The recently released Department of Justice (“DOJ”) opinion (“DOJ Opinion”) concluding that the Wire Act prohibits both sports and non-sports related Internet betting and wagering, leaves the industry with the
Continue Reading DOJ Opinion Leaves Industry Hanging: If UIGEA Exclusions Don’t Modify the Wire Act What Does That Mean for Intrastate Gambling Transactions?

In In re Spanish Peaks Holdings II, LLC, Case No. 15-35572 (9th Cir. Sept. 12, 2017), the Ninth Circuit Court of Appeals held that a bankruptcy trustee may
Continue Reading Double Whammy: In a Sweeping New Opinion, the Ninth Circuit Creates a New Mechanism for Completely Wiping Out Unexpired Leases in Bankruptcy, and Also Undercuts a Critical Protection for Buyers in 363 Sales

Where do marketplace lenders and secondary loan market participants find themselves on the issue of preemption of state usury laws after the June 27 denial of the petition for a writ of certiorari in Madden v. Midland by the U.S. Supreme Court?

In Madden v. Midland, the US Court of Appeals for the Second Circuit refused to follow the “valid-when-made” rule when considering the scope of federal preemption of state usury laws under the National Bank Act.  The court held that the NBA did not bar the application of state usury laws to a national bank’s assignee.  In considering the applicability of the National Bank Act to a loan in the hands of a non-bank assignee, the Second Circuit considered a number of cases upholding preemption of state usury laws under the National Bank Act but invoked a seemingly new rule for applying section 85 of the National Bank Act (permitting a national bank to charge interest at the rate permitted by its home state).  The Second Circuit concluded that preemption is only applicable where the application of state law to the action in question would significantly interfere with a national bank’s ability to exercise its power under the National Bank Act.  The court reasoned further that where a national bank retained a “substantial interest” in the loan, the application of the state usury law would conflict with the bank’s power authorized by the National Bank Act.


Continue Reading Will Madden v Midland Disrupt Loan Sales and Platform Lending?

In a recent decision, the U.S. Bankruptcy Court for the District of Delaware refused to enforce a provision in the debtor’s LLC operating agreement requiring a unanimous vote of the debtor’s members to authorize the debtor to file for bankruptcy.  In re Intervention Energy Holdings, LLC, et al., 2016 Bankr. LEXIS 2241 (Bankr. D. Del. June 3, 2016).  The provision at issue required the consent of all the debtor’s LLC members to file for bankruptcy, including the consent of a member that was a secured creditor holding one unit of ownership in the debtor’s LLC which it bargained for and received pursuant to a forbearance agreement.  In refusing to dismiss the debtor’s bankruptcy case, the Court concluded that such an arrangement giving the secured lender a so-called “golden share” was “tantamount to an absolute waiver” of the debtor’s right to seek bankruptcy protection and therefore void as a matter of federal public policy.
Continue Reading Lenders Cannot Prevent Borrowers From Filing Bankruptcy By Owning Minority Equity With Veto Power Over Borrower’s Decision To File Bankruptcy

Successor liability is often a concern for the acquirer when purchasing substantially all of a seller’s assets.  While this risk is well known, the circumstances under which an acquirer will be found liable under the theory of successor liability are less clear.  The recent decision in Call Center Techs., Inc. v Grand Adventures Tour & Travel Pub. Corp., 2014 U.S. Dist. Lexis 29057, 2014 WL 85934 (D. Conn. 2014), sheds helpful light on this issue by defining the continuity of enterprise theory of successor liability.
Continue Reading Continuity of Enterprise is Enough for Successor Parties to be Liable

On February 11th, the three private plaintiff-appellants and eleven State plaintiff-appellants in State National Bank of Big Spring, et al. v. Jacob J. Lew, et al. filed briefs with the U.S. Court of Appeals for the District of Columbia Circuit in their appeal of the District Court’s decision that the plaintiffs lacked standing to challenge certain provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. No. 111-203, 124 Stat. 1376 (2010) (the “Dodd-Frank Act” or the “Act”).  The plaintiff-appellants challenged the “Orderly Liquidation Authority” granted to the FDIC under Title II of the Dodd-Frank Act on the basis that such authority supplants Chapters 7 and 11 of the Bankruptcy Codeand thereby strips the plaintiff-appellants of the statutory protections, amounting to property rights, afforded by the Bankruptcy Code to unsecured creditors.  Judge Huvelle found this argument insufficient to satisfy the standing requirement imposed by Article III of the Constitution,  stating that “[while] it is true that Dodd-Frank empowers the FDIC to treat creditors’ claims somewhat differently than they are treated in traditional bankruptcy proceedings…no one can know if this will ever happen.” The plaintiff-appellants argue that the challenged provisions are facially invalid, rendering the probability of harm test irrelevant, because “[f]or creditors of large financial institutions, Title II of the Dodd-Frank Act expressly ends one of the Bankruptcy Code’s core statutory rights: creditors’ express right to be repaid equally with other similarly situated creditors.”
Continue Reading Dodd-Frank’s Intersection with the Bankruptcy Code Could Have Significant Impact for Unsecured Creditors

The United States Bankruptcy Court for the Southern District of New York (the “Court”) in Weisfelner v. Fund 1 (In Re Lyondell Chemical Co.), 2014 WL 118036 (Bankr. S.D.N.Y. Jan. 14, 2014) recently held that the safe harbor provision of 11 U.S.C. § 546(e) did not bar unsecured creditors from seeking, under state fraudulent transfer law, to recover payouts made to former shareholders of a company acquired in a leveraged buyout.  This case highlights the limitations in section 546(e)’s so-called safe harbor provision, which protects settlement payments made to complete pre-bankruptcy securities contracts from later being attacked and avoided by the bankruptcy estate representative as fraudulent transfers.
Continue Reading Attacking LBO Payouts as State Law Fraudulent Transfers

BREAKING NEWS: In a contentious 4-3 decision and amid more than 300 community members on both sides of the issue, the City Council for the City of Richmond voted to continue pursuing its eminent domain plan in the early morning hours of Wednesday, September 11. The council also rejected two related measures, one that would withdraw the letters threatening eminent domain and another requiring Mortgage Resolution Partners, the firm providing financial backing for the City’s plan, to obtain insurance to insulate the city from legal liabilities.
Continue Reading Showdown in the Richmond: The City of Richmond Threatens Eminent Domain on Underwater Loans