Brian P. Guiney, Counsel

In January 2014, Lehman Brothers Holdings, Inc. (“Lehman”) settled claims filed by Fannie Mae and Freddie Mac arising out of each of their purchases of mortgage loans from Lehman and its affiliates. Lehman then sought to recoup the amounts paid to Fannie and Freddie by way of third-party indemnification claims brought in the Bankruptcy Court against financial institutions that it alleges sold or submitted the defective mortgage loans into Lehman’s loan sale and securitization channels in the first place. A number of the financial institutions moved to dismiss for lack of subject matter jurisdiction. Earlier this week, Bankruptcy Judge Shelley Chapman held that the Bankruptcy Court has “related to” jurisdiction over the indemnification claims pursuant to 28 U.S.C. § 1334(b) and therefore denied the motions to dismiss.

A recent decision from the Ninth Circuit Court of Appeals highlights an existing circuit split regarding appellate standing.[1] 

Courts in the Fourth and Seventh Circuits have disagreed whether objection and attendance at a hearing are prerequisites for satisfying the “person aggrieved” requirement for appellate standing. Compare In re Schultz Mfg. Fabricating Co., 956 F.2d 686, 690 (7th Cir. 1992) (attendance and objection at a bankruptcy court proceeding are requirements for appellate standing) with In re Urban Broad. Corp., 401 F.3d 236, 244 (4th Cir. 2005) (attendance and objection are not necessary for standing to appeal a bankruptcy court order).

Section 549 of the Bankruptcy Code permits a trustee or debtor in possession to avoid (and ultimately recover) a transfer of the debtor’s property “that occurs after the commencement of the case” and “is not authorized under this title or by the court.”  11 U.S.C. § 549.  This sensible provision safeguards property of the estate for ratable distribution to creditors in accordance with the priorities established by the Bankruptcy Code and provides the Trustee with the necessary authority to pursue transferees that receive property of the estate without Court approval. 

Confirmation of a Chapter 11 plan of reorganization generally requires the consent of each impaired class of creditors.  But, upon satisfaction of additional statutory requirements, a plan proponent can obtain confirmation of a “cramdown” plan over the dissent of one or more classes of creditors as long as “at least one class of claims that is impaired under the plan has accepted the plan.”

Every lawyer knows that it is important to enter into a signed engagement letter with a client before commencing legal representation.  But, as one law firm recently discovered, even an unsigned engagement letter is better than none at all.  The decision of the United States Bankruptcy Court for the Northern District of Georgia in Glass v. Miller & Martin, PLLC addresses this plus several other key concepts for Bankruptcy Court litigants.[1]  

Unsecured creditors and other stakeholders sometimes challenge the reasonableness of fees incurred by estate professionals in a bankruptcy case.  Whether this is to augment unsecured creditor recoveries or serve as a check on the private bar is in the eye of the beholder.  Whatever the reason, fee litigation in bankruptcy caused many professionals to seek payment from the bankruptcy estate for any fees incurred defending against an objection to their fees. This practice was eventually challenged and, in 2014, the Supreme Court ruled that the Bankruptcy Code does not permit it.  The Court’s holding was grounded in the American Rule, which provides that “[e]ach litigant pays his own attorney’s fees, win or lose, unless a statute or contract provides otherwise.”  Section 330(a)(1)’s provision for “reasonable compensation for actual, necessary services rendered,” the Court announced, “neither specifically nor explicitly authorizes courts to shift the costs of adversarial litigation from one side to the other—in this case, from the attorneys seeking fees to the administrator of the estate—as most statutes that displace the American Rule do.”

On June 30, 2016, the Financial Oversight and Management Board for Puerto Rico (“Oversight Board”), which was established under the Puerto Rico Oversight, Management, and Economic Stability Act (“PROMESA”), filed a voluntary petition for relief for the Commonwealth of Puerto Rico (the “Commonwealth”).  On May 5, Chief Justice Roberts appointed District Judge Laura Taylor Swain of the Southern District of New York to conduct the case.  Judge Swain was a bankruptcy judge in the Eastern District of New York before joining the district court in 2000.