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ACIC PRIVATE NOTES
Welcome to the September 2022 edition of the ACIC Private Notes! This edition brings you:
The regular ACIC Committee Reports, compiled by Tyler Margolis (ArentFox Schiff);
Recent case law summaries from New England, prepared by Kevin Braun (Morgan Lewis); and
Recent case law summaries from the Southern Region, prepared by Jeff Dutson (King & Spalding).
ACIC Fall Annual Meeting & Education Conference Reminder
As a reminder, we look forward to seeing you all at the 2022 ACIC Fall Annual Meeting and Education Conference on October 20th and 21st! You can find details about registration here.
ACIC Committee Reports
Curious about what each of the ACIC Committees does? Interested in getting involved? Click here for an overview of the purpose, goals, and current initiatives of each of the College’s Committees, and to find out who to contact to learn more.
Recent Legal Developments
Updates from New England
In Unibank for Savings v. 999 Private Jet, LLC, 410 F. Supp. 3d 261 (Apr. 11, 2022), an officer of a company used company funds to purchase an aircraft, but registered title to the aircraft in the name of a separate entity that he owned. The company discovered the officer’s actions, sued him, and requested that the FAA place a preliminary lien on the aircraft through a claim-of-lien letter. The officer created another entity, transferred ownership of the aircraft to the new entity, and gave a lender a security interest in the aircraft to secure a loan. The court of appeals held that the company failed to perfect its security interest in the aircraft by not satisfying the FAA’s recordation requirements, and that the lender with no knowledge of the adverse claim qualified as a good faith purchaser for value and held a superior security interest in the aircraft. Click here to learn more.
In In re CE Electrical Contractors, LLC, Debtor, 2022 WL 1420094 (May 4, 2022), a senior secured lender objected to the Chapter 11 debtor’s plan of reorganization, including to certain proposed modifications to the lender’s note, such as converting it from a demand note into a term loan, lowering the interest rate to a fixed 4%, eliminating the annual loan charge and default interest, and modifying the terms of a non-debtor guaranty. The bankruptcy court held that, while certain of those proposed changes could be approved, others failed to satisfy the “best interests of creditors” test and Bankruptcy Code cramdown requirements. Click here to learn more.
Updates from the Southern Region
In Cherry Cmty. Org. v. Sellars, 871 S.E. 2d 706 (N.C. 2022), a non-profit sold a debtor development company a parcel of prime real estate for below the market rate after the debtor promised to devote a portion of the new development to housing for vulnerable populations. The debtor instead entered a joint venture with another development company to combine adjoining properties into a mixed-use project. When the non-profit sued, the debtor transferred the property to the other company for half a previous valuation. The non-profit, having won the first lawsuit, filed a second suit against both debtor and the other company alleging that the debtor’s conveyance of the property was voidable under North Carolina’s Uniform Voidable Transactions Act. The North Carolina Supreme Court ultimately found that the debtor had fraudulent intent, and held that the conveyance was voidable because that fraudulent intent could be imputed to the recipient company, excluding it from the UVTA’s good faith purchaser for value safe harbor. Click here to learn more.
In Whitten v. Clarke, 41 F.4th 1340 (11th Cir. 2022), a shareholder failed to make a demand, as required by Delaware law, on the board before bringing a derivative suit against the directors and executives related to the corporation’s deceptive billing and sales practices to collect unwarranted fees in a scheme to inflate its stock price. The Eleventh Circuit affirmed the district court’s dismissal of the derivative action, holding that the demand was not excused because the shareholder did not satisfy the Delaware law requirements to excuse the demand. Click here to learn more.
In Versailles Farm Home and Garden, LLC v. Haynes et al., 647 S.W.3d 205 (Ky. Supp. Ct. 2022), the Kentucky Supreme Court overturned prior appellate court precedent and held that the Kentucky UCC does not require future advances be explicitly stated in a security agreement in order to be secured by such security agreement, so long as future advances were contemplated by the parties as evidenced by their course of performance, course of dealing, or usage of trade. Click here to learn more.
In Tuggle v. Ameris Bank, 363 Ga. App. 600 (Ct. App. Ga. 2022), while a bank was foreclosing on the two properties securing its loan, the borrower transferred property worth more than $1 million to his wife. Ruling on constructive fraudulent transfer claims brought by the bank under Georgia’s Uniform Fraudulent Transfers Act, the court held that love and affection, while nice, did not constitute reasonably equivalent value for the transfer of the properties. Click here to learn more.