In a decision all but certain to engender future litigation, the Supreme Court recently held in the case of Czyzewski v. Jevic Holding Corp. that structured dismissals providing for distributions that do not follow the normal priority rules and that do not have the consent of affected creditors are impermissible. Reversing the Third Circuit Court of Appeals, which had affirmed the decisions of the courts below, the Supreme Court crafted a narrow ruling that raised but left unanswered questions about the permissible contours of structured dismissals. Continue Reading THE SUPREME COURT DISMISSES STRUCTURED DISMISSALS
The Bankruptcy Court for the Western District of Pennsylvania has recently held that a pre-petition foreclosure of a debtor’s real property, conducted in accordance with state law, is not subject to attack as a preference under 11 U.S.C. § 547.
Continue Reading JUDICIAL FORECLOSURE SALES ARE IMMUNE TO PREFERENCE CHALLENGES
The TransVantage bankruptcy case and the resulting efforts by the Trustee to avoid carrier payments made by the defunct freight payment processor has been watched like an upcoming speed trap by the transportation industry concerned about the vulnerability of this business arrangement in bankruptcy. The more than 500 adversary Complaints filed in April of 2015 by the Trustee against the common carriers, shippers and customers of Transvantage Solutions, Inc. have been winnowed down to a just few remaining unresolved cases. Continue Reading The End of the Road for TransVantage Solutions, Inc.?
In the first installment of this article, we discussed the prevalence of preference litigation and some of the commonly-available defenses to business vendors to limit or even eliminate liability to the bankruptcy estate. While preference actions are by far the most common type of avoidance litigation brought in bankruptcy cases, this is not the end of the story. Bankruptcy estate representatives can also bring actions to avoid fraudulent transfers and post-petition transactions. We will first discuss the elements of each of these avoidance claims, followed by some tips to avoid being the target of such an action in the first place or, if a defendant, some strategies to limit liability. Continue Reading Bankruptcy Avoidance Litigation Part II – Do I Really Have to Give That Payment Back?
While initial consumer and commercial bankruptcy filings have, in recent years, ebbed in the wake of the historic highs of the Great Recession, the tail of the bankruptcy boom continues to vex the business community from an unexpected source — avoidance litigation against the debtor’s service and product vendors. The Bankruptcy Code permits a trustee or debtor in possession to avoid and recover certain payments, known as preferences, made by the debtor to its creditors during the 90-day period preceding the filing of its bankruptcy petition. The legislative policy objectives of preference avoidance rest on a dubious proposition: that all creditors should share equally in the debtor’s financial failure and that those creditors who successfully pressured the debtor for payment immediately before the bankruptcy should not gain a greater share of the estate than creditors who did not prey on a distressed debtor. Continue Reading BANKRUPTCY AVOIDANCE LITIGATION — DO I REALLY HAVE TO GIVE THAT PAYMENT BACK?
The Chapter 7 Trustee appointed in the TransVantage Solutions, Inc. bankruptcy case ground the gears of the nation’s trucking industry this past April when he filed over 500 adversary complaints against common carriers, shippers and customers of the bankrupt company. Continue Reading The Road Ahead for TransVantage Solutions, Inc.
The Third Circuit Court of Appeals recently affirmed the decisions of the District and Bankruptcy Court denying, for reasons of inadequate disclosure, the approval of a third-party release provision in the Chapter 11 plan of In re Lower Bucks Hospital, et al., Case No. 10-10239(ELF)(“Lower Bucks”). The offending release purported to prohibit a class of creditors that held corporate bonds in the Debtor, Lower Bucks Hospital, from bringing claims against their Indenture Trustee, The Bank of New York Mellon Trust Company, N.A. The permissibility of third-party releases, where a non-debtor receives a release of the claims of creditors, continues to be a controversial issue in the Third Circuit. While the Third Circuit has yet to issue a definitive opinion on when such third-party releases may be granted, the Court emphatically stated that they may not be granted in the absence of clear and conspicuous disclosure to affected parties. Continue Reading The Third Circuit Affirms the Denial of Third-Party Releases for Lack of Adequate Disclosure