Business Restructuring Review | January–February 2021

In This Issue:

The Year in Bankruptcy: 2020

A brief chronicle of the year's notable developments in corporate bankruptcy and restructuring. [read more …]

Focus on Health Care Provider Bankruptcies

In In re Gardens Regional Hosp. and Medical Ctr., Inc., 975 F.3d 926 (9th Cir. 2020), the U.S. Court of Appeals for the Ninth Circuit reversed in part lower court rulings permitting the State of California to recoup certain fees owed by the debtor hospital from various payments that the state was obligated to make to the debtor under its Medicaid program. [read more …]

Texas Bankruptcy Court Allows Make-Whole Premium as Liquidated Damages and Requires Solvent Chapter 11 Debtor to Pay Postpetition Interest

In In re Ultra Petroleum Corp., 2020 WL 6276712 (Bankr. S.D. Tex. Oct. 26, 2020), the U.S. Bankruptcy Court for the Southern District of Texas issued a long-awaited ruling on whether Ultra Petroleum Corp. must pay a make-whole premium to noteholders under its confirmed chapter 11 plan and whether the noteholders are entitled to postpetition interest on their claims pursuant to the "solvent-debtor exception." On remand from the U.S. Court of Appeals for the Fifth Circuit, the bankruptcy court answered "yes" on both counts, adding yet another chapter to a debate that has long occupied bankruptcy and appellate courts in this and other chapter 11 cases. [read more …]

Energy Sector Update: More Bankruptcy Courts Join the Fray in Dispute Over Rejection of Gas Gathering Agreements

In a leading precedent handed down in 2018—In re Sabine Oil & Gas Corp.—the U.S. Court of Appeals for the Second Circuit upheld rulings authorizing a chapter 11 debtor to reject certain executory gas gathering and handling agreements under section 365 of the Bankruptcy Code, finding that the agreements contained neither real covenants "running with the land" nor equitable servitudes that would continue to burden the affected property even if the agreements were rejected. Since then, bankruptcy courts in Colorado, Texas, and Delaware have joined the fray in the debate on this issue, some concluding that a gathering agreement can be rejected (or sold free and clear) even if it creates a covenant that runs with the land under applicable law. [read more …]

Another Court Adopts Majority View in Approving Bankruptcy Trustee's Use of Tax Code Look-Back Period in Avoidance Actions

In Mitchell v. Zagaroli (In re Zagaroli), 2020 WL 6495156 (Bankr. W.D.N.C. Nov. 3, 2020), the U.S. Bankruptcy Court for the Western District of North Carolina court, adopting the majority approach, held that a chapter 7 trustee could effectively circumvent North Carolina's four-year statute of limitations for fraudulent transfer actions by stepping into the shoes of the IRS, which is bound not by North Carolina law but by the 10-year statute of limitations for collecting taxes specified in the Internal Revenue Code. [read more …]

Restoration of Crown Preference and Erosion of the English Floating Charge

With effect from December 1, 2020, Her Majesty's Revenue and Customs ranks ahead of floating charge holders and unsecured creditors with respect to recovering certain pre-insolvency taxes from an insolvent business (Crown preference). Directors can also now incur personal liability for the unpaid taxes of an insolvent company where they are involved in tax avoidance, evasion, or phoenixism. [read more …]

Second Circuit: Madoff Ponzi Scheme Customers Did Not Receive Fictitious Profit Payments "For Value"

In the latest chapter of more than a decade of litigation involving efforts to recover fictitious profits paid to certain customers of Bernard Madoff's defunct brokerage firm as part of the largest Ponzi scheme in history, the U.S. Court of Appeals for the Second Circuit held in In re Bernard L. Madoff Investment Securities LLC, 976 F.3d 184 (2d Cir. 2020), that the customers did not have a defense to avoidance and recovery because they received the payments "for value." The Second Circuit also ruled that the trustee overseeing the brokerage firm's liquidation properly determined the amount subject to recovery despite calculating the defendants' liability by netting the amounts they received against what they invested since the firm's inception. [read more …]

Administration Sales to Be Subject to Further Scrutiny in the United Kingdom

The UK government has published draft regulations providing that sales by administrators to connected persons will be subject to compulsory scrutiny. [read more …]


Christopher DiPompeo (Washington) was honored among the American Bankruptcy Institute's "40 under 40" for 2020.

Heather Lennox (Cleveland and New York) was named a "Midwest Trailblazer" for 2021 by and The American Lawyer.

An article written by Mark A. Cody (Chicago) and Mark G. Douglas (New York) titled "Bankruptcy Blocking Right in Debtor's Corporate Charter Violates Federal Public Policy" was published in the November 13, 2020, edition of the International Law Office Newsletter.

An article written by Brad B. Erens (Chicago) and Mark G. Douglas (New York) titled "Cram-Down Chapter 11 Plan Need Not Strictly Enforce Subordination Agreement" was published on November 26, 2020, in Lexis Practical Guidance.

An article written by Daniel J. Merrett (Atlanta) and Mark G. Douglas (New York) titled "First Impressions: 10th Circuit BAP Rules that Section 364 of the Bankruptcy Code Does Not Apply to Chapter 11 Exit Financing" was published on December 1, 2020, in Lexis Practical Guidance.

An article written Charles M. Oellermann (Columbus) and Mark G. Douglas (New York) titled "New York District Court Expands the Scope of the Bankruptcy Safe Harbor for LBO Payments" was published on December 1, 2020, in Lexis Practical Guidance.

An article written by Stacey L. Corr-Irvine and Mark G. Douglas (New York) titled "DIP Financing Agreement Initially Rejected As Sub Rosa Chapter 11 Plan" was published on November 26, 2020, in Lexis Practical Guidance.

Juan Ferré (Madrid) was selected for inclusion in the 2021 edition of The Best Lawyers in Spain for his work in Insolvency and Reorganization Law.

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