Perla, Arkansas becomes first U.S. municipality to file for Chapter 9 bankruptcy since 2015 [Bloomberg Law; May 27, 2019]
Yesterday, the Supreme Court held in a 9-0 decision that a creditor cannot be held in contempt of court for violating a bankruptcy discharge order if there is a “fair ground of doubt” as to whether the order barred the creditor’s conduct.
This is primarily an objective standard, which depends on whether the creditor had a reasonable basis for his position. But subjective intent is still relevant; a creditor who acted in bad faith may deserve to be held in contempt, and a creditor who acted in good faith may not deserve a significant contempt sanction
Mayer Brown represented the respondents before the Supreme Court.
CNBC yesterday reported on new warnings from Morgan Stanley analysts about the potential for a near-term recession (CNBC: Morgan Stanley says Economy on Recession Watch), including economic indicators that many in the restructuring and bankruptcy industry are closely tracking.
Relevant data points discussed include slowing manufacturing activity, notable dips in the U.S. services sector and the flattening of the yield curve. Notably, some of the data pre-dates the recent re-escalation of trade tensions between U.S. and China.
More to come no doubt.
Yesterday, in an 8-1 decision, the US Supreme Court held in Mission Product Holdings, Inc. v. Tempnology, LLC1 that under Section 365 of the Bankruptcy Code, a debtor-licensor’s rejection of a trademark license agreement does not terminate the rights of the licensee to continue using the trademark where those rights would otherwise survive the licensor’s breach of the agreement under non-bankruptcy law.2 The Tempnology decision resolves the most significant unanswered question regarding the treatment of trademark licenses in bankruptcy.
On April 23, 2019, the United States District Court for the Southern District of New York, in fraudulent transfer litigation arising out of the 2007 leveraged buyout of the Tribune Company, ruled on one of the significant issues left unresolved by the US Supreme Court in its Merit Management decision last year (which we addressed in a previous post). The district court held Tribune’s post-bankruptcy litigation trustee was barred from asserting certain constructive fraudulent transfer claims against former Tribune shareholders based on what Judge Denise Cote termed a “straightforward” application of the Section 546(e) settlement payment safe harbor. See In re Tribune Co. Fraudulent Conveyance Litigation, No. 12 cv 2652 (DLC), 2019 WL 1771786 (S.D.N.Y. Apr. 23, 2019). In addressing the extent to which a party’s status as a customer of a “financial institution” (as defined in the Bankruptcy Code) affects the applicability of Section 546(e), the district court was the first court post-Merit Management to squarely address that question. Continue Reading Debtor Is a Financial Institution for Purposes of Settlement Payment Safe Harbor, Rules Southern District of New York
In less than 24 hours beginning on May 1, 2019, Sungard Availability Services Capital, Inc., and its affiliates (collectively, “Sungard”) commenced and completed Chapter 11 proceedings in what has been described as the fastest Chapter 11 case ever. Sungard filed its Chapter 11 cases just before 9pm on May 1 in the Bankruptcy Court for the Southern District of New York, White Plains Division, and, before 6pm the next day, Judge Robert Drain entered an order confirming Sungard’s prepackaged Chapter 11 plan. The Sungard debtors were able to obtain this rapid result through extensive pre-filing planning and negotiations, and likely also benefited from assignment of their cases to Judge Drain, who had prior experience in addressing similar, expedited pre-packaged cases. Continue Reading Short-Order Reorganization: Sungard’s 24-hour Bankruptcy Case