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In TLA Claimholders Grp. v. LATAM Airlines Grp. S.A. (In re LATAM Airlines Grp. S.A.), 55 F.4th 377 (2d Cir. 2022), unsecured creditors of Tam Linhas Aéreas S.A., a subsidiary of LATAM Airlines Group S.A., appealed to the U.S. Court of Appeals for the Second Circuit, arguing that their claims should not have been designated as “unimpaired” under the debtors’ chapter 11 plan and they were entitled to post-petition interest by reason of Section 1124(1) of the Bankruptcy Code or under the solvent debtor exception. The Second Circuit affirmed the lower court’s decision, holding that a claim is not impaired under Section 1124(1) of the Bankruptcy Code when it is altered by operation of the Bankruptcy Code, rather than by the plan of reorganization, and that the bankruptcy court did not err in assessing the debtor’s solvency. Click here to learn more.
In Purdue Pharma L.P. v. City of Grande Prairie (In re Pharma L.P.), 69 F.4th 45 (2d Cir. 2023), the U.S. Court of Appeals for the Second Circuit reversed the order of the U.S. District Court for the Southern District of New York and affirmed the bankruptcy court’s confirmation of Purdue Pharma L.P.’s Chapter 11 plan, which included non-consensual releases of direct third-party claims against members of the Sackler family, who were not debtors in the bankruptcy case. The Second Circuit held that such releases are statutorily permitted under Sections 105(a) and 1123(b)(6) of the Bankruptcy Code, and articulated seven factors that bankruptcy courts should consider when determining whether such releases should be approved. Click here to learn more.
Midwest Update
In re Juntoff, 636 B.R. 868 (B.A.P. 6th Cir. 2022) is a consolidated appeal arising from two separate Chapter 13 cases. In those cases, the debtors objected to priority unsecured claims filed by United States on behalf of Internal Revenue Service (“IRS”) for “shared‑responsibility payment” (“SRP”) assessed for failure to purchase health insurance in accordance with the “individual mandate” under Patient Protection and Affordable Care Act. The bankruptcy court sustained the debtors’ objections in both cases, determining that the SRP is not “a tax on or measured by income or gross receipts” or “an excise tax on ... a transaction” entitled to priority treatment under either § 507(a)(8)(A) or (E). The IRS appealed the bankruptcy court’s decision and the U.S. Bankruptcy Appellate Panel of the Sixth Circuit agreed with the IRS, reversing the bankruptcy court. Click here to learn more.
In In re West, No. 21‑31047‑JDA, 2022 WL 1309939 (Bankr. E.D. Mich. May 2, 2022), the bankruptcy court granted defendant Shiawassee County’s motion to dismiss an adversary complaint by the debtor, which alleged that the state court judgment of foreclosure against the debtor’s residence constituted a fraudulent transfer under 11 U.S.C. § 548 of the Bankruptcy Code. Click here to learn more.
In In re Buchanan, 31 F.4th 1091, 1092 (8th Cir. 2022), the debtors were a husband and wife who filed Chapter 7 after their electric company went out of business. A general contractor with a default judgment against the electric company commenced an adversary proceeding objecting to the debtors’ discharge and invoking 11 U.S.C. 523(a)(2), which provides that individual debtors are not discharged for debts for money obtained by false representation. The contractor argued that the debt owed to it was nondischargeable by the debtors because the debtors made false representations in the lien waivers that resulted in the debt. The bankruptcy court granted the debtors’ motion for summary judgment, concluding that the contractor did not have a valid claim for a debt owed by the debtors personally. The bankruptcy appellate panel affirmed. However, the Eighth Circuit reversed, holding that state law would control and there were sufficient grounds for the contractor to have a potential claim against the debtors individually under Nebraska law. Click here to learn more.
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