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Clear Error They Say! Supreme Court Opines On Standard Of Review For Determining Non-Statutory Insider Status

Pictured:  Reno Nevada’s The Villages at Lakeridge, a great investment for non-statutory insiders, or for anyone else!!

 

Last April, we updated you that the Supreme Court had granted review of In re The Village at Lakeridge, LLC, 814 F.3d 993 (9th Cir. 2016). Our most recent post is here.

On March 5, 2018, the Supreme Court held a clear-error standard of review should apply to a review of a determination of non-statutory insider status. U.S. Bank Nat. Ass’n v. Vill. at Lakeridge, LLC, No. 15-1509, ___ S. Ct. ___2018 WL 1143822, at *2 (U.S. Mar. 5, 2018).

As a refresher, in Village at Lakeridge, in exchange for $5,000, an insider (Bartlett) transferred a $2.76 million claim against the debtor to an individual (Rabkin) who was not a statutory insider. 

Bankruptcy Court Reluctantly Allows Creditor To Shuck “Lil’ Sweet Pea” Accounts

Any first-year law student could attest that understanding what the law is can be a difficult task, in part because the law is not always applied consistently by courts.  This problem gives rise to a maxim law professors often invoke (sometimes citing Justice Oliver Wendell Holmes, a proponent of this maxim) when questioned about the law’s occasional incoherence: “hard cases make bad law.”[1]  The idea is that courts are sometimes tempted to skirt the proper application of the law when the result seems harsh or unfair.  Typically, this happens when a court is faced with a particularly sympathetic party who happens to be on the wrong side of the dispute.  Although the court’s desire to avoid a harsh outcome is laudable, if the court allows this desire to distort its interpretation of the law it allows other (often less sympathetic) parties to avoid proper application of the law

In Case You Missed It – PACA Trust Rights in Bankruptcy are Just Plain Old Secured Claims

Happy 2018!  We at The Bankruptcy Cave have been itching to write about the Cherry Growers Chapter 11 case – which really is ground-breaking – but the holidays, life, and yes, work for clients too, all just got in the way.  But with each passing week, the case stayed on our minds.  So now that time permits, here is the writeup – and see below for the remarkable significance of the case.

In re Cherry Growers (now reported at 576 B.R. 569, Bankr. W.D. Mich. 2017), is a garden-variety produce-related bankruptcy case.  (Ha ha, “garden-variety” produce, get it?)  The Debtor bought produce and sold it to others, in addition to conducting other food distribution activities.  When the Debtor filed for bankruptcy, there was the typical push-and-pull between a lender secured by the Debtor’s inventory and a/r, and a supplier claiming a trust interest in those same assets, protected by the

Second Circuit: Market Rate Preferred Over Formula Rate For Purposes of Secured Creditor Cramdown in Chapter 11 Issues

Courts and professionals have wrestled for years with the appropriate approach to use in setting the interest rate when a debtor imposes a chapter 11 plan on a secured creditor and pays the creditor the value of its collateral through deferred payments under section 1129(b)(2)(A)(i)(II) of the Bankruptcy Code.  Secured lenders gained a major victory on October 20, 2017, when the Second Circuit Court of Appeals concluded that a market rate of interest is preferred to a so-called “formula approach” in chapter 11, when an efficient market exists.  In re MPM Silicones (Momentive), LLC, 2017 WL 4700314 (2d Cir. Oct. 20, 2017).

In Momentive, the bankruptcy court categorically dismissed expert testimony presented by the lenders to demonstrate a market rate of 5-6+%.  Because the debtor had offered to cash out the lenders (and prepared to borrow the funds necessary to do it), there was direct evidence of the

Tenth Circuit Joins Missouri River to Divide Kansas City Over What Constitutes A Stay Violation

On February 27, 2017, the United States Court of Appeals for the Tenth Circuit joined a minority approach followed by District of Columbia Circuit:  failing to turn over property after demand is not a violation of the automatic stay imposed by 11 U.S.C. § 362.  WD Equipment v. Cowen (In re Cowen), No. 15-1413, — F.3d —-, 2017 WL 745596 (10th Cir. Feb. 27, 2017), opinion here.

