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Click To Appeal: Recent Second Circuit Decision A Cautionary Tale Regarding Electronically Filed Notices Of Appeal

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A recent Second Circuit Court of Appeals decision, Franklin v. McHugh, 2015 WL 6602023 (2d Cir. 2015), illustrates the dire consequences of failing to comply fully with all electronic filing requirements for a notice of appeal. Although appellant’s counsel in that case attempted to file a timely notice of appeal, properly initiated the electronic filing process, paid the filing fee, and received payment confirmation, the Second Circuit dismissed the appeal for lack of appellate jurisdiction due to the technical failure of appellant’s counsel to “click all the buttons” required to complete the filing. In jurisdictions that require electronic filing, counsel must be mindful not only of the applicable procedural rules but also of the electronic filing requirements.

The Applicable Rules Minefield

10th Circuit Holds That First Time Transactions Fall Within 11 U.S.C. 547(c)(2), Ordinary Course of Business Defense

In a decision that surprised many, the United Stated Circuit Court of Appeals for the Tenth Circuit (the “10th Circuit Court of Appeals”) affirmed decisions finding that a payment made on account of a first time transaction between a debtor and creditor can qualify for the ordinary course of business defense under 11 U.S.C. § 547(c)(2).

C.W. Mining Company (the “Debtor”) entered into an equipment agreement with a new contractor, SMC Electric Products, Inc. (“SMC”), in an attempt to increase the Debtor’s coal production. This agreement was reached several months before the filing of an involuntary bankruptcy petition. Within 90 days of the involuntary bankruptcy filing, the Debtor made the first payment under the agreement in the amount of $200,000 to SMC via wire transfer. The Trustee filed an adversary proceeding seeking to avoid and recover the $2000,000 payment under 11 U.S.C. §§ 547(b) and 550, as an alleged preferential

Earth to Creditors: Triangular Payment Arrangements May Constitute “Reasonably Equivalent Value”

Satellite Orbiting Earth.

The Eleventh Circuit Court of Appeals recently clarified the meaning of “reasonably equivalent value” in a complex fraudulent transfer case.  Its decision in In re PSN USA, Inc., Case No. 14-15352 (11th Cir. Sept. 4, 2015), provides particular insight on fraudulent transfers in the context of parent-subsidiary and other triangular payment arrangements.  The Eleventh Circuit held that even though the debtor, a cable television channel, was not a party to the underlying satellite services contract at issue, payments made from the debtor to the satellite services company pursuant to its parent company’s contracts constituted “reasonably equivalent value” and could not be avoided as constructive fraudulent transfers.

PSN USA, Inc. (the “Debtor”) operated the PSN Channel, a cable television station that broadcasted live and recorded sporting events throughout Latin America. 

The A++, Super Comprehensive, Don’t Ever Start Anywhere Else Set of Opening Questions, Introductory Matters, and Document Inquiries for Taking a Deposition

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The A++, Super Comprehensive, Don’t Ever Start Anywhere Else Set of Opening Questions, Introductory Matters, and Document Inquiries for Taking a Deposition [1]

Have you ever had to press garlic for a recipe? Or put together a Swedish bookshelf, purchased from a Swedish superstore? Yes, you have – and you may have succeeded, so long as you had a garlic press, or the bag of special Swedish tools respectively. But what if you don’t? Yikes. An easy part of the job becomes hard; your likelihood of failure increases, substantially.[2]

Practicing law is often the same. Certain tasks are very complicated. Reasoning, analysis, complex drafting, making hard things simpler for busy clients to understand – not easy stuff. But with the correct tools, forms, checklists,

Inside The N.D. Ill.’s Broad Reading Of Section 546(e)

May 11, 2015

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In what appears to be a case of first impression, the United States Bankruptcy Court for the Northern District of Illinois has concluded that payments to a master servicer of a commercial mortgage backed securitization (a “CMBS”) could not be avoided as either allegedly constructively fraudulent transfers or as allegedly preferential transfers because the securities contract “safe harbor” under section 546(e) of the Bankruptcy Code precluded such claims. Krol v. Key Bank Nat’l Ass’n. (In re MCK Millenium Centre Parking, LLC), 2015 Bankr. LEXIS 1432 (Bankr. N.D. Ill. Apr. 24, 2015). A Bryan Cave team, led by New York partner Larry Gottesman, represented the defendants.

