Business Restructuring Review

In this issue:

• Less Stringent Standard Applies to Rejection of Collective Bargaining Agreements by Municipalities in Bankruptcy
  A California bankruptcy court ruled that section 1113 of the Bankruptcy Code does not apply in chapter 9, such that it would appear to be easier for a municipal debtor to reject a labor agreement.
• Newsworthy
• Delaware Bankruptcy Court Rejects Triangular Setoff
  A Delaware bankruptcy court held that triangular setoffs do not meet the mutuality requirements of section 553, such that a creditor could not effect a triangular setoff of the amounts owed between it and three affiliated debtors, despite pre-petition contracts that expressly contemplated multiparty setoff.
• Bankruptcy Court Lacks Jurisdiction to Adjudicate Avoidance Actions in Chapter 15 Under U.S. or Foreign Law
  A Mississippi bankruptcy court held that unless the representative of a foreign debtor seeking to avoid pre-bankruptcy asset transfers under either U.S. or foreign law first commences a case under chapter 7 or 11, the court lacks subject-matter jurisdiction over the dispute.
• Second Circuit Adopts "Totality of the Circumstances" Test for Pre-Approval of Professional Retentions Under Section 328(a) of the Bankruptcy Code
  In a matter of first impression, the court of appeals affirmed a district court decision that a debtor’s fee arrangement with its special litigation counsel was pre-approved and not subject to modification.
• Australian Voluntary Winding-Up Recognized Under Chapter 15 of the Bankruptcy Code
  A Nevada bankruptcy court’s order recognizing an Australian winding-up proceeding under chapter 15 provides guidance on several important cross-border insolvency issues that may arise in the U.S. and abroad.