Nationally Significant Cases

Though bankruptcy filings are down in 2021, the expiration of the Paycheck Protection Program and reopening of the courts nationwide could lead to a rise in bankruptcy filings with many businesses still struggling to cope with the economic and supply chain aftereffects of the pandemic and consumer purchasing habits.  These bankruptcies, in turn, will have an inevitable ripple effect on creditors and other claimants, whose abilities to collect on claims and exercise rights, are significantly restricted by the automatic stay.  Generally, the automatic stay requires a party seeking relief against a debtor to do so in, and only in, the bankruptcy court, which can provide the relief sought or grant permission to pursue claims and rights in another venue.  For many businesses, considerations regarding the automatic stay end there, believing so long as they were deliberate enough to seek relief in the bankruptcy court, they will not face the potentially harsh consequences of violating the automatic stay.  But, a recent decision in In re Roman Catholic Church of the Archdiocese of Santa Fe serves as the latest reminder that very rarely can one be too careful when seeking relief against a debtor, even in the bankruptcy court itself.

Continue Reading A Bankruptcy Conundrum: When You Must Seek Relief To Seek Relief

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

In In re Lehman Bros. Holdings Inc. 855 F.3d 459 (2d Cir. 2017), the United States Court of Appeals for the Second Circuit affirmed a district court order subordinating the claims of former Lehman Bros. (“Lehman”) employees for undelivered equity-based compensation to those of the defunct bank’s general creditors. The Court determined the compensation benefits were securities that had been purchased by the former employees when they agreed to receive them in exchange for their labor and the asserted damages arose from those purchases, requiring the claims’ subordination under the Bankruptcy Code. The decision is important to employees and employers weighing the value of hybrid compensation packages and creditors seeking to safeguard their priority position among bankruptcy claimants.  
Continue Reading Second Circuit Holds that Contingent Equity-Based Compensation of Former Lehman Employees are Subordinate to Creditor Claims

On March 22, 2017, the Supreme Court in Czyzewski v. Jevic Holding Corp., 580 U.S. __ (2017) held that a bankruptcy court does not have the power to approve a structured dismissal of a bankruptcy case that violates the Bankruptcy Code’s priority scheme unless the affected parties consent.
Continue Reading The Structure of Dismissals – Supreme Court’s Jevic Decision Lays Out Ground Rules for Parties Seeking to Resolve Bankruptcies Through the Increasingly Popular Method of Structured Dismissals

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?