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Business Restructuring Review

Business Restructuring Review July-August 2019

In This Issue:

Washington District Court Overturns Approval of Third-Party Releases in a Settlement Agreement and Related Free-and-Clear Sale

In In re Fraser’s Boiler Serv., Inc., 2019 WL 1099713 (D. Wash. Mar. 18, 2019), the court reversed a bankruptcy court order approving settlement agreements providing for the sale of certain of the debtor’s asbestos insurance policies back to the settling insurers free and clear of the claims of nonsettling insurers. The district court made the ruling on the basis that the settlement agreements’ third-party releases and injunctions were not permissible under Ninth Circuit case law.  [read more … ]

The U.S. Supreme Court Rules That Rejection of a Trademark License Agreement in Bankruptcy Does Not Strip the Licensee of Its Right to Use the Trademark

The U.S. Supreme Court ruled in Mission Product Holdings, Inc. v. Tempnology, LLC, 139 S. Ct. 652, 2019 WL 2166392 (U.S. May 20, 2019), that the rejection in bankruptcy of a trademark license agreement, which constitutes a breach of the agreement under section 365(g) of the Bankruptcy Code, does not terminate the rights of the licensee that would survive the licensor’s breach under applicable non-bankruptcy law.  [read more … ]

Foreign Debtor’s COMI Shift Dooms Bid for Chapter 15 Recognition

In In re O’Reilly, 598 B.R. 784 (Bankr. W.D. Pa. 2019), the U.S. Bankruptcy Court for the Western District of Pennsylvania denied the petition of a foreign bankruptcy trustee for recognition under chapter 15 of the Bankruptcy Code of a debtor’s Bahamian bankruptcy case. Although the Bahamian bankruptcy was otherwise eligible for chapter 15 recognition, the U.S. bankruptcy court held that the debtor’s "center of main interests" was no longer in the Bahamas when the Bahamian bankruptcy trustee filed the chapter 15 petition and that the trustee failed to demonstrate that the debtor even had an "establishment" there.  [read more … ]

Seventh Circuit: Section 363(m) Does Not Moot but Instead Provides a Defense to an Appeal of an Unstayed Bankruptcy Asset Sale Order

In Trinity 83 Dev., LLC v. ColFin Midwest Funding, LLC, 917 F.3d 599 (7th Cir. 2019), the U.S. Court of Appeals for the Seventh Circuit held that section 363(m) of the Bankruptcy Code does not moot an appeal involving a dispute over the proceeds of a sale of assets in bankruptcy. In concluding that section 363(m) does not moot such an appeal, but merely provides the purchaser with a defense in litigation challenging the sale, the Seventh Circuit overruled its prior decision on the scope of section 363(m) in In re River West Plaza-Chicago, LLC, 664 F.3d 668 (7th Cir. 2011).  [read more … ]

The Fifth Circuit Rules That a Make-Whole Premium Is Unmatured Interest Generally Disallowed in Bankruptcy

In In re Ultra Petroleum Corp., 913 F.3d 533 (5th Cir. 2019), the U.S. Court of Appeals for the Fifth Circuit ruled that a "make-whole," or "prepayment," premium owed on unsecured notes issued by a chapter 11 debtor constituted unmatured interest disallowed by section 502(b)(2) of the Bankruptcy Code. The ruling represents a landmark decision on the allowance of such premiums in chapter 11, over which there has been considerable litigation in recent years, including at the circuit court level.  [read more … ]

The Turf War Between the Bankruptcy Courts and FERC Escalates

The recent chapter 11 filings by PG&E Corp., its Pacific Gas & Electric Co. utility subsidiary, and FirstEnergy Solutions Corp. have reignited the debate over the power of a U.S. bankruptcy court to authorize the rejection of contracts regulated by the Federal Energy Regulatory Commission ("FERC"). In PG&E Corp. v. FERC (In re PG&E Corp.), Adv. Proc. No. 19-3003 (Bankr. N.D. Cal. June 7, 2019), as amended and direct appeal certified, 2019 WL 2477433 (Bankr. N.D. Cal. June 12, 2019), the U.S. Bankruptcy Court for the Northern District of California ruled that the lack of any exception for FERC in section 365 of the Bankruptcy Code "simply means that FERC has no jurisdiction over the rejection of contracts." In FirstEnergy Solutions Corp. v. FERC (In re FirstEnergy Solutions Corp.), 2018 WL 2315916 (Bankr. N.D. Ohio May 18, 2018), the U.S. Bankruptcy Court for the Northern District of Ohio enjoined FERC from requiring chapter 11 debtors to continue performing under certain wholesale power contracts that the debtors sought to reject. PG&E and FirstEnergy have been certified for direct appeal to the Ninth and Sixth Circuit Courts of Appeals, respectively.  [read more … ]

From the Top in Brief

The U.S. Supreme Court ruled in Taggart v. Lorenzen, 139 S. Ct. 1795 (2019), that a bankruptcy court may hold a creditor in civil contempt for attempting to collect on a debt that has been discharged in bankruptcy "if there is no fair ground of doubt as to whether the [discharge] order barred the creditor’s conduct."  [read more … ]

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