DOV R. KLEINER

The Supreme Court recently handed down its third decision interpreting the Bankruptcy Code this term. The decision, Lac du Flambeau Band of Lake Superior Chippewa Indians v. Coughlin, is a victory for debtors and a loss for Native American tribes, and also provides insight into how the Court is approaching bankruptcy law issues. Lac du…

The Supreme Court has again entered the insolvency arena, handing down a decision regarding the jurisdiction of courts hearing appeals of bankruptcy sale orders. The decision, MOAC Mall Holdings LLC v. Transform Holdco LLC, clarifies the circumstances under which Bankruptcy Code section 363(m) can statutorily moot an appeal of a sale order in a way…

As inflation and interest rates rise, many businesses begin to restructure their balance sheet, which will, in many cases, include selling assets. When a distressed sale is carried out under bankruptcy court supervision, it is called a Section 363 Sale. Since the last down-market cycle when Section 363 Sales were more plentiful, a form of private third-party…

Recent decisions from New York and Delaware bankruptcy courts reflect the unsettled state of the law regarding third-party releases. The decisions, in In re Gulf Coast Health Care LLC and In re Stoneway Capital, Ltd, do not directly refer to the groundbreaking decision of a New York district court in In re Purdue Pharma, L.P.,…

A recent decision by a Delaware bankruptcy court highlights the important consequences that can flow from a debtor-in-possession (“DIP”) finance stipulation reached early in a case. The decision, in Official Committee of Unsecured Creditors v. The CIT Group /Business Credit, Inc. (In re Jevic Holding Corp.), held that a chapter 7 trustee was barred by…

The United States Supreme Court has issued an opinion that clarifies the extent to which the automatic stay imposes obligations on creditors that seized their debtor’s property pre-petition and resolves a broad split among the circuit courts. The decision, City of Chicago v. Fulton, provides protection for creditors but adds to the burdens faced by…

A recent decision from a New York bankruptcy court provides guidance on how federal courts may approach requests for prejudgment interest in fraudulent conveyance cases. The decision, Picard v. BAM LP, highlights a risk faced by defendants in litigation of lengthy duration and provides practical guidance on how federal judges may exercise their discretion regarding…

A recent decision by the New York Court of Appeals adds teeth to the ability of real estate lenders to dissuade borrowers from filing bankruptcy and highlights the risks faced by borrowers that choose bankruptcy – and those that assist them. The decision, Sutton 58 Associates LLC v. Pilevsky, permits a lender to pursue a…

A recent decision from a Michigan bankruptcy court shows potential limits to Safe Harbor defenses to clawback actions and may provide new hope to trustees and other clawback plaintiffs that seek to push back against defendant-friendly decisions in the Second Circuit. The decision, In re Greektown Holdings, LLC, highlights the importance of appropriately and carefully…

A recent decision by a New York district court confirms that the defendant-friendly holding of the Second Circuit’s Tribune decision (discussed in our prior alert) will be applied broadly to benefit defendants and rejects efforts by plaintiffs to work around Tribune. The decision, In re Nine West LBO Securities Litigation, reaffirms the vitality of the…

A New York Bankruptcy Court has adopted the majority rule in holding that a transferred claim can be disallowed or subordinated based on actions of the initial claim holder, siding with the Third Circuit Court of Appeals and rejecting a contrary decision of a New York District Court. The decision, In re Firestar Diamond, Inc.,…

The Third Circuit Court of Appeals has affirmed the confirmation of a plan of reorganization that did not strictly enforce the subordination provisions of certain public debt issuances. The decision, In re Tribune Co., illustrates limits to the utility of subordination agreements and provides a new standard for the implementation of the “unfair discrimination” test…

A recent unreported decision by a New York bankruptcy court suggests that commercial tenants whose operations were suspended under mandatory shutdown orders as a result of the pandemic may be able to escape their rent obligations that relate to the shutdown period. Background The debtor in the case, In re Edison Price Lighting, Inc., is…

The Second Circuit has affirmed, on appeal, the dismissal of an attempt by the Lehman Brothers estate to unwind payments made in connection with a series of collateralized debt obligation (“CDO”) structures. The decision, Lehman Brothers Special Financing Inc. v. Branch Banking and Trust Company (In re Lehman Brothers Holdings, Inc.), marks the third time that…

The Paycheck Protection Program Flexibility Act of 2020 (the “Flexibility Act”) was signed into law on June 5, modifying the terms of the Paycheck Protection Program (the “PPP”) created by the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The full text of the law can be found here, and our previous coverage of…

A series of recent decisions may provide boosts for the positions of lenders. Post-Petition Interest on an Oversecured Claim In re Family Pharmacy, Inc. held that Missouri law, like New York law, distinguishes between permissible default interest and impermissible penalties. However the case diverges from the majority view adopted by several circuit courts of appeal insofar…

