Bankruptcy Law Commons^™

Deemed Acceptance, Not Deemed Consent: Nonvoting Stakeholders And A Uniform Conspicuousness Standard For Opt-Out Third-Party Releases, Zach Cavagnaro

Student Scholarship

After Harrington v. Purdue Pharma, the fight over third-party opt-out releases has shifted from whether consent is necessary to what consent means. The Supreme Court held that the Bankruptcy Code does not authorize non-consensual nondebtor releases outside 11 U.S.C § 524(g), and—critically—left out what exactly counts as consent. The fight over consent is expected to command a lot of litigation, so a simple, uniform conspicuousness standard for nonvoting stakeholders’ opt-out releases can help alleviate litigation costs and focus on the definition of consent. This Comment argues that courts should evaluate consent through a unified, contract-law-grounded conspicuousness standard calibrated to the …

Dischargeability Of Student Loan Debt In Bankruptcy Cases, Dean Van Noy

Bankruptcy Research Library

(Excerpt)

Student loan debt represents one of the largest categories of consumer debt in the United States. Currently, statistics show that there is $1.8 trillion in outstanding student-loan debt owed by approximately 42.5 – 45.8 million debtors. This statistic can be attributed to the fact that the cost of higher education has increased significantly. Department of Education data shows that average tuition prices have more than doubled at colleges and universities around the country over the last three decades. As a direct consequence of this continuously increasing cost of tuition, many debtors have struggled to pay back their student-loan debt, …

Priority Of Warn Act Claims In Bankruptcy And Rights Of Independent Contractors, Colin Hanlon

Bankruptcy Research Library

(Excerpt)

The Bankruptcy Code establishes a tiered priority system for the payment of unsecured claims, governing the order of distribution when there are insufficient assets to pay all creditors in full. The priority system is fundamental to the operation of the Bankruptcy Code because in most bankruptcy cases, the debtor lacks adequate assets to fully pay all creditors. The Bankruptcy Code grants fourth-level priority up to $17,150 per individual for “wages, salaries, or commissions, including vacation, severance, and sick leave pay earned by an individual.” To receive priority treatment, wages must be earned within 180 days before either the petition …

Applicability Of Section 109(A)’S Debtor Eligibility Requirements To Chapter 15 Cases, Aisha K. Sabar

Bankruptcy Research Library

(Excerpt)

Upon a petition for recognition, a foreign insolvency case may be recognized in the United States under chapter 15 of title 11 of the United States Code (the "Bankruptcy Code"). Courts are divided as to whether section 109(a)’s debtor eligibility requirements, which apply to U.S. bankruptcy cases, apply to a chapter 15 case. In the Second Circuit, a foreign representative will have to demonstrate that the debtor satisfies section 109(a)’s requirement of being "a person who resides or has a domicile, a place of business, or property in the United States, or a municipality," while debtors situated in the …

The Rooker-Feldman Doctrine In The Bankruptcy Context, Brendan Mclaughlin

Bankruptcy Research Library

(Excerpt)

An unfavorable state court judgment can lead to the losing party seeking a second bite at the apple in federal court, but the Rooker-Feldman doctrine blocks second attempts with limited exceptions. The jurisdictional doctrine is derived from two United States Supreme Court cases: Rooker v. Fidelity Trust Co. and District of Columbia Court of Appeals v. Feldman, where the collective holdings stand for the principle that a state court judgment is conclusive and that the lower federal courts lack jurisdiction to review such judgments. The Supreme Court is the only federal court authorized to review state court judgments. …

Do Bankruptcy Judges Belong In Chambers? Rethinking Inherent Civil Contempt Power In Bankruptcy, Abigail B. Willie

Faculty Articles

The bankruptcy court is the face of the federal judiciary to much of the American public. Almost as many cases are filed in bankruptcy courts every year as are filed in the federal district courts and circuit courts combined. And in each bankruptcy case, there are often dozens or more affected parties. As such, it is critical that the public has confidence in the role of the bankruptcy court and its judges. Yet, since the creation of the Bankruptcy Code in 1978, the non-Article III bankruptcy system has faced seemingly never-ending challenges to subject matter jurisdiction in the bankruptcy context …

