided on Venue for Small-Dollar Avoidance Actions ............................................... 108 ‘Stern’ Disputes Invoke a Circuit Court’s General Jurisdiction Under 28 U.S.C. § 1291......... 111 ‘Close Nexus’ Test Doesn’t Apply to Liquidating Trusts After Confirmation ......................... 113 American Bankruptcy Institute • 66 Canal Center Plaza, Suite 600 • Alexandria, VA 22314 1 www.abi.org Creating a Split, Sixth Circuit Holds: No Waiver of Immunity for Indian Tribes .................... 115 Sixth Circuit Pronounces a Two-Prong Test to Determine ‘Finality’ ....................................... 119 Third Circuit Expands the Flexible Notion of ‘Finality’ on Bankruptcy Appeals ..................... 122 Plans & Confirmation .................................................................................................................. 125 Intercreditor Agreement Didn’t Apply to Plan Distributions, Third Circuit Holds ................... 126 Fifth Circuit Revokes a Controversial Opinion with Dicta on the Solvent-Debtor Exception .. 130 Eighth Circuit Upholds Backstopped Rights Offerings for Chapter 11 Plans ........................... 134 New York Judge Gives Reasons for Nixing Nonconsensual, Third-Party Releases ................. 137 Another Judge Clamps Down on Third-Party Releases in a Major Reorganization ................. 141 Stays & Injunctions ...................................................................................................................... 144 Divided Fifth Circuit Again Permits Third-Party Injunctions in Stanford Receivership........... 145 Third Circuit Finds Constitutional Power to Grant Releases in Confirmation Orders .............. 149 Opting Out Won’t Justify Imposing Third-Party Releases, Delaware Judge Says .................... 154 Compensation ............................................................................................................................... 157 Fifth Circuit to Rule on Whether Increased U.S. Trustee Fees Are Retroactive ....................... 158 Delaware Judge Upholds U.S. Trustee Fee Increase in Pending Cases ..................................... 160 Increased U.S. Trustee Fees Stick to ‘Revolvers’ but Not to Pending Cases ............................ 162 Preferences & Claims .................................................................................................................. 165 First Circuit Explains How to Avoid Liability for an Underfunded Pension Plan .................... 166 Another Circuit Allows an Unsecured Claim for Contractual Attorneys’ Fees ........................ 168 Fifth Circuit Invokes ‘Policies’ in Ruling on Subordination under Section 510(b) .................. 171 Fifth Circuit Clarifies ‘Admin’ Status for a Drilling Contractor’s Post-Rejection Claims ....... 173 New Jersey Tax Foreclosures Can Be Preferences, Third Circuit Rules ................................... 176 Delaware Judge Allows Unsecured Claim for Contractual Attorneys’ Fees ............................. 179 ‘Deemed Allowed’ Claims Can Be Binding in Subsequent Litigation, Circuit Says ................ 181 Seventh Circuit Splits with the First Circuit on Sufficiency of Financing Statements .............. 184 Consumer Bankruptcy ....................................................................................................... 187 Ethics ............................................................................................................................................. 188 Fifth Circuit Facilitates ‘No Money Down’ Chapter 13s .......................................................... 189 Fourth Circuit Widens the Split on Judicial Estoppel’s Bad Faith Presumption ....................... 193 For Petitions the Clients Had Not Seen or Signed, Lawyer Recommended for Disbarment .... 195 Discharge/Dischargeability.......................................................................................................... 198 Fifth Circuit Makes Student Loans Even More Difficult to Discharge ..................................... 199 Recent Decisions Deepen and Entrench Circuit Split on Discharging Student Loans .............. 202 Courts Interpret Brunner Too Harshly, Bankruptcy Judge Cecelia Morris Says ...................... 206 Discharge Is Enforceable Only in the Issuing District, Fifth Circuit Says ................................ 209 Seventh Circuit Opinion on Contempt Raises Questions under Taggart .................................. 213 Default Judgments Are (Sometimes) Nondischargeable Under Issue Preclusion ..................... 217 Overpaying a DSO Doesn’t Result in a Nondischargeable Debt, Seventh Circuit