Other Nationally Significant Cases

Secured lenders often resort to non-judicial foreclosure sales of personal property upon a borrower’s default. Article 9, Part 6 of the Uniform Commercial Code requires that every aspect of such a sale must be commercially reasonable. However, the courts have historically provided little guidance as to what exactly constitutes a commercially reasonable sale. Fortunately, the Delaware Chancery Court recently issued a decision, entitled Edgewater Growth Capital Partners, L.P. v. H.I.G. Capital, Inc., C.A. No. 3601-CS (Del.Ch. Apr. 18, 2013), in which the court analyzed the meaning of this “commercial reasonableness” requirement and provided helpful guidance to borrowers and secured creditors alike.
Continue Reading Delaware Court Provides Critical Guidance as to the Commercial Reasonableness of a UCC Article 9 Foreclosure Sale

Judge Christopher M. Klein’s decision to accept the City of Stockton’s petition for bankruptcy on April 1, 2013 set the stage for a battle over whether public workers’ pensions can be reduced through municipal reorganization.

Stockton’s public revenues tumbled dramatically when the recession hit, leaving Stockton unable to meet its day-to-day obligations. Stockton slashed its police and fire departments, eliminated many city services, cut public employee benefits and suspended payments on municipal bonds it had used to finance various projects and close projected budget gaps. Stockton continues to pay its obligations to California Public Employees’ Retirement System (“CalPERS”) for its public workers’ pensions. Pension obligations are particularly high because during the years prior to the recession, city workers could “spike” their pensions—by augmenting their final year of compensation with unlimited accrued vacation and sick leave—in order to receive pension payments that grossly exceeded their annual salaries.


Continue Reading The Stockton Saga Continues: Untouchable Pensions on the Chopping Block?

By Danielle Kennedy

Round one of the fight between the City of Stockton, California and its creditors is finally over. On April 1, 2013, Bankruptcy Judge Christopher M. Klein held that Stockton satisfied the eligibility requirements for a Chapter 9 debtor.

Back on June 28, 2012, Stockton filed a petition seeking to adjust its debts under Chapter 9 of the United States Bankruptcy Code.


Continue Reading Judge Rules In Favor Of Stockton And Accepts Chapter 9 Petition

By Eugene Kim 

In a recent Fifth Circuit decision, Western Real Estate Equities, LLC v. Village at Camp Bowie I, L.P., No. 12-10271 (5th Cir. 2013), the court held that the acceptance vote from a minimally and “artificially impaired” class of claims meets the 11 U.S.C. § 1129(a)(10) requirement for the confirmation of a non-consensual “cramdown” chapter 11 plan.


Continue Reading Lenders Beware — Fifth Circuit has lowered the bar for cramdown plan confirmation

By Reed Mercado 

In a recent decision from the California Court of Appeals entitled Jolley v. Chase Home Finance, LLC, the Court severely curtailed lenders’ ability to dispose of lender liability claims on summary judgment, thereby adopting a marked departure from existing law. In so doing, the Court admonished lenders that the “world [has been] dramatically rocked in the past few years by lending practices colored by short-sighted self-interest.”


Continue Reading Lenders Beware — California decision may ignite next wave of lender liability litigation

By Christine Swanick, Carren Shulman, Wilda Wahpepah, and Shawn Watts

On March 4, 2013, ‘SA’ NYU WA, Inc., a tribally-chartered corporation wholly owned by the Hualapai Indian Tribe, filed a Chapter 11 bankruptcy petition in the United States Bankruptcy Court, District of Arizona. This is a very important case for tribes and any party conducting business with tribes because the petition will raise a question of first impression for the Bankruptcy Court. The Bankruptcy Court will have to decide whether a tribal corporation is eligible to be a debtor under the Bankruptcy Code.


Continue Reading Tribal Corporate Bankruptcy Petition Raises Issues of First Impression for Bankruptcy Court

By Michael M. Lauter 

On May 29, 2012, the Supreme Court ruled 8-0 that a debtor could not confirm a plan over a secured creditor’s objection if the plan provided for the sale of the secured creditor’s collateral free and clear of liens, but did not provide the secured creditor with the option of credit-bidding at the sale. RadLAX Gateway Hotel, LLC v. Amalgamated Bank, No. 11-166, 2012 U.S. LEXIS 3944 (U.S. May 29, 2012). Such a plan, the Supreme Court held, does not meet the statutory requirements for “fair and equitable” treatment of an objecting secured class in 11 U.S.C. § 1129(b)(2)(A).


Continue Reading Canonized Credit-Bidding: The Supreme Court Unanimously Affirms Secured Creditor’s Right to Credit-Bid at Free and Clear Sale in Plan

The House Judiciary Committee recently held a hearing to consider an amendment to the venue provisions of the Bankruptcy Code proposed by the Committee’s Chairman that would require corporations to file voluntary chapter 11 petitions in the district where they maintain their principal place of business or have their principal assets. Under the current bankruptcy venue provisions of the U.S. Code, a debtor corporation can file its bankruptcy case in the state where it is incorporated, where it has its principal assets, or where it is headquartered. A corporation can also file a chapter 11 case in a venue where its corporate affiliate’s case is already pending. Utilizing these rules, many large chapter 11 cases are commenced in Delaware and New York, despite the fact that the corporate debtor has little ties to those states. For example, Enron – a Texas-based company – filed a bankruptcy for a small New York subsidiary in the Southern District of New York. Shortly thereafter, Enron commenced the bankruptcy case for the main company, and used the venue provisions to bootstrap this case with its New York case, which allowed it to heard along with the subsidiary’s case in New York. A more recent example is the Fremont, CA-based Solyndra LLC, which filed a voluntary chapter 11 petition in Delaware, the state of its incorporation.


Continue Reading A Chapter 11 Diaspora? House Judiciary Committee Considers Chapter 11 Venue Reform

On Thursday, the Supreme Court in a 5-4 decision ruled in Stern v. Marshall[1] that the congressional grant of jurisdiction to bankruptcy courts to issue final judgments on counterclaims to proofs of claim was unconstitutional. For the litigants, this decision brought an end to an expensive and drawn out litigation between the estates of former Playboy model Anna Nicole Smith and the son of her late husband, Pierce Marshall, which Justice Roberts writing for the majority analogized to the fictional litigation in Charles Dickens’ Bleak House. For bankruptcy practitioners, it is yet another chapter in an even more epic saga – that of the back-and-forth between Congress and the Supreme Court over the jurisdictional limits of the nation’s bankruptcy courts. Instead of offering finality, the decision only raises more questions about how far the Court’s reasoning will extend, and what the implications will be for practice under the Bankruptcy Code.


Continue Reading A Shock to the Core: The Supreme Court Pries Jurisdiction Away from the Bankruptcy Courts on Counterclaims to Proofs of Claim, and Possibly More