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Global Restructuring & Insolvency Developments

Executory Contracts

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A step forward – the FirstEnergy Solutions court comes to the commonsense conclusion that steel forges aren’t “forward contract merchants.”

Thomas Paine would be proud of this Court’s commonsense approach to the Bankruptcy Code

 

In the In re FirstEnergy Solutions Corporation bankruptcy cases,[1] the court recently issued an opinion narrowing the number of situations in which a fixed-price supply agreement (used to hedge against rising input costs and constituting a “forward contract” in bankruptcy parlance) will be treated as an exception to the general rules governing “executory contracts”[2] in chapter 11 bankruptcy cases.

The “automatic stay” under section 362 of the Bankruptcy Code usually prevents a contract counterparty from terminating an executory contract without first getting court approval (i.e., relief from the automatic stay); this is true even if the contract provides it may be terminated upon the filing of

Everyone Has Rejection Issues

March 21, 2018

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Everyone Has Rejection Issues

March 21, 2018

Authored by: James Maloney

Rejected

In the typical day-to-day experience in bankruptcy proceedings, the debtor’s ability to assume or reject executory contracts and leases under Section 365 of the Bankruptcy Code is seen from the sometimes-unfortunate perspective of the creditor.  To the creditor’s perspective, the prohibitions of the automatic stay, periods of time during which treatment of the contract is uncertain, struggling to acquire adequate protection, a loss of control over who the contract may be assumed and assigned to, and the alternative of being rejected and left with a deemed prepetition claim, all combine to an undesirable scenario.

As misery loves company, two recent cases have illustrated that the requirements and operations of Section 365 can also result in disappointment to a debtor estate seeking contract damages and to a civil action plaintiff seeking compensation for appropriation of its intellectual property.

In Lauter v CITGO Petroleum Corp.[1] a United States District

Sabine: The Next Episode

April 13, 2017

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Sabine: The Next Episode

April 13, 2017

Authored by: Craig Schuenemann

Editor’s Note: On June 16, 2016, The Bankruptcy Cave gave you our previous summary of the controversial Sabine decision.  When Bankruptcy Judge Chapman determined there was no reason to expedite review of her decisions in the case, we brought you Sabine Lives On (and On) detailing the struggles of Sabine’s midstream adversaries.  Like Hollywood, Bankruptcy Cave knows that sequels sell (with some notable awful exceptions, such as here and here).  We now bring you the third installment of Sabine.  If it sounds like a horror film or slasher flick, it was for the midstream sector.

The bankruptcy court was right!  Judge Rakoff of the United States District Court for the Southern District of New York stated starkly: “[T]he bankruptcy court did not err in authorizing the rejection of the Agreements pursuant to 11 U.S.C. § 365(a).  Nordheim challenges the decision

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