Last Friday night, the Department of Treasury (“Treasury”) released the loan forgiveness application (“Application”) for the paycheck protection program (“PPP”). The Application is consistent with the CARES Act provisions and the Treasury’s guidance that Kleinberg Kaplan previously summarized in a client alert, available here. The form of Application can be found here. Applications must be completed by…

On May 3 and May 5, 2020, the Department of Treasury (“Treasury”) updated its frequently asked questions (“FAQs”) related to the paycheck protection loan program (“PPP”) under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). You can find our previous client alerts on the program here and the full text of the…

Late last week, the Department of Treasury (“Treasury”) released a new interim final rule (the “Interim Final Rule”) relating to the administration of the paycheck protection program (“PPP”) under the CARES Act. The Interim Final Rule limits the amount any corporate group can receive under the PPP to $20,000,000. The full text of the Interim…

On April 30, 2020, the Federal Reserve Board (the “Fed”) released new term sheets for the $600 billion Main Street Lending Program, which was initially announced on April 9, 2020. In addition to changing terms to the two existing facilities, the Main Street New Loan Facility and the Main Street Expanded Loan Facility, the Fed…

On April 24, 2020, the Department of Treasury (“Treasury”) issued a new interim final rule (the “Interim Final Rule”) and guidance, which materially changes portions of the existing guidance on the paycheck protection loan program (“PPP”) in a way meaningfully detrimental to hedge funds and private equity funds in particular. You can find our previous…

A recent decision by the Bankruptcy Court for the District of New Jersey, In re Modell’s Sporting Goods, Inc., illustrates the difficult problems caused by the COVID-19 pandemic, the ways that parties to a bankruptcy case may react and issues distressed companies, their creditors and stakeholders should consider in the current climate before a bankruptcy petition…

During these stressful, uncertain and rapidly changing times, Kleinberg Kaplan’s thoughts go out to our clients and the welfare of their families and businesses. As we adjust to the continuously changing circumstances, we reach out to our many fund clients with a reminder that lenders and credit managers will need to be proactive in making sure…

The global outbreak of COVID-19 has reached the United States with significant impact. Right now, we are all doing what we need to do in order to keep our families and communities safe. But as we settle in to what experts say could be weeks, if not months, of slowdown, we also recognize that the business…

The latest decision by the Second Circuit Court of Appeals in the long-running Tribune Company fraudulent conveyance litigation provides Court of Appeals endorsement of safe harbor defenses to clawback actions that had been considered potentially vulnerable following the Supreme Court’s decision in Merit Management Group LP v. FTI Consulting, Inc. The opinion amounts to a reconsideration and reaffirmation…

A review of the two bankruptcy law decisions issued by the Supreme Court in its most recent term (Mission Product Holdings Inc. v. Tempnology, LLC and Taggart v. Lorenzen) shows that the Court may be tilting against avoidance actions in ways that should provide comfort to avoidance defendants. Mission Product Holdings Inc. v. Tempnology, LLC…

The most recent decision in the long-running Tribune Company Fraudulent Conveyance Litigation multi-district case shores up safe harbor defenses to clawback actions that had been challenged following the Supreme Court’s Merit Management decision. The decision approves a broad reading of the statutory definition of “financial institution,” and thus extends the protection of the safe harbor…

On October 16, 2018, the Bankruptcy Court overseeing the Sears bankruptcy cases entered an interim order relating to ownership and transfers of interests in the Sears debtors. Among other things, the interim order requires the filing of a notice by any entity (as defined in Treasury Regulations Section 1.382-3(a)) that is or will become a…

The United States Bankruptcy Court for the Southern District of New York held last week that a foreign corporation that had issued debt pursuant to an indenture with a New York choice of law and New York forum selection clause and had commenced an insolvency proceeding in its home jurisdiction may file for chapter 15…

In a significant victory for brokerage customers, the Supreme Court has declined to accept an appeal by Irving Picard, the Madoff Securities trustee, from a decision by the Court of Appeals for the Second Circuit, Picard v. Ida Fishman Revocable Trust (In re Bernard L. Madoff Investment Securities LLC) (analyzed in our previous alert), that…

A recent decision by the Court of Appeals for the Second Circuit, Picard v. Ida Fishman Revocable Trust (In re Bernard L. Madoff Investment Securities LLC), sharply limits the remedies available to trustees in brokerage liquidations, provides significant protections for innocent customers of fraudulent brokers, and further shapes the ongoing debate over Bankruptcy Code safe harbors. For former customers…

A recent decision by Judge Jed Rakoff of the District Court for the Southern District of New York, Securities Investor Protection Corp. v. Bernard L. Madoff Investment Securities LLC, provides reassurance to foreign investors in off-shore funds that payments they receive are beyond the reach of avoidance actions brought under the U.S. bankruptcy laws. The…

A new decision by the Third Circuit Court of Appeals, In re KB Toys, Inc., may strongly influence the debate regarding whether a bankruptcy claim transferred on the secondary market is subject to disallowance based on acts of the original holder of the claim. As discussed in our prior alert, KB Toys concerned from objections…