Controlling The Mischief Of New York’S Foreclosure Abuse Prevention Act Through Constitutional Pre-Emption, Shelby D. Green

Elisabeth Haub School of Law Faculty Publications

FAPA aimed to ease the burdens of long-delayed foreclosure proceedings by restating the operation of the statute of limitations. It contains provisions across several sections of state statutes that specify that once the six year statute of limitations on actions to foreclose commences, typically by the acceleration of the balance due on the promissory note and commencement of suit, it continues to run, even after the parties have entered into a workout agreement and have dismissed the complaint. By express terms, the Act had immediate effect, such that those lenders who withdrew complaints pursuant to a workout agreement before the …

Executory Contract Provisions That Provide Solely For An Equitable Remedy Are Enforceable Post-Rejection., Ashley Romeo

Bankruptcy Research Library

(Excerpt)

Under Section 365(a) of title 11 of the United States Code (the "Bankruptcy Code"), "a trustee [or debtor in possession], subject to the court’s approval, may assume, or reject an executory contract." Generally, a contract is executory if "performance remains due to some extent on both sides." In general, a debtor may decide whether its executory contract is a good deal going forward. The debtor will likely want to reject a contract that is no longer a good deal in order to repudiate any further performance of its duties. When reviewing the trustee or debtor-in-possession’s decision to assume or …

Rejection Of An Executory Contract Does Not Invalidate Rights Exercised Or Performance Rendered Prior To Rejection, Samantha B. Caraballo

Bankruptcy Research Library

(Excerpt)

Under section 365 of Title 11 of the United States Code (the "Bankruptcy Code"), a trustee or a debtor in possession may "reject" an executory contract. Rejection results in a breach of contract. Courts consider non-bankruptcy contract law to determine the impact of the breach on the executory contract. In general, rejection does not undo a party’s past performance or exercise of rights under the contract. Instead, it relieves a debtor from its future obligation to perform.

Part I of this Article explains the different approaches to defining "executory contract." Part II of this Article elaborates on a trustee …

Property Of The Estate Under Section 541—Accrual Of Causes Of Action And The "Sufficiently Rooted" Test, Hayung Park

Bankruptcy Research Library

(Excerpt)

This article examines the scope of property included in a bankruptcy estate under section 541 of the Bankruptcy Code, with a focus on causes of action arising both before and after the bankruptcy petition date. Courts apply a two-part analysis to determine whether a claim is part of the estate: (1) whether it accrued as of the petition date, and (2) whether a post-petition claim is sufficiently rooted in the pre-bankruptcy past. This article explores how courts interpret and apply these components to determine estate property.

Dismissal Of Chapter 11 Cases For Lack Of Good Faith Filing, Amanda Alongi

Bankruptcy Research Library

(Excerpt)

Section 1112 of title 11 of the United States Code (the "Bankruptcy Code") provides that a Chapter 11 case can be converted or dismissed, upon the request of an interested party, "for cause." While cause is required, the Bankruptcy Code does not provide a definition. Rather, section 1112(b)(4) provides a non-exhaustive list of examples that constitute "cause." In addition to the statutory examples, almost all courts interpret "cause" to include a lack of good faith. The Bankruptcy Code also does not define good faith, resulting in courts adopting different approaches to determine good faith. Therefore, when an interested party …

The Delaware Bankruptcy Court's Approach To The Subjective Prong Of The Ordinary Course Of Business Defense, Andrew Cardello

Bankruptcy Research Library

(Excerpt)

The ordinary course of business defense (the "OCB Defense") to preference claims under section 547(c)(2)(A) of title 11 of the United States Code (the "Bankruptcy Code") protects transfers that are consistent with previous transactions between a debtor and creditor. In evaluating this defense, the United States Bankruptcy Court for the District of Delaware (the "Delaware Bankruptcy Court") conducts a fact-intensive inquiry into whether the challenged transfers were consistent with the parties’ previously established business practices. Key considerations include the length and regularity of the relationship, the timing and method of the transactions, and the absence of aggressive collection tactics …

