Third Circuit Says Trustee Gets to Start With Clean
Slate Under §548
Written by Michael M. Parker

In a recent decision sure to cause some commotion, the Third Circuit has stripped an innocent transferee of its statutory defenses and created a new “innocent trustee” defense in a case where it found that a chapter 7 trustee who proceeds under 11 U.S.C. §548, as opposed to §541, no longer comes to a lawsuit burdened by the pre-petition facts that might have been defensively asserted against his debtor. McNamara v. PFS a/k/a Premium Finance Specialists (In re The Personal and Business Ins. Agency), ___ F.3d ___ (3d Cir. 2003)(June 26, 2003, Cause No. 02-1192).
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Third Circuit Nixes Section 1146(c) Relief for Pre-confirmation Sales
Written by Bob Keach

In what could be a fatal blow for transfer-tax-free sales under §363, the Third Circuit Court of Appeals has held that §1146(c) of the Bankruptcy Code does not apply to real estate transactions that occur prior to the confirmation of a plan under chapter 11 of the Code, even if (as was true in the Third Circuit case) a plan was filed when the sales occurred, the amount of possible tax was escrowed pending confirmation of the plan, and the plan was eventually confirmed. Baltimore County v. Hechinger Liquidation Trust (In re Hechinger Investment Co. of Delaware Inc.), No. 02-1917 (3rd Cir., 7/18/03). Section 1146(c) provides, in pertinent part, that “…delivery of an instrument of transfer under a plan confirmed under §1129 of this title, may not be taxed under any law imposing a stamp tax or similar tax.” Most §363 sale orders in chapter 11 cases include a provision that the sale is in contemplation of a plan and is necessary for a plan and exempt the transaction under §1146(c), conditioned upon the set aside of amounts necessary to pay the tax (if no plan is confirmed) and subsequent confirmation of a plan. If Hechinger becomes the “law of the land,” this practice is no longer permissible and such pre-confirmation transactions will be subject to tax.
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Business Reorganization, International Committees' Joint Program for Winter Leadership Conference Takes Shape

As previously announced, the Business Reorganization Committee and the International Committee will present a joint program at the ABI Winter Leadership Conference. The program, to be presented as a plenary session continuing into a workshop program at the joint committee meeting, will be entitled "A Tale of Two Systems: Airline Insolvency Proceedings Under the Code and the CCAA."

This panel—consisting of major players from the reorganization cases of U.S and Canadian airlines—will compare and contrast actual reorganization proceedings under the U.S. Bankruptcy Code and the Canadian Companies' Creditors Arrangement Act (CCAA). The panel will explore—with examples from recent reorganization cases—the advantages, disadvantages and challenges of each system and statute. Among the subjects to be explored will be "first-day" proceedings, financing the case, problems with (and of) aircraft lenders and lessors, and collective bargaining agreements and other labor issues. The program will provide an insider's look at the functioning of two insolvency systems in connection with a comparable airline "mega-case."