California Lawyers Association

Business Law Insolvency Law Committee

Updates from the BLS Insolvency Law Committee

In re Clinkingbeard, 2020 WL 1517932 (Bankr. D. Kan. Mar. 30, 2020) navigates the crossroad between Article 9 of the Uniform Commercial Code and a state law governing the perfection of a security interest in a motor vehicle. In this case, a discrepancy between the owner shown on the security agreement and the owner shown on an electronic certificate of title left the lender unsecured in a bankruptcy proceeding. Read more
Holding that Congress had no authority under either Article I or Section 5 of the Fourteenth Amendment to the United States Constitution to abrogate sovereign immunity for States that infringe on protected copyrights, the United States Supreme Court struck down the Copyright Remedy Clarification Act of 1990 (“CRCA”). In a discussion that may have a significant impact on the practice of Bankruptcy law, the Court affirmed that the Bankruptcy Clause is “unique” among Article I Clauses, suggesting that it would affirm its controversial Katz decision should the opportunity arise. Read more
Reversing the Bankruptcy Appellate Panel, the Eighth Circuit Court of Appeals recently held that a spouse’s earlier bankruptcy discharge did not retroactively extinguish the debtor’s joint and several liability for a fraudulent transfer judgment against the debtor and her spouse. Lariat Companies, Inc. v. Wigley (In re Wigley), 951 F.3d 967 (8th Cir. 3/9/20). Read more
In Vincent Jue v. Maggie Liu, et al. (In re Liu), 611 B.R. 864 (9th Cir. BAP 2020), the U.S. Bankruptcy Appellate Panel of the Ninth Circuit ruled that: (1) an order denying a 11 U.S.C. § 109(g)(2) dismissal motion is final and immediately appealable; (2) non-statutory, equitable defenses are not available to a recipient of a preferential transfer; and (3) a California attachment lien obtained within the 90-day preference period automatically terminates upon the filing of a bankruptcy petition by operation of law. Read more
In Sterling-Pacific Lending, Inc. v. Moser (In re Moser), 613 B.R. 721 (9th Cir. BAP 2020), the Bankruptcy Appellate Panel for the Ninth Circuit held that the bankruptcy court abused its discretion in declining to rule on a lender’s adversary proceeding seeking a declaratory judgment that the lender’s attempt to collect fees awarded to it in state court litigation did not violate the debtor’s chapter 7 discharge injunction. The BAP directed judgment in favor of the lender on remand because the debtor had repeatedly conceded that there was no discharge violation. Read more
In In re Dao, __ B.R. __, No. 20-20742, 2020 Bankr. LEXIS 1260 (Bankr. E.D. Cal., May 11, 2020), Judge Christopher Klein published a decision joining the majority view that the termination of the automatic stay under Section 362(c)(3) is only with respect to the debtor and does not terminate as to estate property. Read more
In a relatively short period of time, the United States Court of Appeals for the Ninth Circuit decided two reorganization cases involving the growing and sales of marijuana in very different manners, and for very different reasons. Read more
A District Court vacated and remanded a Bankruptcy Court order authorizing the assumption and assignment of a lease between Sears and Mall of America, because the District Court found that the Bankruptcy Court had improperly allowed a provision in the lease to override the statutory mandate of Bankruptcy Code section 365(b)(3)(A) requiring similar financial condition. MOAC Mall Holdings LLC v. Transform Holdco LLC (In re Sears Holdings Corporation), 2020 WL 953528 (S.D.N.Y. 2/27/20). Read more
Relying on the strong Texas principle of freedom to contract, the Texas Supreme Court held recently that although emails are writings, an exchange of emails and documents which demonstrate that parties have reached a meeting of the minds is not sufficient to form a definitive agreement to create an enforceable contract. Chalker Energy Partners III, LLC v. Le Norman Operating LLC, 2020 WL 976930 (Tex. 2/28/20). Read more
The Fifth Circuit Court of Appeals took the unusual route of ruling that a bankruptcy court’s factual findings were clearly erroneous when it reversed the finding that, when renewing a business loan guaranteed by the debtor, a creditor did not reasonably rely on the debtor’s false financial statement, the reversal resulting in the debt being nondischargeable under 11 U.S.C. Section 523(a)(2)(B). The Circuit Court’s reversal was founded on its perception that the reasonable reliance requirement of the statute is intended to target creditors acting in bad faith to prevent debtors from discharging debts. Veritex Community Bank v Osborne, 2020 WL 1140845 (5th Cir. 3/10/20). Read more

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