Business Law Insolvency Law Committee

Summary: A bankruptcy court in New York has held that a liquidated damages clause based on "stipulated loss value" contained in an equipment lease was void because the lessee's liability was not connected to any losses caused by the lessee's default; further, the clause could not be enforced against a guarantor, even though the guarantee contained broad waivers. [In re Republic Airways Holdings, Inc., 2019 Westlaw 630336 (Bankr. S.D.N.Y.).] Read more

Summary: The California Supreme Court has held that when a creditor proffers a declaration in lieu of live testimony in a limited civil case, the affiant must be available for service of process within 150 miles of the place of trial, under some circumstances. [Meza v. Portfolio Recovery Associates, LLC, 2019 Westlaw 641517 (Cal.).] Read more

Summary: In In re QDOS, Inc., 591 B.R. 843 (Bankr. C.D. Cal. 2018), the bankruptcy court interpreted the meaning of the phrase “subject of a bona fide dispute as to liability or amount” in 11 U.S.C. § 303(b)(1). A dispute as to liability, the court held, means a “dispute over the entirety of the claim,” whereas a dispute as to amount means “a dispute only over a portion of the claim.” A legitimate dispute as to either liability or any portion of the amount of a claim is sufficient to disqualify a claim holder from qualifying as a petitioning creditor in an involuntary case. Read more

Summary: In Bank of New York Mellon v. Lane (In re Lane), 589 B.R. 399 (9th Cir. BAP 2018), the U.S. Bankruptcy Appellate Panel of the Ninth Circuit (the "BAP") held that disallowance of a claim for lack of standing by the claimant did not also void the underlying lien under 11 U.S.C. section 506(d) because no argument had been made by the debtor that the lien or underlying obligation was substantively invalid. Read more

Summary: In Ress Fin. Corp. v. Beaumont 1600, LLC (In re Preserve, LLC), 2018 WL 4292023, filed September 7, 2018, the Bankruptcy Appellate Panel of the Ninth Circuit vacated the Bankruptcy Court’s grant of attorney’s fees arising from a stay violation and remanded the case to the Bankruptcy Court for further proceedings. The BAP reversed on the grounds that (1) the trustee should have filed the contempt action as a contested matter as opposed to an adversary proceeding; (2) the trustee was ineligible to recover damages under section 362(k) because a trustee is not an “individual” within the meaning that section; and (3) the court was required to determine, under the clear and convincing standard of review, that the contemnor had knowledge of the stay and intended to violate it before awarding civil contempt damages. Read more

Summary: In Gomez v. Stadtmueller (In re Gomez), 592 B.R. 698 (9th Cir. BAP 2018), the U.S. Bankruptcy Appellate Panel of the Ninth Circuit affirmed sanctions awarded against a debtor's lawyer for claiming an exemption without sufficiently analyzing whether the debtor could assert the exemption. Read more

Summary: The Second Circuit has held that the FTC was empowered to force a corporate officer to disgorge $11 million, his companies' gross revenue, as a result of the corporations' fraudulent debt collection practices. [Federal Trade Commission vs. Moses, 2019 Westlaw 166011 (2nd Cir.).] Read more

Summary: A bankruptcy court in Delaware has held that a consignor whose financing statement had lapsed nevertheless prevailed over an inventory lender due to the lender's actual knowledge of the existence of a consignment relationship. [In re TSAWD Holdings, Inc., 2018 Westlaw 6839743 (Bankr. D.Del.).] Read more

Summary: A bankruptcy court in Delaware has held that an assignment of a bankrupt estate's avoidance claims was not champertous because the assignees were creditors of the estate, rather than third-party strangers, and because they promised to remit the net recovery to the estate. [In re Pursuit Capital Management, LLC, 2018 Westlaw 6841364 (Bankr. D. Del.).] Read more

Summary: The First Circuit has held that although the original financing statements pertaining to a $2.9 billion bond issuance failed to describe the collateral, the bonds were properly secured because the subsequent amendments to the financing statements eventually cured the defects. [In re Financial Oversight and Management Board for Puerto Rico, 2019 Westlaw 364029 (1st Cir.).] Read more