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Business Restructuring Review Vol. 23 No. 1 | January-February 2024

The Year in Bankruptcy: 2023

A brief chronicle of the year's notable developments in corporate bankruptcy and restructuring, including business bankruptcy filings and significant court rulings. [read more …]

Second Circuit Adopts "Transfer-by-Transfer" Approach to Bankruptcy Code's Safe Harbor for Securities Contracts Payments

In In re Nine W. LBO Sec. Litig., 87 F.4th 130 (2d Cir. 2023), reh'g denied, Nos. 20-3257-cv (L) et al. (2d Cir. Jan. 3, 2024), a divided panel of the U.S. Court of Appeals for the Second Circuit reversed in part a district court's 2020 ruling dismissing fraudulent transfer and unjust enrichment claims brought by a chapter 11 plan litigation trustee and an indenture trustee to recover payments made by women's clothing retailer Nine West Holdings, Inc. as part of a 2014 LBO. According to the Second Circuit majority, each component transaction in an LBO should be analyzed individually to determine if it falls within the scope of the safe harbor. Because the debtor, through its bank agent, qualified as a "financial institution" in relation to payments made to public shareholders as part of the LBO, the majority held that those payments were safe harbored, but that payments made directly to the debtor's officers, directors, and other shareholders were not because no financial institution was involved. A dissenting opinion suggests that a "contract-by-contract" analysis would be more appropriate and that all of the transfers should therefore have been shielded from avoidance. [read more …]

Chapter 15 Filing as a Litigation Tactic Not Bad Faith Justifying Automatic Stay Relief

In In re Culligan Ltd., 2023 WL 5942498 (Bankr. S.D.N.Y. Sept. 12, 2023), the U.S. Bankruptcy Court for the Southern District of New York denied a motion for relief from the automatic stay filed by the plaintiffs in state court litigation against a Bermuda-based debtor's directors, its controlling shareholders, and certain other defendants asserting derivative claims challenging the legality of payments made and obligations incurred by the debtor as part of a 2006 restructuring. In so ruling, the bankruptcy court rejected the plaintiffs' argument that stay relief was warranted because the debtor's foreign representatives filed a chapter 15 case for the debtor in bad faith as a litigation tactic to gain the upper hand in the state court litigation. According to the court, even if there were a good-faith filing requirement in chapter 15, "a bankruptcy filing cannot be said to be in bad faith where the debtor reasonably seeks the benefit of the automatic stay to effectuate an orderly liquidation." [read more …]

New York Bankruptcy Court: Setoff and Unjust Enrichment Cannot Be Asserted as Affirmative Defenses in Bankruptcy Avoidance Litigation

The U.S. Bankruptcy Court for the Southern District of New York held in Picard v. ABN AMRO Bank NV (In re Bernard L. Madoff Investment Securities LLC), 654 B.R. 224 (Bankr. S.D.N.Y. 2023), that a defendant in fraudulent transfer litigation cannot offset its fraudulent transfer liability against a claim the creditor asserts against the debtor because there is no mutuality between the fraudulent transfer claim and the prepetition debt underlying the setoff claim. The court also ruled that, depending on the specific facts and equities of the case, recoupment might be asserted as an affirmative defense in avoidance litigation. Finally, it held that unjust enrichment cannot ordinarily be raised as an affirmative defense and is particularly disfavored in bankruptcy because it undermines the Bankruptcy Code's priority scheme. [reads more …]

Delaware Bankruptcy Court Imputes Officer's Fraudulent Intent to Corporation in Avoidance Litigation

In In re Cyber Litigation Inc., 2023 WL 6938144 (Bankr. D. Del. Oct. 19, 2023), the U.S. Bankruptcy Court for the District of Delaware granted summary judgment in favor of a litigation trustee seeking to avoid payments made as part of a pre-bankruptcy tender offer as a fraudulent transfer, holding that the intent of a fraudster-officer can be imputed to the board and, in turn, the debtor, where the fraudster manipulated the board through deceit. The court also considered, and rejected, application of the "earmarking" defense to avoidance. [read more …]

Second Circuit: Bankruptcy Courts Have Inherent Authority to Impose Civil Contempt Sanctions

In In re Markus, 78 F.4th 554 (2nd Cir. 2023), the U.S. Court of Appeals for the Second Circuit affirmed a bankruptcy court decision imposing sanctions on a chapter 15 debtor's lawyer who repeatedly flouted the court's discovery orders and awarding attorneys' fees to the debtor's foreign representative incurred in bringing a motion for sanctions. In so ruling, the Second Circuit reaffirmed its earlier decisions concluding that a bankruptcy court has the inherent authority to impose civil sanctions for contempt. However, the Second Circuit expanded the scope of that inherent authority to include punitive civil contempt sanctions in an amount greater than it had approved in its previous rulings. According to the Second Circuit, "we hold that a bankruptcy court's inherent sanctioning authority includes the power to impose civil contempt sanctions in non-nominal amounts to compensate an injured party and coerce future compliance with the court's orders." [read more …]