The background of the decision is straightforward. The chapter 7 trustee of the debtor brought an adversary proceeding against Key Bank (“Key”), as master servicer, and the related CMBS trust, alleging that the debtor had made loan payments on a loan owed by the debtor’s

Spring Cleaning, Avoidance Actions, and Time to Tweak the Loan Forms, Just In Case

April 3, 2015

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Winter is over; time for spring cleaning. Alas, your authors are so desperate to put off such drudgery that they decided to write about avoidance actions, and form language for notes and security agreements. If you represent lenders, try taking five from the cluttered garage, dust-bunnied closet, or bursting kitchen junk drawer, and read this; you may save your lender client a buck or two.

The Basics: Workout lawyers all agree on certain principles. For instance, fully secured creditors with undisputed claims deserve to be paid. Further, if the collateral value exceeds the amount of the secured creditor’s claim then payment must include interest, costs, and attorneys’ fees, if the loan documents so provide.[1]

The Wrinkle: But add a wrinkle – the kind of wrinkle rarely considered when structuring a loan, in the glorious salad days of the lending relationship. That wrinkle: Upon the obligor’s bankruptcy, what if

Voidable If Not Fraudulent — NCCUSL Approves the Uniform Voidable Transactions Act

In July 2014, the National Conference of Commissioners on Uniform State Laws (NCCUSL) approved the Uniform Voidable Transaction Act (UVTA), a long-awaited update to the Uniform Fraudulent Transactions Act (UFTA). As the new title suggests, the UVTA, like the UFTA before it, encompasses a broader range of transactions than those traditionally deemed fraudulent and therefore avoidable under the common law. The amended Act clarifies and expands the burden of proof as well as presenting new challenges and opportunities to creditors seeking to avoid transfers by debtors operating under insolvent conditions. This development also has importance for creditors with claims in bankruptcy due to the bankruptcy trustee’s power to bring avoidance actions based on state law under 11 U.S.C. § 544(b) and thereby increase the assets available to repay debts.

Under the amended Act as before, creditors bringing constructive fraudulent transfer claims have the ability to avoid transactions which deprive the

Case Updates: Glaski v. Bank of America  and Sandri v. Capital One

The California Court of Appeal for the Fifth Appellate District has held that a borrower has standing to state a claim for wrongful foreclosure based on the alleged improper securitization of the borrower’s note and deed of trust. Glaski v. Bank of America, N.A., et al., 218 Cal. App. 4th 1079 (Cal. App. 5th Dist. 2013). This is a minority view. Rejecting both the holding and reasoning of the Glaski court, and adopting the majority view, the U.S. Bankruptcy Court for the Northern District of California reached a contrary conclusion. Sandri v. Capital One, N.A., et al. (In re Sandri), No. 12-3165DM, 2013 WL 5925655 (Bankr. N.D. Cal. Nov. 5, 2013).

I. Glaski v. Bank of America, N.A., et al., 218 Cal. App. 4th 1079 (Cal. App. 5th Dist. 2013)

Factual Background and Procedural History:

In mid-2005, appellant Glaski obtained a purchase money loan from lender Washington Mutual Bank, FA

When is a financing statement that is no longer effective, still effective? When it lapses in bankruptcy, of course!

October 8, 2014

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The 11th circuit is becoming easier on lenders who forget to continue financing statements post-bankruptcy, thanks to a recent Middle District of Florida Bankruptcy Court ruling in March in the Colony Resort bankruptcy. In re Colony Beach & Tennis Club Association, Inc., Case No. 13-00348, Bankr. M.D. Fla. (March 21, 2014). Colony Resort is a development in Longboat Key on the Gulf of Mexico, built in 1973. The resort had fallen on hard times, due in large part to condominium owner refusals to pay assessments, which in turn prevented needed renovations. The resort closed in 2010, followed by the bankruptcy filings of the resort’s related entities.

The entity that ran the resort was Colony Beach and Tennis Club, Ltd (the “Club”). The Club’s primary asset is a potential recovery in a pending lawsuit against the home owners’ association (the “Association”) for refusing to pay assessments. The Club’s primary secured creditor

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