Insights

Business Restructuring Review

Business Restructuring Review | Vol. 21 No. 3| May–June 2022

In This Issue:

Fifth Circuit Weighs In on Bankruptcy Asset Sales Free and Clear of Leasehold Interests

Until 2022, only two federal courts of appeals had weighed in on whether real property may be sold in bankruptcy free and clear of a leasehold interest. In Precision Industries, Inc. v. Qualitech Steel SBQ, the Seventh Circuit held in 2003 that a real property lease can be extinguished in a free-and-clear bankruptcy sale. In its 2017 ruling in In re Spanish Peaks Holding II, LLC, the Ninth Circuit essentially endorsed this position, with certain caveats. The Fifth Circuit is the latest circuit court to examine this issue, but in an oblique way. In In re Royal Street Bistro, L.L.C., 26 F.4th 326 (5th Cir. 2022), the court denied certain tenants' motion for a writ of mandamus directing a district court to issue a stay pending appeal of a bankruptcy court order approving the sale of leased real property free and clear of the tenants' leasehold interests. However, the Fifth Circuit agreed with the result reached by the lower courts, but cautioned courts against "blithely accepting Qualitech's reasoning and textual exegesis." [read more … ]

Bright-Line Rule: No Modification of Substantially Consummated Chapter 11 Plan

In In re Northeast Gas Generation, LLC, 2022 WL 828263 (Bankr. D. Del. Mar. 18, 2022), the U.S. Bankruptcy Court for the District of Delaware denied the motion of a secured creditor that, under a confirmed chapter 11 plan, received 100% of the reorganized debtor's equity as well as reinstated debt for "reconsideration" of the amount of its secured claim. The court ruled that, despite characterizing the relief it sought as reconsideration of a claim, the secured creditor was attempting to modify a substantially consummated plan, which is barred by section 1127(b) of the Bankruptcy Code, even if the proposed changes would not "materially and adversely" impact other stakeholders. [read more … ]

Delaware Bankruptcy Court Rejects Use of Tax Code Look-Back Period in Avoidance Action

In In re J&M Sales Inc., 2022 WL 532721 (Bankr. D. Del. Feb. 22, 2022), the U.S. Bankruptcy Court for the District of Delaware denied a chapter 7 trustee's motion to amend his complaint in an avoidance action to use the Internal Revenue Service as a "predicate" or "triggering" creditor because the IRS had not filed a proof of claim in the bankruptcy case and the existence of a prepetition payroll tax debt, which was paid pursuant to a "first day motion," was insufficient to treat the IRS as a creditor. [read more … ]

Florida District Court: Foreign Debtor Need Not Have U.S. Residence, Assets, or Place of Business to Be Eligible for Chapter 15 Recognition

In In re Talas Qais Abdulmunem Al Zawawi, 2022 WL 596836 (M.D. Fla. Feb. 28, 2022), appeal filed, No 6:21-cv-00894-GAP (M.D. Fl. Mar. 30, 2022), the U.S. District Court for the Middle District of Florida recently affirmed a bankruptcy court ruling that chapter 15 has its own eligibility requirements, and that the eligibility requirements for debtors in cases under other chapters of the Bankruptcy Code do not apply in chapter 15 cases. [read more … ]

Fifth Circuit Rules that Chapter 11 Debtors May Reject Filed-Rate Contracts Without FERC Permission

In FERC v. Ultra Resources, Inc. (In re Ultra Petroleum Corp.), 2022 WL 763836 (5th Cir. Mar. 14, 2022), the U.S. Court of Appeals for the Fifth Circuit held that a bankruptcy court properly authorized Ultra Resources, Inc. ("Ultra") to reject a filed-rate gas transportation contract as part of its chapter 11 plan without obtaining the approval of the Federal Energy Regulatory Commission ("FERC"), that Ultra was not subject to a separate public-law obligation to continue performance under the rejected contract, and that section 1129(a)(6) of the Bankruptcy Code does not require a bankruptcy court to seek FERC approval before confirming a chapter 11 plan providing for rejection of the contract. [read more … ]


Newsworthy

Corinne Ball (New York), Bruce Bennett (Los Angeles and New York), Carl E. Black (Cleveland), Jeffrey B. Ellman (Atlanta), Brad B. Erens (Chicago), Gregory M. Gordon (Dallas), Heather Lennox (Cleveland and New York), Joshua M. Mester (Los Angeles), Charles M. Oellermann (Columbus), and Kevyn D. Orr (Washington) were among the 2022 Lawdragon 500 Leading U.S. Bankruptcy & Restructuring Lawyers.

 Bruce Bennett (Los Angeles and New York), Heather Lennox (Cleveland and New York), Corinne Ball (New York), and Ben Larkin (London) were ranked in the practice areas of Bankruptcy/Restructuring or Restructuring/Insolvency in Chambers Global 2022.

 Roger Dobson (Sydney) was ranked in the practice area of Restructuring/Insolvency in the 2022 edition of Chambers Asia Pacific.

 On April 29, 2022, Gregory M. Gordon (Dallas) was on a panel discussing the "Texas Two-Step of Tort Liability (J&J)" at the 2022 Annual Spring Meeting of the American Bankruptcy Institute in Washington, DC.

 Oliver S. Zeltner (Cleveland) guest lectured at Harvard Business School in a class on the Chapter 9 Bankruptcy Case of the City of Detroit on April 8, 2022.

 On April 27, 2022, Kevyn Orr (Washington) spoke on a panel after the public premiere of the award-winning documentary "Gradually, Then Suddenly: The Bankruptcy of Detroit." The film opened the Freep Film Festival and was shown to a sold-out audience at the Detroit Institute of Arts. The documentary won the 2021 Library of Congress Lavine/Ken Burns Prize for film.

 Fabienne Beuzit (Paris) was designated a "Next Generation Partner" in the practice area of Insolvency in the 2022 edition of The Legal 500 EMEA.

 Olaf Benning (Frankfurt) attended the Handelsblatt Annual Conference on Restructuring, which was held from May 11 to May 13, 2022, in Frankfurt, Germany.

 On May 23, 2022, Carl E. Black (Cleveland) and T. Daniel Reynolds (Cleveland) were part of a panel discussion at the William J. O'Neill Great Lakes Regional Bankruptcy Institute sponsored by the Bankruptcy and Commercial Law Section of the Cleveland Metropolitan Bar Association. Marissa Alfano (Cleveland) was a member of the planning committee for the event.

 An article written by Corinne Ball (New York) titled "Seventh Circuit Permits Prior Interest Holder To Challenge 'Free and Clear' Sale After the Fact" was published in the April 27, 2022, edition of the New York Law Journal.

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