Insurers Have Standing To Object To Reorganization Plans, Haley Daniels

Bankruptcy Research Library

(Excerpt)

Section 1109 of title 11 of the United States Code (the "Bankruptcy Code") allows any "party in interest" to raise, appear, and be heard on any issue in a chapter 11 bankruptcy case. The term party in interest is not otherwise defined in the Bankruptcy Code. The United States Supreme Court has interpreted the phrase to describe a party that has a sufficient stake in the outcome of the bankruptcy reorganization. Importantly, Section 1128(b) of the Bankruptcy Code explicitly provides that a party in interest "may object to confirmation of a plan" in a chapter 11 case.

The United …

Granting A Stay For Non-Debtors, Daniel Denaroso

Bankruptcy Research Library

(Excerpt)

Under section 362 of title 11 of the United States Code (the "Bankruptcy Code"), the filing of a bankruptcy petition results in an automatic stay of actions against a debtor or its assets. While the automatic stay is primarily for the benefit of the debtor, courts have generally extended the stay to non-debtors. However, the Supreme Court disrupted this principle in Purdue by interpreting that the Bankruptcy Code does not authorize a release that effectively discharges a non-debtor’s obligations. Since then, courts have generally interpreted Purdue narrowly to avoid eliminating the ability to grant a stay for non-debtors.

This …

The Valuation Of Crypto Currency Mining Property Under 11 U.S.C. § 506(A)(1), Michael Galletti

Bankruptcy Research Library

(Excerpt)

Section 506(a)(1) of title 11 of the United States Code (the "Bankruptcy Code") provides that a secured creditor's claim is "a secured claim to the extent of the value of such creditor's interest in the estate's interest in such property . . . and is an unsecured claim to the extent that the value of such creditor's interest . . . is less than the amount of such allowed claim." The valuation of collateral is determined "in light of the purpose of the valuation and of the proposed disposition or use of such property." However, the Bankruptcy Code is …

Reconsideration Of A Previously Allowed Or Disallowed Claim Under Section 502(J) Of The Bankruptcy Code In New York And Delaware., Kalina Mesrobian

Bankruptcy Research Library

(Excerpt)

Section 502(j) of title 11 of the United States Code (the "Bankruptcy Code") states that "[a] claim that has been allowed or disallowed may be reconsidered for cause" in a bankruptcy case. 11 U.S.C.S. §502(j). Section 502(j) further states that "a reconsidered claim may be allowed or disallowed according to the equities of the case." Id. There is no definition of "for cause" or "according to the equities of the case," but the courts have generally held that reconsideration ultimately "lies within the discretion of the court." This article will analyze the scenarios under which a bankruptcy court in …

U.S. Court’S Role In Approving The Sale Of U.S. Assets In A Chapter 15 Case, Jamie Vang

Bankruptcy Research Library

(Excerpt)

Chapter 15 cases deal with cross-border insolvency and allow U.S. courts to recognize foreign bankruptcy proceedings and cooperate with foreign courts. Upon recognition of a foreign main proceeding, section 363 of title 11 of the United States Code (the "Bankruptcy Code") will apply to the transfer of U.S. assets. However, the standard for approving a sale under section 363 in a chapter 15 case is not specified.

This article analyzes the bankruptcy court decisions on whether chapter 15 requires U.S. courts to conduct their own individual analysis or to defer to the foreign court in approving the sale of …

The Objective Establishment Of A Ponzi Scheme Is Sufficient To Establish A Debtor’S "Actual Intent To Defraud" Creditors In Fraudulent Conveyance Actions, Sarah Wilkinson

Bankruptcy Research Library

(Excerpt)

A business entity that meets the objective elements of a Ponzi scheme gives rise to the presumption that a debtor possesses the requisite mens rea—the "actual intent to defraud" creditors—in fraudulent conveyance actions. Section 548 of title 11 of the United States Code (the "Bankruptcy Code") "authorizes a trustee to avoid any transfer of funds made by a debtor with (a) an 'actual intent to hinder, delay, or defraud' creditors; or (b) for less than a 'reasonably equivalent value,' among other criteria." Fraudulent conveyance actions are "often called 'clawback' actions." These actions "seek to recover the false returns received …

Adjudicatory Comity As An Alternative To Recognition Under Chapter 15 Of The Bankruptcy Code For Foreign Bankruptcy Proceedings, Janet Wong

Bankruptcy Research Library

(Excerpt)

In the absence of Chapter 15 recognition, foreign debtors may still rely on the doctrine of adjudicatory comity for recognition of a foreign order in some instances. However, because of the limitations on the applicability of adjudicatory comity alone, Chapter 15 recognition may be a safer option for foreign debtors.

