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Supreme Court Weighs Granting Cert on Bankruptcy Issues Involving Surcharge and Voting Rights of Assignee of Insider Claim

December 5, 2016

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The Supreme Court is considering whether to grant review of two bankruptcy cases.  On October 3, 2016, the Supreme Court invited the Solicitor General to file briefs expressing the views of the United States.  Because the Supreme Court’s justices normally give significant weight to the federal government’s recommendations regarding interpretations of federal statutes (here, the Bankruptcy Code), the Solicitor General’s forthcoming briefs could influence whether the Supreme Court grants cert. on the two notable bankruptcy cases.

Southwest Securities v. Segner

The first case under consideration is Southwest Securities v. Segner (In re Domistyle, Inc.), 811 F.3d 691 (5th Cir. 2015).  At the commencement of this case, the trustee believed the debtor possessed equity in certain real property that could benefit unsecured creditors.  Id. at 693-94.  The property was encumbered by Southwest Securities’ lien.  After marketing the property for a year, the trustee was unable to sell the property and ultimately abandoned it

This Just In – Supreme Court to Provide Clarity on Whether Collection of Time-Barred Debts in Bankruptcy Violates the Fair Debt Collection Practices Act.

October 11, 2016

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jabez-stoneWe all remember The Devil and Daniel Webster – the Devil comes to collect a seven year old debt (secured by Jabez Stone’s soul), only to be foiled by the great trial lawyer Daniel Webster – thanks to a skilled litigator, the old debt is forgiven!

But that isn’t the only example of years’ old debt becoming a real matter of contention.  Earlier today, the Supreme Court granted certiorari on an issue that (a) is pretty important in the world of consumer debt collection, and (b) makes some folks pretty darn furious. The issue is this:  if you file a proof of claim in a bankruptcy case, and you know such claim is barred by the applicable statute of limitations, are you committing a “misleading” or “unfair” practice under the Fair Debt Collection Practices Act (FDCPA)?  (Coverage of the case and

High Court Broadens the Definition of “Actual Fraud” under Section 523(a)(2)(A)

The Supreme Court’s Decision:

On May 16, 2016, in Husky International Electronics, Inc. v. Daniel Lee Ritz, Jr., Case No. 15-145, the Supreme Court held that the term “actual fraud” in § 523(a)(2)(A) of the Bankruptcy Code encompasses fraudulent conveyance schemes, even if the scheme does not involve a false representation to the creditor.  In reversing the judgment of the Fifth Circuit, the Supreme Court’s ruling settled a split among the circuits regarding whether “actual fraud” under § 523(a)(2)(A) requires a misrepresentation or misleading omission to the creditor. Compare In re Ritz, 787 F.3d 312 (5th Cir. 2015) with McClellan v. Cantrell, 217 F.3d 890 (7th Cir. 2000), and Sauer V. Lawson, 791 F.3d 214 (1st Cir. 2015).

The Appeal:

On March 1, 2016, the Supreme Court heard arguments as to whether the “actual fraud” exception to discharge under § 523(a)(2)(A) applied narrowly (i.e. only when the debtor

Supreme Court Rules No Fees for Defending Fee Applications

July 20, 2015

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The Supreme Court of the United States recently addressed whether estate professionals could recover fees expended in defending fee applications. Baker Botts L.L.P. v. ASARCO LLC, 576 U.S. _____ (2015). A divided court ruled that the plain language of 11 U.S.C. § 330(a)(1) allowed compensation only for “actual, necessary services rendered[,]” and that to allow fees for defending fee applications would be contrary to the statute and the “American Rule” that each litigant pay her own attorneys’ fees unless a statute or contract provides otherwise. Procedural Background

In 2005, ASARCO, a copper mining, smelting, and refining company, filed for Chapter 11 bankruptcy protection. ASARCO obtained the Bankruptcy Court’s permission to hire two law firms, Baker Botts L.L.P. and Jordan, Hyden, Womble, Culbreth & Holzer, P.C. Among other services, the firms prosecuted fraudulent-transfer claims against ASARCO’s parent company and ultimately obtained a judgment against it worth between $7 and $10 billion.

Did the Bankruptcy Code Save Obamacare?

July 17, 2015

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brown gavel and a medical stethoscope

Over the years, the United States Supreme Court has had to interpret ambiguous, imprecise, and otherwise puzzling language in the Bankruptcy Code, including the phrases “claim,” “interest in property,” “ordinary course of business,” “applicable nonbankruptcy law,” “allowed secured claim,” “willful and malicious injury,” “on account of,” “value, as of the effective date of the plan,” “projected disposable income,” “defalcation,” and “retirement funds.” The interpretive principles employed by the Court in interpreting the peculiarities of the Bankruptcy Code were in full view when the Court recently addressed another complex statute that affects millions of Americans each year—the Patient Protection and Affordable Care Act (“PPACA”). Both the majority opinion of Chief Justice Roberts and the dissent of Justice Scalia relied heavily on bankruptcy precedents in

U.S. Supreme Court: Inherited IRA Funds not “Retirement Funds”

On June 12, 2014, the Supreme Court issued a unanimous opinion in Clark v. Rameker, Dkt. No. 13-299, 573 U.S. ___ (2014), holding that funds held in inherited Individual Retirement Accounts are not “retirement funds” within the meaning of 11 U.S.C. § 522(b)(3)(c) and therefore not exempt from the bankruptcy estate. This opinion limits retirement funds that remain out of creditors’ reach when an individual files a bankruptcy case.

In Clark, Heidi Clark inherited a traditional IRA account established by her mother. Clark then filed a Chapter 7 bankruptcy case and claimed the inherited IRA account as exempt from the bankruptcy estate under Section 522(b)(3)(C). The trustee and unsecured creditors objected, arguing that the inherited IRA funds were not “retirement funds” within the meaning of the statute.

The Court distinguished between inherited IRAs and traditional IRAs, noting that holders of inherited IRAs are prohibited from making contributions to those accounts,

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