"Lights, Camera, Boston!" - A Sneak Peak at the 2022 Annual Fall Meeting
On behalf of the Board of Trustees and the Education Committee, we invite you to join us for the ACIC's 2022 Fall Annual Meeting and Education Conference on Thursday and Friday, October 20 and 21, at the Boston Marriott Long Wharf. This year’s Boston movie-themed Fall Conference, titled “Lights! Camera! Boston! Art Imitates (ACIC) Life,” will provide an opportunity to socialize and network in person with your friends and colleagues and feature a variety of relevant and topical panel discussions. From market and regulatory updates, bespoke private placements, alternative investment sourcing, creditor-on-creditor violence and cryptocurrency to aircraft financings, ESG and ethics, our wicked smaht cast of experts will guide you through these current topics. Plus, what could be better than Boston in the Fall?
Register for the 2022 Fall Annual Meeting here! And, for some inspiration on planning your trip to Boston, click here!
Recent Legal Developments
In Tilton v. MBIA Inc. (In re Zohar III, Corp.), the U.S. Bankruptcy Court for the District of Delaware engaged in an analysis of the three factors for equitable subordination, which it considered a "drastic" remedy, and found that the alleged facts were not sufficient to state a claim for equitable subordination. Moreover, the plaintiffs who were seeking equitable subordination were collaterally estopped from doing so because the grounds for their claim had been previously litigated. Read a full summary of the case here.
In In re Ocean View Motel, the U.S. Bankruptcy Court for the District of New Jersey confirmed, over the objections of a secured creditor, that a Chapter 11 plan satisfied the cramdown requirements of Section 1129(b) of the Bankruptcy Code. As part of the plan, the secured creditor's deeds-in-lieu of foreclosure, which had been granted to him as part of a prepetition settlement agreement, were voided. The court found that eliminating the deeds-in-lieu of foreclosure was not unfair or inequitable. Among other factors, the secured creditor retained the liens securing his claim, and permitting the creditor to keep the deeds-in-lieu of foreclosure would hamper the feasibility of the plan. A detailed summary of the case can be found here.
In Miller v. Fallas (In re J & M Sales Inc.), the U.S. Bankruptcy Court for the District of Delaware denied the Chapter 7 trustee an opportunity to allege constructive fraudulence conveyance claims on behalf of the IRS, as the claims were time-barred after four years. The trustee argued that the IRS was a predicate creditor, which would extend the statute of limitations for up to ten years. Because the IRS had not filed a proof of claim in the bankruptcy, the claim was not allowable and the IRS could not be considered a predicate creditor. Click here to read the full summary.
In Peterson v. Colony American Finance Lender LLC, et al. (In re Mack Industries, Ltd., et al.), a secured creditor provided financing that was secured by both the debtor's real property and the membership interests in the debtor. The creditor foreclosed on the membership interests and subsequently caused the debtor to sell the properties for significantly less than their initial valuations, resulting in the creditor receiving substantial equity in the properties. The U.S. Bankruptcy Court for the Northern District of Illinois dismissed the Chapter 7 trustee's claims to avoid the transfer, finding that the secured creditor was not an "initial transferee" because the creditor had never received title to the properties. The Bankruptcy Court also rejected the trustee's attempts to pierce the corporate veil of the debtor. For a full summary of the case, click here.
In Upper Explorerland Regional Planning Commission v. Vanhorn (In re Vanhorn), the U.S. Bankruptcy Court for the Northern District of Iowa looked to Iowa state law to determine that a secured creditor in a Chapter 7 proceeding did not have a purchase-money security interest in the debtor's tools, which the debtor could exempt up to $10,000 as "tools of the trade." As to whether the creditor's loan balance could be discharged, the court remanded the issues for further consideration to determine whether the debtor's sale of a skid loader was intended to cause financial harm to the lender. A full summary of the case can be found here.
In Lowry v. Southfield Neighborhood Revitalization Initiative, et al. (In re Lowry), the U.S. Court of Appeals for the Sixth Circuit reversed the decision of the U.S. Bankruptcy Court for the Eastern District of Michigan on the basis that (1) the rule in BFP v. Resolution Trust Corp. is limited to mortgage foreclosures and does not extend to tax foreclosures in Michigan, as the two types of foreclosures are governed by different processes under state law, and (2) the Rooker-Feldman doctrine did not preclude the debtor's claims; though the issues of the state foreclosure judgment and the fraudulent transfer were closely related, the debtor was not re-litigating the former by seeking to avoid the foreclosure as a fraudulent transfer. For additional details about the case, click here.
In In re Nu-Cast Step & Supply Inc., the U.S. Bankruptcy Court for the Eastern District of Michigan abstained from exercising jurisdiction to reopen a four-year-old Chapter 11 case to determine whether a Section 363 sale had included the debtor's intellectual property, instead ceding jurisdiction to the state court to make such findings. Read more about the case here.
Delaware Supreme Court Invalidates Asset Transfer to Secured Creditors - Stream TV Networks, Inc. v. SeeCubic, Inc.
In June 2022, the Delaware Supreme Court found that a transfer, conducted in a privately structured foreclosure transaction, by an insolvent corporation of substantially all of its assets to a newly created entity controlled by the corporation's secured creditors, in full satisfaction of its debs, violated the corporation's charter because the sale was not approved by a majority of the corporation's Class B shareholders. For more details on the case, including its possible far-reaching implications and considerations for future secured loans, click here.