In 2005, Congress enacted Chapter 15 under Title 11 of the United States Code (the "Bankruptcy Code") to "provide effective mechanisms for dealing with cases of cross-border insolvency." Under Chapter 15, a foreign representative may apply to the court for recognition of a foreign bankruptcy proceeding. Upon recognition of …

Loosen Up: The Follies Of Strict Construction As Applied To A Statutory Tribal Sovereign Immunity Waiver, Joseph M. Raimondi

St. John's Law Review

(Excerpt)

On February 9, 2020, Brian Coughlin attempted suicide, leading to an eleven-day stint at the hospital. He was experiencing “overwhelming stress, anxiety and lack of hope for a better life.” He had recently filed for bankruptcy, which normally triggers a stay that prevents creditors from engaging in “any act to collect, assess, or recover a claim against the debtor . . . .” However, one of Coughlin’s creditors, associated with a Native American tribe —the Lac Du Flambeau Band of Lake Superior Chippewa Indians (“the Band”)—believed that it did not have to comply with the stay by virtue of …

Applicability Of Discharge Exceptions To Corporate Debtors In Subchapter V: A “Death Blow” To Rescuing Small Businesses, Robert J. Landry Iii

The Journal of Business, Entrepreneurship & the Law

On August 23, 2019, the Small Business Reorganization Act of 2019 (SBRA) was signed into law, adding a new subchapter to Chapter 11 for small business debtors, i.e. “Subchapter V”. The underlying driver for SBRA was a concern that while most Chapters 11 cases are small business debtors, most small business debtors face difficulty successfully reorganizing under Chapter 11. SBRA is intended to streamline Chapter 11 reorganization for small business debtors by making the process quicker and cheaper. However, SBRA arguably curtailed the scope of discharge when a plan is confirmed without the consent of the creditors for corporate small …

Chapter 5 Avoidance Actions Can Be Sold As Property Of The Estate, Enrica Brook

Bankruptcy Research Library

(Excerpt)

Many courts, including the Fifth, Seventh and Ninth Circuits, have found that avoidance actions, under Chapter 5 of the Bankruptcy Code, are property of the estate. Section 541(a)(1) of the Bankruptcy Code defines property of the estate as "all legal or equitable interests of the debtor in property as of the commencement of the case," and section 541(a)(7) states that "[a]ny interest in property that the estate acquires after the commencement of the case" is estate property. The Supreme Court has interpreted the definition of "property of the estate" broadly, finding section 541(a)(1) can be read "to include in …

Data In Distress: Effectuating State Data Privacy Laws During Bankruptcy, Cameron Love

Emory Law Journal

In 2000, an online toy retailer, Toysmart.com, attempted to liquidate consumer data to pay creditors in its bankruptcy case. The attempted sale drew objections from the Federal Trade Commission and forty-seven state attorneys general. Five years later, Congress attempted to resolve privacy concerns in bankruptcy, amending the Bankruptcy Code to provide clear procedures for the liquidation of “personally identifiable information.” Recently, scholars have criticized these amendments, characterizing them as “limited,” “outdated,” and “privacy theater.” This Comment adds to these criticisms, arguing the amendments’ failure to mandate consideration of relevant nonbankruptcy law puts these permissive sales procedures on a collision course …

The Lease Of All Evils: How A Middle-Ground Approach Can Resolve The Bankruptcy Code Conflict Between Section 363(F) Sales And Section 365(H) Lessee Protections, Kate Christensen

