Mayer Brown partners Brian Trust, Sean Scott, and Aaron Gavant and associate Kyle Tum Suden discussed the evolving case law surrounding whether companies in bankruptcy are eligible to pursue funding pursuant to the SBA’s Paycheck Protection Program in an article available here. For a further discussion of this issue, see prior articles for Mayer
Paycheck Protection Program Loans and DIP Financing
In an article for Mayer Brown’s COVID-19 Response Blog, Mayer Brown partners Brian Trust, Adam Paul, Tom Kiriakos, Sean Scott, Aaron Gavant, and associate Kyle Tum Suden discuss the intersection between paycheck protection program loans and DIP financing.
US Supreme Court Discards Bob Richards Rule, Holds “Federal Common Law” Does Not Govern Inter-Company Distribution of Tax Refunds
In its February 25, 2020, decision in Rodriguez v. FDIC, the US Supreme Court unanimously rejected the “Bob Richards rule” (so named for a 1973 Ninth Circuit decision) and held that federal common law does not govern the allocation of tax refunds within a consolidated corporate group in the absence of a tax allocation agreement to the contrary.1 The decision is likely to have significant implications with respect to inter-corporate disputes over the proper allocation of tax refunds.2
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Third Circuit Holds Bankruptcy Courts May Constitutionally Confirm a Chapter 11 Plan Containing Nonconsensual Third-Party Releases
On December 19, 2019, the US Court of Appeals for the Third Circuit held in In re Millennium Lab Holdings II, LLC1 that bankruptcy courts have the constitutional authority, well within the constraints of Stern v. Marshall,2 to confirm Chapter 11 reorganization plans containing nonconsensual third-party releases. This decision is notable not only because it is the first federal circuit court of appeals decision addressing (and overruling) a Stern challenge to a bankruptcy court’s authority to approve such releases but also because it was issued in a circuit where the ability of a plan to otherwise provide for nonconsensual releases of third-party claims is already generally recognized.3
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US Bankruptcy Code Defines Right to Receive “Make-Whole” Premium under Chapter 11 Plan
On November 26, 2019, the US Court of Appeals for the Fifth Circuit held in Ultra Petroleum Corp. v. Ad Hoc Committee of Unsecured Creditors of Ultra Resources1 that the US Bankruptcy Code limits in certain respects the right of creditors to enforce contractual claims for a “make-whole” premium owed under a note agreement as the result of the debtor’s prepayment of the notes. The Ultra Petroleum case may ultimately lead to a decision addressing the unresolved questions of whether, and in what circumstances, a claim for a make-whole premium must be disallowed as “unmatured interest” under Section 502(b)(2) of the Bankruptcy Code.
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