Business Law Insolvency Law Committee

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

Summary: The Fifth Circuit has held that when a transferee is on inquiry notice of fraudulent behavior on the part of the transferor, the “good faith” defense under the UFTA is destroyed, even if an inquiry by the transferee would have been futile since the transferor’s scheme was so complex. [Janvey vs. GMAG, LLC, 2019 Westlaw 141107 (5th Cir.).] Read more

The Second Circuit has held that an arbitration clause contained in a consumer contract was unenforceable because the provision was so obscure that it never became part of the contract at all. [Starke v. SquareTrade, Inc., 2019 Westlaw 149628 (2nd. Cir.).] Read more

A bankruptcy court in Illinois has held that a "silent second" clause contained in a subordination agreement barred a junior creditor from conducting discovery in aid of a bankruptcy trustee's objection to a senior creditor's claim against the debtor. [In re Argon Credit, LLC, 2019 Westlaw 169315 (Bankr. N.D. Ill.).] Read more

Summary: A California appellate court has held that a holdover tenant cannot invoke a right of first refusal that was contained in an expired commercial lease. [Smyth vs. Berman, 2019 Westlaw 156761 (Cal.App.).] Read more

An asset purchaser has obtained $10 million in compensatory civil contempt damages from a prepetition creditor due to the creditor's assertion of successor liability claims, in violation of the injunctions and releases contained in a Chapter 11 plan of reorganization. [In re Kimball Hill, Inc., 2019 Westlaw 93311 (Bankr. N.D. Ill.).] Read more

A bankruptcy court in South Carolina has held that a trustee may invoke the power of the IRS to avoid the debtors' disclaimer of settlement proceeds, even though other unsecured creditors could not have done so under applicable state law. [In re Gaither, 2018 Westlaw 6287971 (Bankr. D. S.C.).] Read more

The Supreme Judicial Court of Maine has held that an unauthorized modification of a commercial lease was extinguished when the holder of the senior mortgage foreclosed on the landlord’s interest in the property. [Littlebrook Airpark Condominium Association vs. Sweet Peas, LLC, 2019 Westlaw 123599 (Maine).] Read more