In Cowen, one secured creditor (WD Equipment) repossessed a vehicle in need of repairs for which the debtor (Cowen) could not pay.  Id. at *1.  Another secured creditor (Dring, the debtor’s father-in-law who is likely no longer welcome at Thanksgiving) repossessed a separate vehicle through the use of false pretenses, a can of mace, and five goons helpful colleagues:

“Mr. Dring lured Mr. Cowen under false pretenses to his place of business to repossess the Kenworth [truck].  Mr. Dring asked Mr. Cowen,

Fifth Circuit Rules for PACA Claimants, and Weakens PACA, All in One Curious Ruling

Set of colored vegetables for kids

Most restructuring practitioners are aware, either vaguely or through punishing experience, of the power of PACA creditors.  PACA (or the Perishable Agricultural Commodities Act, 7 U.S.C. § 499a et seq. for those who hate brevity) requires that buyers of produce hold such produce – and their proceeds – in trust for the benefit of produce sellers.  General creditors of the produce buyer receive nothing, even if they hold a lien on the buyer’s assets, until produce sellers are paid in full on any valid PACA claims (including their interest and attorneys’ fees in most instances).

But sometimes, or many times, the PACA trust assets needed to pay produce sellers are not present.  Accounts must be collected, by use of employees, lawyers, collection agents, or

A Lender’s Federal Post-Judgment Interest Quandary

Post-judgment interest is not something most lenders consider when making a loan. In fact, it is not ordinarily the subject of significant analysis even when litigation becomes necessary.  Where the United States District Court is the preferred venue, however, parties easily can fall into the quandary of being stuck with the federal statutory post-judgment interest rate, which is currently less than 1% per annum.

Pre-judgment, a lender often has solid rights to contract interest and potentially very high default interest rates, which often approach double-digits, added to a recovery when a solvent obligor is on the other side. But a final judgment may be a game-changer on the rate of interest a lender is able to receive.  Recent circuit court decisions are developing the law on post-judgment interest in a way contrary to the economic recovery of contracting parties, and lenders in particular.  It may be possible, however, to draft

The Little Airline That Couldn’t

July 27, 2016

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The Little Airline That Couldn’t

July 27, 2016

Authored by: Clif Burns

Editor’s Note:  Our colleagues at Bryan Cave’s Export Law Blog, your one stop shop for helping clients navigate export matters, customs, cross-border, and all the daily evolutions in those practices, allowed us to cross-post this piece on the intricacies of Article 4A of the UCC (it covers funds transfers – we at the Bankruptcy Cave had to look it up!).  Anyone dealing with funds transfers (which is just about everyone) should read this great post.  

[Copyright © 2016 Clif Burns. All Rights Reserved.]

sabena

Remember Sabena, the ill-fated Belgian airline that declared bankruptcy in 2001?  Well, to quote Ford Madox Ford, this is the saddest story I have ever heard.

One of the things that Sabena did, other than fly people back and forth to Brussels, was to

Banks and Marketplace Lenders Absorb a Blow Under the Supreme Court’s Refusal to Hear Madden v. Midland Funding, LLC

July 21, 2016

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Editor’s Note:  Our great friends at BankBryanCave, one of the top blogs out there for banking, regulatory, financial institution M&A, and related banking matters, allowed us to cross-post this compelling post on the impact of  the Supreme Court’s denial of cert of the 2nd Circuit’s decision in Madden.  We think this is pretty important stuff, especially for parties in the consumer debt secondary market.  

In a blow to banks and the marketplace lending industry, on June 27, 2016, the U.S. Supreme Court denied the petition by Midland Funding to hear the case Midland Funding, LLC v. Madden (No. 15-610).  That case involves a debt-collection firm that bought charged-off credit card debt from a national bank.  The borrower’s legal team argued that a buyer of the debt was subject to New York interest rate caps even though the seller of the debt, a national bank, was exempt from those state law rate caps due

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