by: Andrew L. Cole
Franklin & Prokopik; Baltimore
The February newsletter contained an article by Edward L. Schnitzer and Anting J. Wang contrasting the Commissary [1] and Circuit City [2] decisions regarding the interplay between § 503(b)(9) administrative claims and the new value defense under § 547(c)(4). The conclusion reached in that article was that Commissary and Circuit City represented conflicting decisions. This author finds common ground between these decisions but notes that additional related issues are lurking just over the horizon. Click here to read Part I.
Circuit City and Commissary
As discussed in the previous article, in Circuit City, the United States Bankruptcy Court for the Eastern District of Virginia refused to allow a preference defendant to claim § 547(c)(4) subsequent new value for goods that were also the subject of a 503(b)(9) claims (20-day goods). In Commissary, the U.S. Bankruptcy Court for the Middle District of Tennessee, seemingly, did just the opposite.
Read the full article.
by: Joseph A. Friedman
Kane Russell Coleman & Logan PC; Dallas
John J. Kane
Kane Russell Coleman & Logan PC; Dallas
Representing creditors’ committees can be lucrative. Law firms, therefore, often engage in competitive pitches with other firms when seeking to become creditors’ committee counsel. In order to bolster the odds of winning multi-firm “beauty contests,” many firms actively solicit votes from committee members, or if the committee is not yet formed, from the potential committee members. While some solicitations are perfectly acceptable, others may violate applicable rules of professional conduct. A recent Delaware decision, Universal Building Products, found committee counsel on the wrong side of the disciplinary rules. Understanding the disciplinary rules governing the solicitation of creditors' committees, and knowing how to properly solicit committee representations is critical.
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by: Elan A. Gershoni
Rattet Pasternak LLP; New York
Creditors share bankruptcy estate assets according to the amount and priority of their claims. The estate is comprised of the debtor’s legal and equitable interests in property as of the filing date. Property that the debtor holds in trust for another is not an asset of the bankruptcy estate, [1] and accordingly, the beneficiary of that trust is entitled to collect the entire amount it is owed before other creditors of the estate are entitled to their distribution. The Perishable Agricultural Commodities Act (PACA) creates a trust (the “PACA trust”) for the benefit of suppliers (the “PACA suppliers”) of perishable agricultural commodities (PACs). [2] The benefits provided by a PACA trust are numerous: Not only is a PACA supplier able to collect the debt it is owed ahead of other creditors, it is relieved from the difficult process of tracing funds owed to it because PACA creates a floating trust that attaches to all of the debtor’s assets. [3] In certain circumstances, PACA suppliers may also recover directly from a debtor’s officers and directors. The advantages of being a PACA trust beneficiary are clear. However, PACA suppliers must satisfy numerous requirements to be eligible for PACA protection. Further, a PACA supplier must be wary of unintentionally waiving its PACA rights.
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by: Neil Steinkamp
Stout Risius Ross; Detroit
Relations between one company and another do not always follow a consistent and steady course. As the economy, industry dynamics, material prices and politics change, the relationship between the customer and suppliers will also often change. This article discusses recent and long-standing opinions of various U.S. courts regarding these circumstances and provides guidelines for information that may be helpful in establishing that such arrangements and payments may indeed be “ordinary.”
Read the full article.
At the 29th Annual Spring Meeting, held March 31 - April 3, the Unsecured Trade Creditors Committee gave a presentation titled "Intercreditor Agreements Between Junior and Senior Lenders and the Impact of Recent Rulings and Trends on the Treatment of Trade Creditors." The speakers discussed first lien holders' debt and their restrictions and limitations, as well as inter creditor agreements and related cases. The panel included David M. Posner of Otterbourg, Steindler, Houston & Rosen, PC in New York; Sarah Borders of King & Spalding LLP in Atlanta; Larry Forte of Wells Fargo Capital Finance in New York; Sharon Levine of Lowenstein Sandler in Roseland, N.J.; and Jesse Austin of Paul, Hastings, Janofsky & Walker LLP in Atlanta.
Intercreditor Agreements Between Junior and Senior Lenders and the Impact of Recent Rulings and Trends on the Treatment of Trade Creditors
In the session titled "Dodd-Frank: Will It Work?" the panel discussed some of the biggest question marks regarding Dodd-Frank, including liquidation authority, including which companies are potentially subject to the authority, how the authority is to be funded and its general and specific terms. The panel included Michael Krimminger of the FDIC in Washington D.C.; Paul L. Lee of Debevoise & Plimpton in New York; and Peggy A. Peterson of Baker Hostetler in Washington D.C.
Dodd-Frank: Will It Work?
In the Friday afternoon panel "Complex UCC Issues" panelists addressed several provisions of the bankruptcy code, including 101(37) and 552(b)(1); UCC Article 9 security interests; and best practices for the assignment of a note and mortgage. Deborah L. Thorne of Barnes & Thornburg LLP in Chicago moderated the session. Panelists included Hon. Dennis R. Dow of the U.S. Bankruptcy Court (W.D. Mo.) in Kansas City; Terri L. Gardner of Nelson Mullins Riley & Scarborough, LLP in Raleigh, N.C.; and Steven O. Weise of Proskauer in Los Angeles.
Complex UCC Issues
Click here to view all conference materials related to the Unsecured Trade Creditors Committee.
ABI is pleased to announce the arrival of it's newest publication, "The Bankruptcy Court's Watchdog: Examiners Today." This new publication, written by John C. (Kit) Weitnauer, walks practitioners through the appointment of an examiner in a bankruptcy case, the examiner's responsibilities, the selection and appointment process, the requirements for the examiner's final report and the examiner's fee structure. This comprehensive manual is replete with case law, with several appendices that contain examples from actual cases.
Did you know that all of ABI's publications are written by experts in the field and are widely used by the bankruptcy bar and bench? You can own these same publications by visiting the online ABI Bookstore. The ABI Bookstore carries over 40 publications, offers several bundled packages for your convenience and includes free ground shipping!
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