Fordham Journal of Corporate & Financial Law

The Fifth Circuit’s recent decision in In re Royal St. Bistro, LLC has awakened an unsettled issue in the Bankruptcy Code that has divided the bankruptcy community for over two decades. The question examined by the Fifth Circuit was whether a non-debtor lessee with a right to continued possession through section 365(h) of the Bankruptcy Code loses this right if the debtor-lessor can sell its property “free and clear” under section 363(f). While early decisions held that section 365(h) always protects lessees against debtors’ free and clear sales, some subsequent decisions created a circuit split by ruling that section 365(h) …

Chapter 13: Let’S Call The Whole Thing Off, Lawrence Ponoroff

Emory Bankruptcy Developments Journal

Courts cannot agree on much of anything about chapter 13, and legislators cannot agree and are confused over what to do about it. This state of affairs benefits no one and shows no signs of abating. So, in this Article, I propose to throw in the towel by imagining a world without chapter 13. Spoiler alert: although I am not superstitious, with just a few tweaks and tucks to chapter 7, I think the Bankruptcy Code might just be better off operating like a high-rise elevator that goes directly from floor twelve to floor fourteen. I will lay it out …

Bankrupting The Matrix: Daos And The Code, Ryan Levin

Emory Bankruptcy Developments Journal

The utilization of the novel Decentralized Autonomous Organization (“DAO”) structure to conduct business activity creates substantial challenges for the Bankruptcy Code (the “Code”). The characteristics of this unregulated, extralegal entity, built entirely on a blockchain and controlled by anonymous members through digital tokens, provides endless opportunities to avoid legal enforcement and exploit the Code. While the Code has provisions to apply to both individuals and organized actors, such as partnerships and corporations, neither DAOs nor their individual token holders fit neatly into these molds. When a DAO, or a DAO token holder, eventually faces bankruptcy, the current state of the …

Third-Party Bankruptcy Releases And The Separation Of Powers: A Stern Look, Henry Reynolds

Emory Bankruptcy Developments Journal

In the last few years, bankruptcy scholars and professionals have criticized mass tort debtors’ use of chapter 11 bankruptcy as a litigation forum. One such criticism concerns mass tort debtors’ use of third-party releases: provisions in chapter 11 reorganization plans that enjoin creditors’ claims against non-debtor third parties. If a bankruptcy court approves such releases, creditors lose claims against the released third parties, which often include the debtor’s directors, insurers, or employees.

Third-party releases have troubled many. Critics and courts have said that third-party releases violate (1) the Bankruptcy Code, (2) bankruptcy policy, (3) the constitutional right to due process, …

Safe Harboring Sloppiness: The Scope Of, And Available Remedies Under, Sections 363(M) And 364(E), Vishal Patel

Emory Bankruptcy Developments Journal

No abstract provided.

Courts Are Divided On Whether Electric Energy Is A "Good" Under Section 503(B)(9) Of The Bankruptcy Code, Mari Bijimenian

Bankruptcy Research Library

(Excerpt)

Under Section 503(b)(9) of title 11 of the United States Code (the "Bankruptcy Code"), the value of goods received by a debtor in the ordinary course of business, within 20 days before the date of commencement of a case, can be granted administrative priority status. Bankruptcy courts have grappled with settling on a definition of "goods" because neither Section 503(b)(9) nor the Bankruptcy Code at large define "goods." While the definition of "goods" is a matter of federal interpretation because Section 503(b)(9) of the Bankruptcy Code is federal law, "bankruptcy courts have almost without exception looked to the Uniform …

Section 363(M) Is Not A Jurisdictional Constraint On Appellate Review Of Property Transfers, Agustin Bujanda

Bankruptcy Research Library

(Excerpt)

Under section 363(b) of title 11 of the United States Code ("the Bankruptcy Code"), the trustee "may use, sell, or lease, other than in the ordinary course of business, property of the estate." Under section 363(m), once a transfer of property has been authorized, the "reversal or modification on appeal of an authorization under subsection (b) . . . of a sale or lease of property does not affect the validity of a sale or lease . . . unless such authorization and such sale or lease were stayed pending appeal."

Until recently, various circuit courts were split on …