Dan T. Moss (Washington/New York),Olaf Benning (Frankfurt),David S. Torborg (Washington), Colleen E. Laduzinski (Boston/New York), Ryan Sims (Washington), S. Christopher Cundra IV (Washington), Nick Buchta (Cleveland), Richard H. Howell (Washington), Elizabeth A. Dengler (Boston), and Alexandra Levay (Boston) are part of a team of Jones Day attorneys advising Spark Networks SE ("Spark"), a Germany-based leading social dating platform, in connection with a cross-border restructuring under the recently enacted German Act on the Stabilization and Restructuring Framework for Companies (Gesetz über den Stabilisierungs und Restrukturierungsrahmen für Unternehmen ("StaRUG")) and chapter 15 of the U.S. Bankruptcy Code. Introduced in January 2021 after a 2019 EU Directive to Member States to implement preventative restructuring frameworks, StaRUG allows German companies to impose an arrangement on their creditors, including a restructuring of liabilities, subject to a vote and court approval. Spark's StaRUG proceeding involved restructuring more than $100 million in secured debt held by MGG Investment Group LP, a U.S.-based credit fund. Spark's StaRUG proceeding also restructured more than $13 million of Spark's unsecured debt. The StaRUG restructuring plan was approved by Spark's creditors in December 2023 and confirmed by the German Restructuring Court on January 4, 2024. On December 14, 2023, the U.S. Bankruptcy Court for the District of Delaware recognized the StaRUG proceeding of Spark and its two U.S. subsidiaries under chapter 15 of the Bankruptcy Code. Spark intends to seek recognition of the restructuring plan in the chapter 15 proceedings in the coming weeks.

An article written by Corinne Ball (New York) titled "Texas Bankruptcy Court Holds Code Overrides State Law on Expulsion" was published in the December 27, 2023, edition of the New York Law Journal.

An article written by Heather Lennox (Cleveland/New York), Jasper Berkenbosch (Amsterdam), Nicholas J. Morin (New York), Dan T. Moss (Washington/New York), and Sid Pepels (Amsterdam) titled "Historic Outcome for Diebold Nixdorf" was published in INSOL World Q4 2023

An article written by Mark A. Cody (Chicago) titled "Health Care Provider Bankruptcy Update: Patient Care Ombudsman Not Necessary in Every Health Care Business Bankruptcy Case" was published on December 16, 2023, in Lexis Practical Guidance.

An article written by Daniel J. Merrett (Atlanta) titled "Court's Broad Interpretation of Definition of 'Securities Contracts' Promotes Expansive Scope of Bankruptcy Code 'Safe Harbour'" was published in the November 2023 INSOL International Restructuring Alert.

An article written by Oliver S. Zeltner (Cleveland) titled "Cure and Reinstatement of Defaulted Loan Under Chapter 11 Plan Requires Payment of Default-Rate Interest" was published on November 14, 2023, by Lexis Practical Guidance.

Juan Ferré (Madrid) was recognized in the practice area "Insolvency and Reorganization Law" in the 2024 edition of The Best Lawyers in Spain.™


Lawyer Spotlight: Dan T. Moss

Dan Moss, a partner in the Washington and New York offices, has in-depth experience in business finance and restructuring, particularly complex corporate and cross-border reorganizations, distressed acquisitions, and crypto-related matters. As Chambers USA noted, "he is good at developing pragmatic business solutions."

Dan represents debtors, creditors, and creditor committees in some of the largest corporate and government reorganizations, and counsels clients on avoidance litigation and corporate governance matters. He served as co-lead counsel for Diebold Nixdorf in its recent successful restructuring in 71 days of more than $2.7 billion in funded debt. The restructuring involved the first-ever dual proceeding under the United States Bankruptcy Code and the recently enacted Dutch restructuring law, the Dutch Act on Confirmation of Extrajudicial Plans (Wet Homologatie Onderhands Akkoord). Dan also served as lead counsel for Spark Networks SE and its subsidiaries in the first-ever cross-border restructuring under the recently enacted German Act on the Stabilization and Restructuring Framework for Companies (Gesetz über den Stabilisierungs- und Restrukturierungsrahmen für Unternehmen ("StaRUG")) and recognition of Spark's StaRUG proceeding under chapter 15 of the U.S. Bankruptcy Code. 

Other significant experience includes serving as co-lead counsel for the Official Committee of Unsecured Creditors in the Toys "R" Us Property Company I and Peabody Energy chapter 11 cases, and being involved in nearly all aspects of the City of Detroit's historic chapter 9 proceeding. Dan also oversaw all aspects of Jones Day's representation of the Chapter 7 Trustee of Anthracite Capital, one of the largest chapter 7 cases ever filed, resulting in a recovery of approximately $47 million for the estate and a release of more than $33 million in secured affiliate claims.

Dan is involved in the representation of disabled veterans and other pro bono activities. He is an active leader of INSOL International and writes frequently about cross-border restructuring matters. In November 2023, Dan was welcomed as a new member of the International Insolvency Institute.

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